On Thursday, September 6, 2012, Judge Cote approved the settlement between the Department of Justice and three of the major US publishers to resolve a dispute over price fixing allegations. The upshot of this ruling means that Simon & Schuster, HarperCollins, and Hachette will no longer be able to restrict ebook sellers like Amazon from discounting ebooks.
This is a big win for Amazon even though the retailer was not a part of the lawsuit brought by the Department of Justice. Instead, the suit targeted five of the so called Big 6 of publishing of conspiring with Apple to fix prices and disallow any discounting. These publishing houses are referred to as such because according to some reports, nearly 80% of the books sold are through one of the Big 6. The practice of setting the price and not allowing discounting, buy clubs or coupons on ebooks is called agency pricing. Only one of the Big 6, Random House, escaped being sued because it did not switch to agency pricing until many months after the other five publishing houses did.
Image credit: Judge's gavel via Shutterstock
The case was assigned to federal district Judge Cote who reviewed almost 900 comments, several legal briefs by parties and other interested individuals such as Authors Guild, the president of one of the largest agenting firms in the U.S., and Barnes & Noble. Many of those who wrote to the judge protested the settlement. Judge Cote responded to the complaints and determined that the settlement, which was bargained for between the DOJ and three publishers, was in the best interests of the public which was not special interest groups like brick and mortar stores or competitors of Amazon, but rather the ebook customer.
The settlement requires the settling publishers to do three things: 1) terminate their contracts with Apple in 7 days instead of the 30 that is in the contract; 2) allow retailers to discount their books for at least two years; and 3) refrain from allowing any retailer to enjoy most favored nation status. The latter allows the retailer to demand that its store has the lowest price anywhere on the internet.
Calling the suit a straight forward price fixing case, Judge Cote found these remedies to address the allegations of conpsiratorial price fixing.
The clock on the settlement began with the order accepting the settlement and all contracts need to be terminated within 30 days and thus the three publishing houses participating must get new contracts negotiated shortly so as not to see any disruption. However, should books not be for sale at your favorite ebook retailer, it may be because the publishers and retailers haven't come to an agreement yet.
Apple and the others could appeal and request a stay of the proceedings, but based on Judge Cote's ruling wanting to get the benefits of the settlement to the ebook consumer as quickly as possible, those delays aren't likely to be approved.
The next step for Judge Cote will be to consider the settlement between the State AGs and the same three settling publishers. That settlement involves a cash rebate to ebook customers in 49 states and 4 territories that totals over $69 million. Consumers who purchased ebooks between April 1, 2010, and May 21, 2012, published by one of the settling publishers will receive emails from ebook retailers which in would allow the consumers to accept a rebate or a voucher toward future purchases.
Disclosure: BlogHer has a financial relationship with Penguin, sponsor of the BlogHer Book Club and one of the Big 6. This editorial post was neither commissioned nor paid for by Penguin.
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