Macmillan US has done a u-turn over the Department of Justice agency model e-books pricing case, and has reached a settlement with the DoJ, having previously been the last remaining publisher continuing to fight the collusion case. Macmillan US c.e.o. John Sargent said the decision to settle came because the company "is not large enough to risk a worse case judgment".
Apple continues to dispute the case and the trial against the technology company is scheduled to begin in June 2013. Penguin had also previously pledged to fight the case at trial, but settled with the DoJ in December last year. At that time, Sargent said the publisher would continue to fight the lawsuit, and said: "It is hard to settle when you have done nothing wrong."
The proposed settlement with Holtzbrinck Publishers, which trades as Macmillan, was filed today [8th February] in the US District Court for the Southern District of New York. If approved, the settlement will resolve the department's competitive concerns involving Macmillan.
According to a DoJ statement, under the proposed settlement agreement, Macmillan will "immediately lift restrictions it has imposed on discounting and other promotions by e-book retailers and will be prohibited until December 2014 from entering into new agreements with similar restrictions". According to the filing, Macmillan must contact all e-book retailers with which it has an agreement to sell e-books that it will "no longer enforce any term or terms in any such agreement that restrict, limit, or impede the e-book retailer's ability to set, alter, or reduce the retail price of any e-book or to offer
It added: "The proposed settlement agreement also will impose a strong antitrust compliance program on Macmillan, including requirements that it provide advance notification to the department of any e-book ventures it plans to undertake jointly with other publishers and regularly report to the department on any communications it has with other publishers. Also for five years, Macmillan will be forbidden from agreeing to any kind of most favored nation (MFN) provision that could undermine the effectiveness of the settlement."
Chief of staff and counsel at the Department of Justice's Antitrust Division Jamillia Ferris said: "As a result of today's settlement, Macmillan has agreed to immediately allow retailers to lower the prices consumers pay for Macmillan's e-books. Just as consumers are already paying lower prices for the e-book versions of many of Hachette's, HarperCollins' and Simon & Schuster's new releases and bestsellers, we expect the prices of many of Macmillan's e-books will also decline."
In a letter to authors, illustrators and agents, Macmillan c.e.o. John Sargent said he had agreed to settle because "the potential penalties became too high to risk even the possibility of an unfavourable outcome".
He said that the Random House-Penguin merger had contributed to the volte-face, as it would mean the combined publisher would sell its e-books under terms Penguin reached with the DoJ.
He also said that as Macmillan was the last publisher to be fighting the case, it faced the possibility of being responsible for the damages of the other publishers as well as its own. These would have totaled "much more than the entire equity of our company", said Sargent. He said that he expected the change in Macmillan's terms "to take effect quickly".
According to the filing, the DoJ judgement for Macmillan differs from that offered to the other publishers. Whereas they were given time to negotiate new retail contracts, Macmillan must “immediately stop enforcing restrictions on discounting or promotions contained in its contracts with retailers”, allowing retailers to begin offering discounts within three days of the settlement being agreed.
Their two-year cooling-off period has been agreed to have started on 18th December 2012, the date on which Penguin signed its own settlement with the DoJ.
Macmillan must contact all e-book retailers with which it has an agreement to sell e-books within three days to inform them that it will "no longer enforce any term or terms in any such agreement that restrict, limit, or impede the e-book retailer's ability to set, alter, or reduce the retail price of any e-book or to offer price discounts or any other form of promotions to encourage consumers to purchase one or more e-books".
The settlement will apply until 8th December 2014.