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February 8, 2013

Justice Department Still Gunning for Apple in eBook Dispute

Government, Macmillan Reach Settlement in Anti-trust Case

And then there was Apple.

The U.S. Justice Department says it will continue to litigate against the iPhone maker for conspiring with Holtzbrinck Publishers (also known as Macmillan) and four other of the largest book publishers in the U.S. to raise eBook prices.

The Justice Department announced today it has reached a settlement with Macmillan, the last of the book publishers, in the eBook anti-trust lawsuit. The department’s Antitrust Division previously settled its claims against Hachette Book Group Inc., HarperCollins Publishers L.L.C., Penguin Group (USA) Inc. and Simon & Schuster Inc.

Despite the settlement, Macmillan Chief Executive John Sargent maintains the company has done nothing wrong.

“I had an old-fashioned belief that you should not settle if you have done no wrong. As it turns out, that is indeed old-fashioned,” Sargent wrote in a letter posted on the company website.

“I like to believe that we would win at trial. But outcomes are hard to predict with certainty, particularly in a civil case with a low burden of proof. And so we agreed to settle with no admission of guilt.”

Sargent said had the company chosen to stand its ground despite all of the other publishing houses agreeing to settle, it would have been responsible for not only its own damages, but those of the other publishers as well, less the amount they paid in the settlement.

“A few weeks ago I got an estimate of the maximum possible damage figure,” Sargent said in the letter. “I cannot share the breathtaking amount with you, but it was much more than the entire equity of our company.”

Under the proposed settlement agreement, Macmillan must immediately lift the restrictions it set on discounting and other promotions by eBook retailers, the Justice Department 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,” said Jamillia Ferris, chief of staff and counsel at the Department of Justice’s Antitrust Division. “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 best sellers, we expect the prices of many of Macmillan’s e-books will also decline.”

The publisher will be banned from entering into new agreements with comparable restrictions until December 2014. Macmillan must also follow a strong antitrust compliance program which will require the firm to provide advance notification to the Justice Department of any eBook ventures it plans to start jointly with other publishers. The firm must also 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,” the Justice Department said in a statement.

The government filed its lawsuit against Apple and the five publishers April 11, 2012, accusing the group of plotting to eradicate retail price competition, resulting in customers forking out more for their eBooks.

The settlement with Hachette, HarperCollins and Simon & Schuster was approved by the court in September 2012.  The public comment period on the department’s settlement with Penguin will close on March 5, 2013.

Unless Apple also decided to settle, the trial against the iPhone maker will take place in June.

Apple has described the suit as “unfair, unlawful, and unprecedented.”

One Response to “Justice Department Still Gunning for Apple in eBook Dispute

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