Another settlement in the DoJ’s e-Books investigation

Published On 11/02/2013 | By Kim de Kock | Cartels, Enforcement, Litigation

As we reported in our previous post, a number of antitrust regulators around the world have been investigating arrangements between publishers and Apple which were alleged to restrict retail competition and raise the retail prices of e-books.

The US Department of Justice (DoJ) brought charges against Apple and five major publishers in April 2012 for conspiring to raise retail e-book prices and eliminate price competition, which resulted in substantial price increases for consumers.  According to the DoJ, prior to the conspiracy between the parties, retailers regularly sold new releases and bestsellers in e-book versions for, as described by the CEO of one of the publishers, the “wretched $9.99 price point.”  As a result of the conspiracy, prices were increased to between US$12.99 and US$14.99.

During the course of its investigation, the DoJ settled with four of the five publishers; Hachette, HarperCollins, Simon & Schuster and Penguin.  Despite settling with the European Commission in early December 2012, Holtzbrinck Publishers LLC, trading as Macmillan, continued to oppose the allegations brought by the DoJ until the end of last week.

On Friday 8 February, the DoJ announced that it had reached an agreement with Macmillan which, if accepted by the US District Court in Manhattan, will result in the removal of restrictions that Macmillan had imposed on e-book retailers in relation to discounting and other promotions.  Under the settlement agreement, Macmillan is prohibited from imposing any similar restrictions until December 2014 and must establish a comprehensive antitrust compliance program which includes obligations to notify the DoJ of any e-book joint ventures it may consider undertaking and to report all communications it has with other publishers.  Macmillan is also prohibited from including most favoured nation (MFN) clauses in any of its agreements for a five year period.  An MFN clause is one which entitles a contracting retailer to apply any lower retail price offered for an e-book by another retailer, regardless of whether that other retailer is operating on a wholesale or agency model.

The DoJ continues to pursue Apple, the only remaining defendant in the matter, and trial is scheduled to commence in June 2013.

While the Financial Review previously reported that the ACCC is considering its options following the US lawsuit, no public investigative action has been taken by the ACCC to date.

Photo credit: ceslava.com / Foter.com / CC BY-SA

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About The Author

is a Senior Associate in the Sydney office of King & Wood Mallesons where she specialises in anti-trust law, with a focus on mergers and acquisitions, access matters as well as general competition issues. Outside of the office, Kim has recently taken up surfing... but is probably not going to be appearing on the ASP tour any time soon.

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