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Judge approves publishers' settlement over e-books
07.09.12 | Joshua Farrington
A judge has approved the settlement in the US of three publishers accused of conspiring to fix the prices of e-books, meaning that they must now terminate their agency agreements with Apple in the US.
HarperCollins US, Simon & Schuster Inc, and Hachette Book Group USA all agreed to settle in the Department of Justice case, while Macmillan, Penguin and Apple have vowed to fight the lawsuit with a trial due to start in June next year.
Apple is accused of conspiring with the publishers to use the agency model, letting them set the prices on e-books, and prevent retailers undercutting each other via the Most Favoured Nation clause. The moves were designed to keep e-books at sustainable prices and curb Amazon's growth in this market at a time when it was the dominant player.
However in the settlement, the three publishers agreed not to use an undiluted agency model for two years and to agree to an MFN clause for five years. Last week, the three publishers also agreed to a settlement with the US States, paying out $69m in compensation over similar charges.
Barnes & Noble and the American Booksellers Association, which represents independent shops, opposed the settlement arguing it would strengthen Amazon’s dominance, as did many publishing insiders in the US. Apple, Penguin, and Macmillan USA, also opposed it, with Apple arguing that the settlement unfairly penalized it in a case that had not yet been heard in court—the settlement requires termination of the settling defendants’ agency agreements within seven days.
But in her report, US District Judge Denise Cote in Manhattan said the unravelling of the agency agreements only affected the settling publishers, and that these publishers were already entitled to terminate those agreements after 30 days' notice. "Accordingly, the sum total of Apple’s complaint is that it bargained for twenty-three days more notice of termination than what is provided by the decree," she noted.
On the wider complaint that the case and settlements would only benefit Amazon, Cote resonded: “Even if Amazon was engaged in predatory pricing, this is no excuse for price-fixing.”
Amazon executive Jay Marine said at the launch of the company’s new devices that the settlement was “great for customers”. Apple has already indicated that it would appeal this ruling if it went against the company. But Cote warned in her statement that the settling publishers had "elected to settle this dispute and save themselves the expense of engaging in discovery", adding that they were "entitled to the benefits of that choice and the certainty of a final judgment".