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Judge approves DOJ $69 million e-book settlement with three publishers

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Citing Emily Dickinson’s mantra that “There is no Frigate like a Book / To take us Lands away”, a federal judge yesterday approved the US department of justice’s settlement with three publishers over alleged ebook price-fixing.

The publishers Simon & Schuster, Hachette, Penguin, Macmillan and HarperCollins had been accused by the department of justice of conspiring with Apple to push up the prices of ebooks over fears that the increasingly widespread $9.99 price for ebooks would affect their short and long-term profits. According to the DoJ, the publishers decided they needed to act collectively, to force Amazon to abandon its discount pricing model.

While Penguin, Macmillan and Apple are continuing to fight the accusations, Simon & Schuster, Hachette and HarperCollins agreed to settle with the justice department in April. Last week the three publishers agreed to a $69m (£44m) settlement fund to compensate readers who bought ebooks between 1 April 2010 and 21 May 2012, as well as to cease existing agreements under the so-called agency model, which allowed the publisher rather than the retailer to set the price of ebooks.

Booksellers including Barnes & Noble and the American Booksellers Association had disputed the DoJ’s proposed settlement, as had more than 90% of the 868 public comments received, noted US district judge Denise Cote in her decision yesterday.

“Some comments were filled with extreme statements, blaming every evil to befall publishing on Amazon’s $9.99 price for newly released and bestselling ebooks, and crediting every positive event – including entry of new competitors in the market for ereaders – on the advent of agency pricing,” wrote Cote.

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Many complaints, she said, referred to Amazon’s pricing of ebooks at $9.99 as “predatory”, but she ruled that “even if Amazon was engaged in predatory pricing, this is no excuse for unlawful price-fixing”, and said that “the familiar mantra regarding ‘two wrongs’ would seem to offer guidance in these circumstances”.

Cote did admit that the sheer volume of negative comments opposing the final judgment meant that “hesitation is clearly appropriate in this case”, saying that “there can be no denying the importance of books and authors in the quest for human knowledge and creative expression, and in supporting a free and prosperous society”.

She used a quote from Dickinson to back up her point, that: “there is no Frigate like a Book / To take us Lands away, / Nor any Coursers like a Page / Of prancing Poetry — / This Traverse may the poorest take / Without oppress of Toll — / How frugal is the Chariot / That bears a Human soul.”

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Still, she concluded that given the voluminous submissions received in this “straightforward price-fixing case”, it was not necessary to hold an evidentiary hearing before approving the decree, because the court is “well-equipped to rule on these matters” and “a hearing would serve only to delay the proceedings unnecessarily”.

“The proposed final judgment appears reasonably calculated to restore retail price competition to the market for trade ebooks, to return prices to their competitive level, and to benefit ebooks consumers and the public generally,” she said. “Ebooks consumers should not be forced to wait until after the June 2013 trial to experience the significant anticipated benefits of the decree.” Penguin, Macmillan and Apple, who rejected the terms of the DoJ settlement, face trial next June.

In the UK, the Society of Authors expressed its concerns over the settlement’s approval. “Publishers large and small, authors and booksellers have all protested that the agency model is almost the only thing which stands in the way of Amazon using its dominant position to discount ebooks to prices other retailers cannot match, enhancing Amazon’s market share but devaluing the product to the extent that in the long-term everyone (including Amazon) loses out,” said deputy general secretary Kate Pool. “To survive, publishing must be profitable. Publishers have long been at the mercy of the discounts demanded by the major retailers; if the agency model is outlawed, this further weakens their position. Many authors feel that as the industry changes, some of the terms traditionally asked of them are no longer reasonable – but most also believe that, provided the terms are right, publishers remain a vital part of the equation.”

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© Guardian News and Media 2012


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