May 23, 2013

Penguin settles antitrust suit, will pay nearly $90 million


Penguin, one of five big publishers to be targeted by the Department of Justice in an ebook price-fixing investigation, has settled antitrust claims brought on behalf of consumers and 33 state attorneys general. The move follows Penguin’s settlement with the DOJ in December of 2012, after vowing for months to fight the lawsuit in court. (After vowing to fight for many months, the company then said it would settle, only to return to saying it would go to trial.)

Lest you think Penguin was holding out for a good deal: it ended up paying more than all of the other publishing defendants, at a total cost of more than $90 million in payments and fees. By contrast, according to PublishersLunch, the total bill will be “more than the $78.9 million paid by the first three Settlers combined.”

The New York Times phrases the cost to Penguin at a much smaller amount, reporting only $75 million in consumer damages “plus costs and fees.” But, as the PublishersLunch dispatch clarifies, the fees add up to nearly $15 million…. a enormously bad break for Penguin. To put that number in context:

Hachette had incurred the largest penalty, paying $31.7 million in compensation, plus costs… When Macmillan settled earlier this year, they agreed to pay $20 million in consumer restitution and roughly $6 million more in costs and fees. Total consumer payments secured now add up to $164 million, with another $31 million or so in costs and fees.

In a press release, the law firm of Hagens Berman, which “was appointed lead counsel to represent the rights of consumers in the consolidated class-action lawsuit first filed on Aug. 9, 2011,” claims credit for the savvy negotiations that led to the massive settlement, but it’s hard to imagine that the size of the settlement is anything other than punishment for Penguin’s threatening to go to trial.

The size of the settlement and related fees likely come as something of a shock to even Penguin, which, in a February 2012 filling, estimated possible charges at only $40 million.

The settlement is subject to court approval, but if accepted Penguin would withdrawal from the trial scheduled to begin June 3, which will—if all goes according to plan—have only one defendant, Apple, now said by the government to be the “ringleader” of a conspiracy to raise ebook prices.



Kelly Burdick is the former executive editor of Melville House.