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DoJ Finally Settles with Penguin over Ebook Price Fixing

By - Source: Department of Justice | B 11 comments

Penguin is the next ebook publisher to fall under the mighty Department of Justice banhammer.

The Department of Justice said on Tuesday that it had finally reached a settlement with book publisher Penguin Group Inc regarding the ebook price-fixing scandal. The Department said it will continue to litigate against iPad giant Apple and publisher Macmillan (Holtzbrinck Publishers LLC) for conspiring to raise ebook prices.

"Today’s proposed settlement was filed in the U.S. District Court for the Southern District of New York," the Department said. "If approved by the court, 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 news follows a previous settlement the Department of Justice made with Hachette Book Group Inc., HarperCollins Publishers L.L.C. and Simon & Schuster Inc. All three reportedly didn't have the resources to fight the Department's claims in court, and chose to reach an agreement back in September which now includes a refund to consumers who purchased over-priced ebooks.

"Since the department’s settlement with Hachette, HarperCollins and Simon & Schuster, consumers are already paying lower prices for the e-book versions of many of those publishers’ new releases and bestsellers,” said Jamillia Ferris, Chief of Staff and Counsel at the Department of Justice’s Antitrust Division.  "If approved by the court, the proposed settlement with Penguin will be an important step toward undoing the harm caused by the publishers’ anticompetitive conduct and restoring retail price competition so consumers can pay lower prices for Penguin’s e-books."

The complaint filed by the Department of Justice accused five major book publishers of conspiring with Apple to raise ebook prices. All six parties reportedly feared the ebook market dominance of Amazon and its Kindle ereader, and decided to eliminate the competition once the iPad arrived by eradicating the competitive "Wholesale" price model – where retailers set the price – to an Agency model that allows the publisher to set ebook prices instead.

Once the iPad stormed the computing market, consumers began to see rising costs in ebooks, most of which began to hover around the $15 region – that's more expensive than a paperback book. No longer were retailers allowed to sell ebooks at the "wretched $9.99 price point," as one ebook publisher allegedly described the previous pricing model.

At one point, Penguin said that it would fight the Department of Justice alongside Apple and Macmillan, but that stance seems to have changed. "Under the proposed settlement agreement, Penguin will terminate its agreements with Apple and other e-books 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 Department said.

The proposed settlement agreement will also impose a strong antitrust compliance program on Penguin which forces the publisher to report any communication it has with other publishers. Penguin must also not enter into any kind of most favored nation (MFN) agreement for the next five years.

A trial against Macmillan and Apple currently is scheduled to begin in June 2013, the Department said.

 

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  • 4 Hide
    Andy Chow , December 19, 2012 6:42 PM
    Quote:
    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


    Why two years? Shouldn't the ban be permanent? You mean two years from now they will be allowed to conspire to raise ebook prices?
  • 3 Hide
    Soda-88 , December 19, 2012 7:47 PM
    Andy ChowWhy two years? Shouldn't the ban be permanent? You mean two years from now they will be allowed to conspire to raise ebook prices?

    And risk getting banned again? That's a pretty poor business model IMO.
  • 3 Hide
    Anonymous , December 19, 2012 8:35 PM
    When I bought my Kindle first gen - Amazon promised all books would always be $9.99 or less.... That lasted less than 2 yrs...
  • 0 Hide
    raidenfox123 , December 19, 2012 8:57 PM
    Now if only the DOJ would go after apple for there ridiculous pricing of there computers, tablets, and well anything else they sell haha. :) 
  • 4 Hide
    Marcus52 , December 19, 2012 10:14 PM
    The DoJ is doing great work here, much thanks to them!
  • 2 Hide
    bllue , December 19, 2012 10:48 PM
    And where is the mastermind, Apple, in all of this?
  • 3 Hide
    keczapifrytki , December 19, 2012 11:13 PM
    I love it. Next should be the price fixing of video games. Anybody else notice that all new games (not including indy) start at $59.99? Or is just me?
  • 0 Hide
    alidan , December 20, 2012 5:46 AM
    keczapifrytkiI love it. Next should be the price fixing of video games. Anybody else notice that all new games (not including indy) start at $59.99? Or is just me?


    so, you want it to be like japan where the FF13 over there cost 120$ about? base version was 120$ not a special...

    in fact most places do charge well over 60$ for games, and they only charge less in places where piracy is so rampant they they are fighting against that (russia, borderlands 2 cost 7$ there)

    lets say that modern warfare did this, as they are really one of the few that could,

    lets say they do the math, and find out that if they sell the game at 80-90$ for the basic version, they pull in more money than they would if they sold it at 60$ even with people who wouldnt buy it because it cost more.

    lets imagine that they are sucessfull at that?

    i mean its crappy enough that we went from cartrages which cost real money to make, to cds that cost very little but they still sold them at high prices compared to n64 games

    and than we moved over to dvd, and they bloated the development cost of games to the point where they now charge 60$ a game... remember katamari damacy? that game came out at 20$

    when was the last budget game released for a non wii console?

    and here is the funny thing, they are planning to increase the price again to between 70 and 80$ for the next generation too.
  • -1 Hide
    triggerbiz , December 20, 2012 10:27 AM
    I pay nothing!
  • 0 Hide
    internetlad , February 12, 2013 2:19 AM
    triggerbizI pay nothing!


    This is why we can't have nice things.
  • 0 Hide
    alidan , February 12, 2013 4:16 AM
    internetladThis is why we can't have nice things.

    if enough people do it that way business would start to compete with free... like the russia example...

    just saying, steam compeats with piracy, that's why we get great sales.
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