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DOJ Sues Apple & Publishers

The Department of Justice has sued Apple and publishers for allegedly colluding to set eBook prices. Apple, Macmillan and Penguin will fight the suit in court; HarperCollins (statement here), Simon & Schuster and Hachette (statement here) have settled with the government.

In court documents, DOJ attorneys alleged that Apple and five major publishers engaged in a “substantial” conspiracy as they set up the agency model for eBook pricing–including deleting emails “to avoid leaving a paper trail.”

Macmillan CEO John Sargent has decided to fight the suit. Read his letter here: “Other publishers have chosen to settle. That is their decision to make. We have decided to fight this in court.”

The settlement will end the agency model that set a single price for an eBook across all digital book marketplaces. The pricing structure will end for the next two years. Here is the most important part of the settlement agreement reached by HarperCollins, Simon & Schuster and Hachette:

For two years, Settling Defendants shall not restrict, limit, or impede an E-book Retailer’s ability to set, alter, or reduce the Retail Price of any E-book or to offer price discounts or any other form of promotions to encourage consumers to Purchase one or more E-books, such two-year period to run separately for each E-book Retailer.

Publishers have seven days to decide between these two DOJ-mandated options:

1. the termination of an agreement between the Settling Defendant and the E-book Retailer that restricts, limits, or impedes the E-book Retailer’s ability to set, alter, or reduce
the Retail Price of any E-book or to offer price discounts or any other form of promotions to
encourage consumers to Purchase one or more E-books; or

2. the date on which the Settling Defendant notifies the E-book Retailer in
writing that the Settling Defendant will not enforce any term(s) in its agreement with the E-book Retailer that restrict, limit, or impede the E-book Retailer from setting, altering, or reducing the Retail Price of one or more E-books, or from offering price discounts or any other form of promotions to encourage consumers to Purchase one or more E-books.

Bloomberg had the first complete report: “The U.S. filed an antitrust lawsuit against Apple Corp., Hachette SA, HarperCollins, Macmillan, Penguin and Simon & Schuster in New York district court, claiming collusion over eBook pricing.”

The Wall Street Journal added: “A settlement involving some of the publishers is expected to be filed Wednesday, according to a person familiar with the matter.” Macmillan CEO John Sargent wrote a public letter about the case.

Editor’s Note: This post has been updated as the story evolved.

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