Penguin and DOJ Reach E-Book Pricing Settlement

The Department of Justice announced on Tuesday [1] that it had reached a settlement with Penguin Group (USA) in the antitrust suit brought in April against Apple and five major publishers with agency model pricing for e-books [2]. As in previously announced settlements with Hachette, HarperCollins, and Simon & Schuster, Penguin denies violating antitrust laws but must terminate its agreements with Apple and other e-book retailers and will be prohibited 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 Penguin’s e-books.”

The New York Times [3]observed that the settlement is Penguin’s attempt to clean the slate before its merger with Random House.

“Penguin has always maintained, and continues to maintain, that it has done nothing wrong and has no case to answer,” the company said in a statement, as reported by the Times. However, the publisher noted that it was in “everyone’s interests that the proposed Penguin Random House company should begin life with a clean sheet of paper,” as reported by the Wall Street Journal [4].

The proposed settlement with Penguin was filed in the U.S. District Court for the Southern District of New York.  If approved by the court, DOJ stated the settlement will resolve the department’s competitive concerns as to Penguin, ending Penguin’s role as a defendant in the civil antitrust lawsuit filed by the department on April 11, 2012.

The proposed settlement agreement imposes a “strong antitrust compliance program on Penguin,” DOJ said, including a requirement that it provide advance notification to the department of any e-book ventures it plans to undertake jointly with other publishers and that it regularly report to the department on any communications it has with other publishers.  Also for five years, Penguin will be forbidden from agreeing to any kind of most favored nation (MFN) agreement that could undermine the effectiveness of the settlement.

DOJ said that it is currently reviewing the proposed merger of Penguin and Random House Inc., and should the proposed joint venture proceed to consummation, the terms of Penguin’s settlement will apply to it.

The remaining two defendants in the DOJ’s civil suit, Macmillan and Apple, are scheduled to go to trial in June 2013.

The proposed settlement with Penguin will be published in the Federal Register and any person may submit written comments concerning the proposed settlement within 60-days of its publication to John R. Read, Chief, Litigation III Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, NW, 4th Floor, Washington, DC 20530.  These comments will be published either in the Federal Register or, with the permission of the Court, will be posted electronically on the department’s website.  At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.