Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: U.S. consent decree with Macmillan approved in e-book price fixing case, (Aug 15, 2013)

By Jeffrey May, J.D.

The last remaining consent decree resolving allegations against a major publishing house in the U.S. Department of Justice action against Apple Inc. and major publishers for conspiring to fix e-book prices has been approved by the federal district court in New York City. On August 12, the court entered the consent decree as to Verlagsgruppe Georg von Holtzbrinck GmbH and Holtzbrinck Publishers, LLC, which does business as Macmillan (U.S. v. Apple, Inc., August 12, 2013, Cote, D.).

The consent decree settles civil charges against Macmillan for participating in a conspiracy with other publishers—Hachette Book Group (USA), HarperCollins Publishers L.L.C., Simon & Schuster Inc., and Penguin Group (USA)—and Apple Inc. to raise e-book prices by moving to a new sales model. Under the new agency model, the publishers sold titles to consumers directly at prices set by the publishers with retailers serving as the publishers’ “agents” and receiving a percentage of each sale as commission. The change from the wholesale model—where a publisher receives its designated wholesale price for each e-book and the retailer sets the retail price—was purportedly intended to force market leader Amazon Inc. to relinquish retail pricing authority. The publishers entered into functionally-identical agreements with Apple, which distributes e-books through its “iBookstore.”

The suit was announced in April 2012. At that time, three of the publishers—Hachette, HarperCollins, and Simon & Schuster—agreed to resolve the allegations under the terms of a consent decree. Eventually, all of the publishers settled, and the case went to trial against Apple only. Following a bench trial, Apple was found liable for violating the antitrust laws in July.

The original consent decree required the first three settling publishers to terminate their agreements with Apple and other e-book retailers and prohibited them for two years from entering into new agreements that constrain retailers' ability to offer discounts or other promotions to consumers to encourage the sale of the publishers' e-books (the “cooling-off” period). It also imposed a strong antitrust compliance program on the three companies. The final judgment was entered by the court in September.

In December 2012, a fourth publisher, Penguin, agreed in its settlement to substantially similar terms as those in contained in the earlier consent decree. The final judgment with Penguin was entered by the court in May 2013.

Macmillan reached a settlement with the Justice Department in February 2013. Macmillan also agreed to settle on substantially the same terms as those contained in the earlier publisher settlements. Unlike the earlier settlements, however, the consent decree with Macmillan required the publisher to immediately stop enforcing restrictions on discounting or promotions contained in its contracts with retailers. Macmillan was not permitted to wait for court approval of the settlement or the termination of existing contracts with retailers. In addition, the “cooling-off” period would last through December 2014.

In a separate order also entered on August 12, the court explained its reasons for finding the consent decree with Macmillan to be in the public interest. The language and relief contained in the consent decree with Macmillan was “largely identical” to the terms included in the earlier settlements with the other publishers. While a commentor had objected to certain aspects of the Macmillan consent decree, similar comments had already been considered when reviewing the two other settlements. The commentor's arguments had already been comprehensively addressed, in the court's view.

This is Case No. 12 Civ. 2826 (DLC).

Attorneys: John R. Read for Department of Justice. Joel M. Mitnick (Sidley & Austin LLP) for Holtzbrinck Publishers LLC.

Companies: Apple Inc.; Hachette Book Group Inc.; HarperCollins Publishers L.L.C.; Simon & Schuster Inc.; Penguin Group (USA) Inc.; Holtzbrinck Publishers, LLC.

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