DOJ: E-Book Settlement with Publishers to Benefit Consumers

As the Justice Department prepares to battle Apple Inc. over alleged price-fixing in the electronic books market, top department officials said today they are hopeful consumers will benefit from the settlement reached with three publishers.

Sharis Pozen, the acting head of the DOJ Antitrust Division, said the government believes the settlement with three publishers—HarperCollins Publishers LLC, Simon & Schuster, Inc. and Hachette Book Group, Inc.— will restore price competition and lead to lower prices for e-books.

The settlement requires the publishers to terminate their agreements with Apple and other e-book retailers. The publishers will be restrained from entering into new agreements that “constrain retailers’ ability to offer discounts or other promotions to consumers,” DOJ said.

Pozen, joined by Attorney General Eric Holder Jr. to announce the settlement and the antitrust suit (PDF) against Apple, said at a press conference at Main Justice: “By requiring the companies to allow retailers the freedom to lower the prices of their e-book titles, it will provide for a more open and fair marketplace.”

The suit against Apple in Manhattan federal district court accuses the company of conspiring to increase the price of e-books. Pozen said consumers paid two to three dollars more for book titles.

“As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles,” Holder, who reads e-books, said in a statement. “We allege that executives at the highest levels of these companies–concerned that e-book sellers had reduced prices–worked together to eliminate competition among stores selling e-books, ultimately increasing prices for consumers.”

Apple’s attorney, Richard Parker, a partner in the Washington office of O’Melveny & Myers, was not immediately reached for comment this afternoon. Parker chairs the firm’s antitrust and competition practice.

Clifford Aronson, a partner in the New York office of Skadden, Arps, Slate, Meagher & Flom, was not immediately reached for comment. Paul Yde, an antitrust partner in the Washington office of Freshfields Bruckhaus Deringer, represented Hachette.

Hachette said in a statement that the company, after much deliberation, “reluctantly agreed” to the settlement with the Justice Department. “Hachette was not involved in a conspiracy to illegally fix the price of eBooks, and we have made no admission of liability,” the statement said.

“We are disappointed that we were unable to persuade the Department of Justice of the merits of our actions, but believe much has been accomplished to increase diversity and competition in the market for eBooks since the advent of the agency model,” Hachette’s statement said.

DOJ’s suit also names two other publishers as defendants: Holtzbrinck Publishers LLC, which does business as Macmillan, and Penguin Group, Inc. (Click here for a full list of the defense lawyers in the case.)

Penguin’s lawyer, Daniel McInnis, an antitrust partner in the Washington office of Akin Gump Strauss Hauer & Feld, wasn’t reached for comment. Sidley Austin litigation partner Joel Mitnick in the firm’s New York office, representing Macmillan, also wasn’t reached.

Connecticut Attorney General George Jepsen announced at today's press conference that he and Texas Attorney General Greg Abbott reached an agreement with Hachette and HarperCollins to provide $51 million in consumer restitution.

Jepsen said the details will be worked out in the coming weeks. A formula based on the number of participating states and the number of e-books sold in each state will determine the distribution of money, he said.

“Publishers deserve to make money, but consumers deserve the price benefits of competition in an open and unrestricted marketplace,” Jepsen said in a statement. “Those interests clearly collided in this case and we are going to work to ensure the eBook market is open once again to fair competition.”

Comments

[jrsposter]

David wrote: Once a customer has their [sic] ereader in customer's hand they have an exclusive monopoly on electronic delivery to the customers [sic] reader.

This is simply not true. I have downloaded books from sites other than Amazon. These books are in the mobi format. Even the Gutenberg Project has books in the format used by both my Kindle and the Kindle App which I use on my iPod Touch.

There is also a free computer application called Calibre which can convert epub and pdf format books to Kindle format, thereby bypassing Amazon completely.

[ColorBlindJustice]

Insofar as Apple and the publishers weren’t selling scarce necessities such as food and water, and since no one put a gun to any e-book buyer’s head, I can’t help but wonder, who was hurt by this alleged collusion?

So folks may have paid a few more bucks for a book ot two, so what? (Are ObaMao administration redistributionists the only ones who are to be allowed to take more money from the well-heeled?) Does Eric Holder want authors and publishers to starve and be forced to abandon their industry? Who will write and publish books for the reading public then?

Though some may feel a little schadenfreude vis-à-vis Apple and the late Steve Jobs, who never hesitated to sue or threaten litigation against competitors, it's difficult to see this whole thing as anything other than misguided populist politics in an election year (see the rest of the Obama campaign). And if the innovative icon Jobs were still alive, the government almost certainly would have held off pursuing this lawsuit at least until after the election, if at all.

DOJ’s anti-trust division these days behaves as though it were the early 20th century. Perhaps it's time to start calling it the anti-capitalism division.

[David]

“... we are going to work to ensure the eBook market is open once again to fair competition.”

There was never an open market. Before the change to an agency model Amazon had a practical monopoly on ebooks, selling them below cost and advertising the prices as a low cost alternative next to the traditional pulp and paper books to generate a market for the kindle. Once a customer has their ereader in customer's hand they have an exclusive monopoly on electronic delivery to the customers reader.

The agency model created more competition and adequate prices.