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DOJ reaches settlement with Penguin over e-book price fixing

If the settlement is approved, Macmillan and Apple will be the lone defendants in the government’s suit.

By Husna Haq / December 19, 2012

Given the Penguin-Random House merger, it is in “everyone’s interests that the proposed ... company should begin life with a clean sheet of paper,” said Penguin.

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Another victory for the Department of Justice?

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The DOJ has reached a settlement with Penguin in the e-book price fixing case accusing five of the nation’s largest publishers of colluding with Apple to raise e-book prices. 

If approved, the settlement leaves just one publisher – Macmillan – and Apple as the lone defendants in the government’s suit, to be argued in court next year. Hachette, Simon & Schuster, and HarperCollins have already agreed to settle.

Under the settlement, Penguin must submit to an antitrust compliance program and is prohibited from entering into new agreements that constrain retailers’ ability to offer discounts and promotions for a period of two years.

“The proposed settlement with Penguin will be an important step toward undoing the harm caused by the publishers' anticompetitive conduct and restoring retail price competition so consumers can pay lower prices for Penguin's e-books,” said Jamillia Ferris, chief of staff and counsel at the Justice Department's antitrust division, according to the AP.

But in announcing the settlement, Penguin denied any wrongdoing. “Penguin has always maintained, and continues to maintain, that it has done nothing wrong and has no case to answer,” the publisher said in a statement.

Instead, it has agreed to settle due to its impending merger with Random House. The two publishers announced their plans to join forces in October. If approved by the European Union, Penguin Random House will be the world’s largest publisher and control about 25 percent of all books published in the US.

Considering the publishers’ impending betrothal, it was critical that Penguin settle. “It is also in everyone’s interests that the proposed Penguin Random House company should begin life with a clean sheet of paper,” the company said. (Random House was not involved in the DOJ case.)

The DOJ filed its suit due to an agreement Apple struck with publishers in 2010 as part of the tech company’s iBookstore launch that debuted a pricing rubric called the agency model. This allowed publishers, rather than retailers, to set their own prices for e-books, then take a percentage of sales, rather than a fixed price. The arrangement was an effort to counter Amazon’s deep discounts. But in the Justice Department’s view, it represented an illegal price fixing collusion.

Last week the European Union accepted settlements by four publishers and Apple, thus bringing its investigation to an end. That leaves only Apple and Macmillan to fight the case in an American court next year.

Husna Haq is a Monitor correspondent.

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