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Macmillan Finally Settles with DoJ Over Ebook Pricing

If there's one thing you can't do, it's fight the government without lots of money. Tons of it. Book publisher Macmillan has finally figured this out in its battle with the Department of Justice. The company said that it could no longer afford defending itself against allegations of ebook price fixing, and is now settling so it can move on.

Macmillan was the last in a list of five publishers who were called out by the government last spring for conspiring with Apple to raise ebook prices. Emails collected by the government clearly revealed that the six parties involved feared Amazon's dominance in the ebook sector thanks to its popular Kindle and wholesale ebook pricing. They conspired to use an "agency model" which inflated ebooks at an artificially high level across the board once the original iPad hit stores.

In response to the lawsuit filed by the Department of Justice, the five publishers admitted that they were defending themselves against Amazon which was selling ebooks at incredibly low prices in order to sell its own hardware. This was putting financial pressure on the publishers, enough so that they feared going out of business.

But soon three publishers, HarperCollins, Simon & Schuster and Hachette, packed up their defense and settled with the Department of Justice. Then in December, Penguin finally caved in and settled with the government so it could complete its merger with Random House. Now Macmillan has bailed out, leaving Apple standing all alone when it goes to court with the Department of Justice this June.

"Our company is not large enough to risk a worst case judgment," said Macmillan’s chief executive John Sargent in a latter to authors, illustrators and agents. "In this action the government accused five publishers and Apple of conspiring to raise prices. As each publisher settled, the remaining defendants became responsible not only for their own treble damages, but also possibly for the treble damages of the settling publishers (minus what they settled for). A few weeks ago I got an estimate of the maximum possible damage figure. I cannot share the breathtaking amount with you, but it was much more than the entire equity of our company."

Ouch. Whatever that "breathtaking" figure was, it was enough to turn a stubborn publisher around after it insisted from day one that it would never settle. Now Macmillan must lift restrictions of selling ebooks at discounted prices and other promotions. It will also be prohibited until December 2014 from entering into new agreements with similar restrictions. If there are any new ebook ventures with other publishers, the government must know about those in advance.

One analyst believes that Macmillan gave up because it simply wasn't worth the fight. The publisher's stand on pricing had no effect in the ebook market. Even more, ebook prices have dropped somewhat, but not "precipitously" since the first settlement went into effect last September. Settling won't change the market either, but it sure will make that pesky Department of Justice fly go away. For now.


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Kevin started taking PCs apart in the 90s when Quake was on the way and his PC lacked the required components. Since then, he’s loved all things PC-related and cool gadgets ranging from the New Nintendo 3DS to Android tablets. He is currently a contributor at Digital Trends, writing about everything from computers to how-to content on Windows and Macs to reviews of the latest laptops from HP, Dell, Lenovo, and more. 

  • rohitbaran
    Well, I say DOJ do on thing right and pound Apple this time.
  • Cons29
    apple will say, they are pricing it wrong.

    seriously, if the others admits, i think you look guilty too
  • anathema_forever
    I hope Apple gets a bit of smack down.
  • JerryC
    Prepare for a $10 billion judgment against Apple
  • IndignantSkeptic
    Now the DOJ needs to go after companies for making our book collections locked to specific hardware companies only. Same with movies, TV series, and music.
  • Draven35
    All these publisher claiming Amazon is gutting their ebook prices, all the DoJ has to do is show Baen Books' ebook prices....
  • DSpider
    Even if Apple keeps fighting it's just chump change for them.
  • derekullo
    Apple: We built a $50 billion Money Fort just so Michael Dell wouldn't have the largest number associated with his name this week. We also invited the Department of Justice to stay in the Fort for one month free of charge.

    Apple: Next week we are going to take it out to sea and see if it floats.
  • hragarand
    Publishers are struggling with public and school library lending models. Librarians expect to provide access to resources for their customers (the public/students) at the best price point. The public is relying more and more on the library for resources as disposable income has diminished - best sellers, video lending, games lending, e-books, etc. Print lending has a built-in multi-copy purchase model by replacing damaged or lost print books. The e-book format provides for zero lost and damaged product and the publisher and author (royalties) are not interested seling fewer copies that last longer.

    Publishers are trying to limit the number of circulations for a title in a library environment or may charge more for a title that has a one to many lending model versus a one to one lending model. Will be interesting to see how this playes out going forwa
  • Draven35
    Publishers, like newspapers, are going to have to adapt or die. They are not the gateway to people getting their message out that they once were.

    And some publishers (Baen) give away ebooks of their older books for FREE.