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Penguin c.e.o Makinson to DoJ 'see you in court'
11.04.12 | Philip Jones
Penguin chief executive John Makinson has said the Department of Justice's document alleging publisher collusion over the shift to the agency model in 2010 "contains a number of material misstatements and omissions".
Penguin, along with fellow US publisher Macmillan, has refused to reach an agreement with the DoJ, after the regulatory authority found that five US publishers and Apple made a "collective effort to end retail price competition by coordinating their transition to an agency model across all retailers".
In a statement released this evening, Makinson said Penguin had held no settlement discussions with the DOJ or US States. He said: "The decisions that we took, many them of them costly and difficult, were taken by Penguin alone."
The suit, filed today by the DoJ, is particularly damaging to Penguin. The company is referenced 41 times, more than Macmillan, and double the number of times any of the settling publishers--HarperCollins, Hachette Book Group, and Simon & Schuster--are referred to. Makinson is also directly named, as is David Shanks, c.e.o of Penguin USA, a number of times: again more than any other c.e.o.
Makinson, for example, is cited as telling his parent company board of directors that "the industry needs to develop a common strategy" to address the threat "from digital companies whose objective may be to disintermediate traditional publishers altogether". He is also one of four c.e.os said to have attended two dinner meetings in "The Chefs Wine Cellar," a private room at Picholene.
Shanks is said to have wanted assurances from Apple that Penguin was "1 of 4" before signing Apple's agency terms. Penguin and Shanks are also reported to "have taken the lead" in the efforts to convinced Random House to move to agency. According to the DoJ's filing, "Shanks also encouraged a large print book and e-book retailer to punish the other publisher for not joining defendants' conspiracy."
But Makinson responded: "We have had the opportunity to study the complaint released by the DOJ today and nothing in this lengthy document causes us to veer from that position. The document contains a number of material misstatements and omissions, which we look forward to having the opportunity to correct in court."
Makinson also continued to defend the agency model. He said: "We believed then, as we do now, that the agency model is the one that offers consumers the prospect of an open and competitive market for e-books."
Statement in full
You may have seen that the US Department of Justice, and a number of state Attorneys-General, brought civil antitrust actions today against Penguin Group, the international publishing company, and several other parties.
A responsible company does not choose a path of litigation with US Government agencies without carefully weighing the implications of that course of action. Nonetheless, countless hours discussing this issue with colleagues here at Penguin, as well as with our parent company, Pearson plc, have not led any of us to the view that we should settle this matter. Indeed, alone among the publishers party to the investigations that resulted in today’s announcements, we have held no settlement discussions with the DOJ or the states.
We have held strongly to this view for two, and only two, reasons. The first is that we have done nothing wrong. The decisions that we took, many them of them costly and difficult, were taken by Penguin alone.
We have had the opportunity to study the complaint released by the DOJ today and nothing in this lengthy document causes us to veer from that position. The document contains a number of material misstatements and omissions, which we look forward to having the opportunity to correct in court.
The second, and equally powerful, reason for our decision to place this matter in the hands of a court is that we believed then, as we do now, that the agency model is the one that offers consumers the prospect of an open and competitive market for e-books. We understood that the shift to agency would be very costly to Penguin and its shareholders in the short-term, but we reasoned that the prevention of a monopoly in the supply of e-books had to be in the best interests, not just of Penguin, but of consumers, authors and booksellers as well.
We are of course in the business of making money for our shareholders, but our purpose as a company is to make entertaining and intelligent books for readers of all ages and tastes. We shall not achieve either of those objectives in the absence of competition or choice. The decision we took in January 2010 to move Penguin’s e-book business to agency pricing has been vindicated by the very rapid subsequent growth in the volume of e-books sold by agency publishers, and by the benefit to consumers of the steep decline in the price of e-book readers that that has resulted from this open competition.
Any other decision would have been a disservice in the long term to our staff and our shareholders, but also to the writers, booklovers, retailers and agents whom we serve.