Penguin settles with DOJ over e-book price fixing allegations

The U.S. Department of Justice announced on Tuesday that it had reached a settlement with Penguin Group (USA) Inc. over whether or not the publisher was breaking the law when it conspired with other publishers and Apple to set prices for digital book releases on Apple’s iBookstore. The settlement, which requires approval from a court before finalization, will remove the publisher from ongoing litigation against Apple and book publisher Macmillan which is headed to court next summer.

Details of the settlement remain unknown at time of writing, but it’s believed that Penguin’s settlement with the DOJ closely mirrors those previously agreed on by three other publishers earlier in the investigation. Earlier this April, Hachette, Harper Collins, and Simon & Schuster all settled with the Justice Department over the issue, agreeing to cancel their current e-book agreements with online retailers in favor of the creation of new deals that would give retailers the opportunity to set their own pricing to customers for e-book releases, even if that meant they are losing money and treating certain titles as loss-leaders for the sake of future customer loyalty.

That settlement also saw the three publishers agreeing to pay for the legal expenses of the states that had brought the price-fixing charges against them in addition to collectively providing a $69 million fund that would be available to customers who had purchased e-books from any of the publishers released between April 2010 and May 2012 at the “unfair” prices offered at the time. Presumably, Penguin will be required to contribute some level of money towards the fund, although details are, again, unclear.

Penguin’s settlement comes as a surprise in light of the publisher’s initial reaction to the DOJ’s lawsuit, which took the form of an extremely lengthy denial that rebutted every single one of the DOJ’s 104 allegations in detail. The statement very plainly specified that “Penguin did not conspire to fix the prices of eBooks with other publishers or with Apple,” but instead the publisher, “at the invitation of Apple, independently negotiated and ultimately entered into a vertical distribution agreement with Apple.” The action led to increased competition by preventing Amazon from becoming a monopoly on e-book sales and distribution. Clearly, despite such initial vehemence, the two parties found some common ground.

Such ground may have come in the form of Random House Inc., the largest U.S. book publisher (and one unnamed in the DOJ suit); Penguin announced a merger with Random House in late October, and a merger of that size requires the blessing of the DOJ in order to proceed. Perhaps those at Penguin realized that it would be in everyone’s interests to play nice, just in case.

The DOJ suit against Apple and Macmillan is due to be heard in June 2013.

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