Department of Justice Asks Judge to Approve Agency Pricing Settlement

5069265780_3c7be147e1_mThe process moves on. Publishers Weekly reports that the Department of Justice filed a motion (PDF, 19 pages) on Friday officially requesting Judge Denise Cote to approve the proposed settlement between the DoJ and Hachette, Simon & Schuster, and HarperCollins. The settlement won’t kick in right after that happens, but it will be an important milestone on the road.

It’s also unclear yet whether the settlement will be approved; remember that the judge in the controversial Google Books case decided that the Authors Guild’s proposed settlement was too one-sided and rejected it. I don’t recall seeing much in the way of opinions from the judge one way or another as to the validity of the settlement—but the settlement’s detractors have claimed it is based on a “fairly creative interpretation of anti-trust law”. If the judge sides with the opponents and rejects the settlement, will this throw a wrench in the DoJ’s plans?

As mentioned before, the agreement requires the publishers to cease their agency pricing arrangements with Apple within seven days of its approval and any other retailer within 30 days. They also can’t enter into any “Most Favored Nation” contracts, which allow the retailers to match lower prices from competitors.They have to discuss any new contract arrangements with the DoJ, and can’t retaliate against any retailers for discounting pricing on their books.

The settling publishers can’t share privileged information about business plans and strategies with each other, and are limited to specific information such as current cover prices or matters concerning rights or IP issues.

The settlement notes that publishers can pay retailers (including e-book retailers) extra for promotional services—so they could choose to pay bookstores extra for plugging e-books for them, for instance. And they could enter into agency agreements (where the revenue is 30%/70% split, for instance) as long as the agreements don’t prohibit the retailer from running sales—though the retailer can’t discount by more than the amount of its own total commission on all of that publisher’s books. (Which kind of makes the whole purpose of the agency scheme in the first place a moot point.)

The publishers will have to designate a member of their legal staff an anti-trust compliance officer, who must undergo four hours of training per year to make clear what’s expected under the settlement.

Will Judge Cote approve the settlement? Or will she send it back to the drawing board? Whatever happens, it promises to be interesting finding out.

Photo by geetarchurchy.

Chris Meadows

View posts by Chris Meadows
Chris Meadows, Editor of TeleRead, has been writing about e-books and mobile devices since 1999: first for ThemeStream, later for Jeff Kirvin's Writing on Your Palm, and then for TeleRead starting in 2006. He has also contributed a few articles to The Digital Reader along the way. Chris has bought e-books from Peanut Press/eReader, Fictionwise, Baen, Barnes & Noble, Amazon, the Humble Bundle, and others. He is a strong believer in using Calibre to keep his library organized.


  1. fjtorres6 August, 2012

    The only reason the judge might reject the settlement is if she thinks it is too light a punishment on the three settling publishers. Which is true.

  2. Richard Adin7 August, 2012

    I disagree, Felix. I think there are a number of good reasons to reject the settlement, including that the proposed “punishment” bears no relationship to the alleged “crime.” The judge might well think that it is irrational to require the settlers to give up what the DOJ agrees is legal for them to do (agency pricing). The judge might also agree to some terms and not others.

    1. fjtorres7 August, 2012

      The intent of settlements in cartel cases is to restore the status quo ante. The list of *limited* restrictions in the settlement seek to achieve that. Prohibiting otherwise legal behavior is not without precedent in antitrust cases and do remember, the settling publishers *agreed* to those terms. It is the recalcitrant conspirators and other beneficiaries of the illegal behavior that are objecting.
      Mostly because the only other viable alternative would’ve been to fine the beneficiaries of the conspiracy their ill-gotten gains, plus penalties; something in the high nine figures.
      So two years of light restraints versus a sacking of their operational capital?

      This isn’t the Google case where two private parties were usurping the Congress’ power to set copyright policy but rather a case where the government is enforcing the law of the land. If anything, I expect harsh words from the judge and a warning to B&N that they still could be named as a participant in the conspiracy for their role in “convincing” RH into joining up.

      There’s a lot of dirty hands in this affair and may are getting away scot-free.

      1. fjtorres7 August, 2012

        Make that: Many are getting away scot-free.

    2. fjtorres7 August, 2012

      Let me put it this way:
      1- Judges rarely reject negotiated settlements for being *too harsh*. They do reject them for being *too lenient*.

      2- In this case there was a conspiracy to carry out a certain concerted action. Whether that action was legal by itself is irrelevant; the conspiracy is the crime, the concerted action is the *benefit* of the crime to the criminals. Depriving criminals of the benefits of crime is a fitting part of any punishment. (C.F. RICO statutes).

      So there is plenty of logic in companies that conspired to impose price fixing being prevented from price fixing. Especially since the prohibition only lasts as long as the conspiracy ran roughshod over consumers. Two years? Not much, really.
      They’ll be back to their old ways by 2015 and back in court by 2017. Count on it.

      That they are given the fig leaf of *not* being legally branded as price-fixing conspirators (giving them a modicum of leverage in the attendant civil suits) is actually more leniency than they deserve.

      Just as B&N not being named an “un-indicted co-conspirator” or “accessory after the fact” is by itself an act of underserved leniency. Fortunately, that one is revocable.

      And I can easily see the class -action lawsuits being ammended to include B&N, among others, once the case against the recalcitrants gets to trial and the unredacted evidence becomes part of the public record.
      Once email names are named…

  3. Mike Cane7 August, 2012

    If the Judge has any sense of bookselling history, the settlement will be approved. The discounting Amazon engaged in was first done by objectors such as Barnes & Noble itself — which *brags* of that historical fact on its own website.

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