September 8, 2012

Judge Approves E-Book Price-Fixing Settlement

redOrbit Staff & Wire Reports — Your Universe Online

The U.S. Justice Department's proposed settlement with three electronic book publishers accused of participating in an ebook price-fixing scheme has been approved by a federal judge, various media outlets have reported.

The ruling, handed down by U.S. District Judge Denise Cote in Manhattan on Thursday, decrees that the three publishers involved -- Hachette Book Group, HarperCollins Publishers Inc and Simon & Schuster Inc -- must abandon a pricing system that they and the other publishers had agreed to with former Apple CEO Steve Jobs prior to the release of the iPad in 2010, AP Technology Writer Michael Liedtke explained.

A revised pricing structure is expected to be unveiled sometime next week, according to the AP.

"The ruling released Thursday cast aside the strident objections of Apple, other book publishers, book sellers, and authors who argued the settlement will empower Internet retailing giant Inc. to destroy the 'literary ecosystem' with rampant discounting that most competitors can't afford to match," Liedtke said. "Those worries were repeatedly raised in court filings about the settlement."

"Apple“¦ and two of the objecting publishers, Macmillan and the Penguin Group, also had argued it would be unfair to approve the settlement before they have a chance to fight the government's price-fixing allegations in a trial scheduled to begin next June," he added. However, "Cote“¦ decided the settlement 'appears reasonably calculated to restore retail price competition to the market.'"

According to Diane Bartz of Reuters, all five publishers were allegedly convinced by Apple to use the so-called agency model, which allows publishers to determine the price of their e-books while allowing the Cupertino, California-based company to take a 30% cut of the profits on all copies downloaded on the iPad, iPhone or iPod Touch.

As part of the deal, the three companies involved with the settlement have vowed not to use the model for a 24-month period, allowing retailers to purchase the e-books and then set their own prices for them.

"The proposed settlement was unpopular with bookseller Barnes & Noble Inc and the American Booksellers Association, which represents independent stores, with both arguing that it would strengthen Amazon's dominance," Bartz said. "Many people in the book publishing and selling industry accuse Amazon of selling books below cost to drive other e-book sellers out of business, and then raising prices."

However, in her 45-page ruling, Cote declared that even if Amazon did participate in such practices, it was still "no excuse for price-fixing" amongst Apple and the publishers. Apple, who was reportedly considering appealing if the settlement was approved, had no comment following Cote's verdict, Liedtke said.

The Justice Department, on the other hand, released a statement in which they said that they were "pleased the court found the proposed settlement to be in the public interest and that consumers will start to benefit from the restored competition in this important industry," the AP also reported.