April 5, 2012

Penguin, Macmillan, and Apple said to be holding out from settlement with DOJ


“Talks to resolve U.S. and European price-fixing probes into e-books are heating up, with three international publishers inclined to settle the matter,” according to a Wall Street Journal report by Thomas Catan and Jeffrey A. Trachtenberg posted last night. However, “Apple Inc., another target of the investigation, and two publishers appear reluctant to settle on the terms sought by antitrust authorities in both the U.S. and Europe.” (See the earlier MobyLives report.)

“Word has it that Apple along with Penguin Group and Macmillan are the remaining holdouts,” says a CNET News report by Charles Cooper — although he seems more maniacally focused on seeing “tech celebs” getting their comeuppance from the Department of Justice in this case, even though the only possible “tech celeb” he could be referring to, Steve Jobs, is dead. But a more detailed and thoughtful report from Bryan Chaffin for the Mac Observer more convincingly also says the holdouts are Penguin and Macmillan.

Regardless of the holdouts, the WSJ report notes that potential settlement terms haven’t yet been finalized, but “early indications suggest they could have broad repercussions for the fast-growing e-book market.”

A settlement would likely involve tearing up contracts the publishers signed with Apple when it first introduced the iPad tablet computer in 2010, according to the people familiar with the matter.

Publishers who sign on to the settlement would likely have to allow market leader Amazon.com resume discounting their e-books, a practice they dislike. It is unclear whether books by publishers who settle with the government would continue to be available on the iPad, and if so at what price.

But the further implications of such a settlement upon publishers outside the potential lawsuit remain unclear. As the WSJ report concludes, “It is unclear what publishers that aren’t party to a settlement—including Bertelsmann AG’s Random House Inc. which isn’t part of the investigation—would do if the books of their competitors were sharply discounted while their own titles remained set at the agency prices.”

Meanwhile, as for those involved in the settlement, Chaffin in the Mac Observer notes that the government seems focused on Apple’s contract having a “most favored nation” clause, meaning no one could get a better deal. Chaffin notes sources are saying any potential settlement would “include scrapping the most favored nation clause, as well as a ‘cooling off’ period before the publishers could resume their existing deals with retailers. The DOJ apparently believes this will eliminate any taint of collusion.”

Shouldn’t take long, as there wasn’t any collusion in the first place.


Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House. Follow him on Twitter at @mobylives