Three publishers settle ebook price-fixing suit

12 April, 2012 by John P. Mello Jr., TechHive
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Within hours of an antitrust lawsuit being filed against several large U.S. tradebook publishers and Apple for fixing the prices on ebooks, three of those publishers have agreed to a settlement of the case with the U.S. Department of Justice (DOJ).

Hachette, Harper Collins and Simon & Schuster agreed to settle with the DOJ while not admitting any violation of federal law. Penguin and Macmillan did not join the settlement.

Under the terms of the settlement, the publishers agreed to terminate any existing deal with Apple or any other seller of ebooks that “restricts, limits or impedes the ebook retailer’s ability to set, alter or reduce the retail price of any ebook.” They also agreed not to enter into such deals for at least two years or to retaliate against retailers that set, alter or reduce ebook prices.

In its complaint, the DOJ explained that the publishers saw the rise of ebooks and particularly price discounting by Amazon, as a substantial challenge to their traditional business model.

The publishers feared that lower retail prices for ebooks might lead eventually to lower wholesale prices for ebooks, lower prices for print books or other consequences the publishers hoped to avoid, the DOJ said.

When efforts to change Amazon’s pricing policies failed, the complaint noted, the publishers “conspired to raise retail ebook prices and to otherwise limit competition in the sale of ebooks.”

The publishers teamed up with Apple, which also wanted to keep ebook prices high, to boost their margins on them, the complaint said. Apple declined to comment for this story.

“This is a big win for Kindle owners and we look forward to being allowed to lower prices on more Kindle books,” Amazon spokesman Andrew Herdener said.

While agreeing to the settlement, Harper Collins defended the practices of the publishers called into question by the DOJ. Those practices centre on a sales practice called agency, which treats retailers as “agents” of the publisher. As such, the publishers, not the retailers, set prices for ebooks.

“After HarperCollins adopted the agency model in 2010, the ebook market exploded, giving consumers more choices of devices, formats and prices that would never have existed but for the agency model,” the company said in a statement.

 

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