November 24, 2014

Macmillan Settles Ebook Price-Fixing Suit

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Macmillan on Friday became the last of five major publishers to settle a lawsuit over the pricing of ebooks originally filed by the U.S. Department of Justice (DOJ) and 15 states in April 2012. In an email addressed to “Authors, Illustrators and Agents” Macmillan CEO John Sargent wrote that he believed the company had done nothing wrong and could still win the case, but the risk of losing the legal battle had become too high.

“Our company is not large enough to risk a worst case judgment,” he wrote. “In this action the government accused five publishers and Apple of conspiring to raise prices. As each publisher settled, the remaining defendants became responsible not only for their own treble damages, but also possibly for the treble damages of the settling publishers (minus what they settled for). A few weeks ago I got an estimate of the maximum possible damage figure. I cannot share the breathtaking amount with you, but it was much more than the entire equity of our company.”

The lawsuit had accused Hachette, HarperCollins, Simon & Schuster, Penguin, and Macmillan of conspiring with one another and working with Apple to set agency-model prices for ebooks. Presumably, the goal was force Amazon to raise the $9.99 price point that it charges for many bestselling ebook titles.

Hachette, HarperCollins, and Simon & Schuster settled with the DOJ and the states immediately after the suit was filed. Penguin reached a settlement with the DOJ in December, but remains a defendant in the case brought by the states. In addition to its settlement with the DOJ, Macmillan last week agreed to pay up to $20 million to settle both the state and related consumer class action cases.

Apple remains a defendant in all of the cases, and the company has shown little indication that it will back down. In August 2012, Apple sent a strongly-worded memo to the Southern District Court of New York, describing the DOJ’s handling of the case and its proposed settlement terms as “fundamentally unfair, unlawful, and unprecedented.”

Under terms of the settlement, Macmillan will immediately lift restrictions on discounting and promotions by ebook retailers, according to the New York Times. The company will be prohibited from entering into new agreements with similar restrictions through December 2014.

“I’m disappointed it ended this way. But this round will shortly be over, and it is time for us to move on to the next,” Sargent wrote.

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Matt Enis About Matt Enis

Matt Enis (menis@mediasourceinc.com; @matthewenis on Twitter) is Associate Editor, Technology for Library Journal.

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