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Macmillan Settles Antitrust Action

By Joel L. Hecker

As you probably know by now, the U.S. Justice Department commenced a civil antitrust action against five of the six major book publishers in the United States as well as Apple, Inc. This action arose out of allegations that the defendants conspired to raise the price of e-books over a period of time in response to the practice by Amazon.com of selling e-books for $9.99.

The parties had extensive negotiations prior to the filing of the action and the government reached a settlement with Hachett Book Group, Inc., HarperCollins Publishers, LLC, and Simon & Schuster, Inc., three of the publishers. As a result, simultaneously with the filing of that complaint, the government also filed a Stipulation of Settlement and Consent Decree along with a Competitive Impact Statement. That settlement was approved by Judge Cote of the Southern District of New York on September 5, 2012, at which time she granted the government's motion for a final judgment against these three publishing defendants. (Please see my article in the Fall/Winter 2012 Edition of the EASL Journal for a detailed description of the terms of that settlement.)

In December 2012, the fourth publishing defendant, the Penguin Group (Penguin), a division of Pearson PLC, Penguin Group (USA) Inc. abandoned its defense and also agreed to settle on the same terms as previously approved by Judge Cote. The public comment period on that settlement runs through March 5, 2013, after which Judge Cote will hold a hearing on the government's motion to approve that Consent Decree and whether to grant the government's motion for a final judgment against Penguin.

As a result, Macmillan (actually Verlagsgruppe Georg Von Holtzbrinck GMBH, Holtzbrinck Publishers, LLC d/b/a Macmillan) was left as the only remaining publishing defendant in the action (along, of course, with Apple). On February 8, 2013, Macmillan gave in and agreed to settle on the same terms previously agreed to by the other four publishing defendants. The reasons given for abandoning its defense were spelled out, in a letter by Macmillan's CEO, John Sargent, that Macmillan "settled because the potential penalties became too high to risk even the possibility of an unfavorable outcome." Sargent also wrote that, "I had an old-fashioned belief that you should not settle if you had done no wrong. As it turns out, that is indeed old-fashioned." Aside from being old-fashioned, the government obviously takes issue that Macmillan had done no wrong!

Another reason that Macmillan reached the settlement was that the market for e-books seems to have not led to any noticeable drop in e-book prices, which was the great fear of the publishers. Therefore, Macmillan had been out of step in the marketplace.

Macmillan will now go through the same process of having the government file a Stipulation of Settlement and Consent Decree along with a Competitive Impact Statement. There will then be a period for public comment, followed by a motion by the government before Judge Cote for approval and for a final judgment.

This leaves Apple as the only defendant in the action with a trial date currently set for June 2013.

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This page contains a single entry from the blog posted on February 12, 2013 12:24 PM.

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