Three Publishers Settle DOJ e-Book Antitrust Lawsuit

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Three publishers have agreed to a settlement in the e-book antitrust lawsuit filed by the U.S. Department of Justice.

Hachette, HarperCollins and Simon & Shuster agreed to settle with the DOJ as well as 29 states, the District of Columbia and Puerto Rico in an antitrust lawsuit alleing they participated in a conspiracy with Apple to fix e-book prices in 2010.

The remaining Defendants, Macmillan, Penguin and Apple, are continuing to litigate the case.

Under the DOJ e-book price-fixing settlement, the publishers agreed to:

* terminate any deals with Apple or other sellers of e-books that “restricts, limits, or impedes the e-book retailer’s ability to set, alter, or reduce the retail price of any e-book;”
* not to enter into such deals for at least two years; and
* abstain from retaliating against any retailer setting, altering, or reducing the retail price any e-book.

In addition to the antitrust lawsuits by the DOJ and states, a consumer class action lawsuit is pending against the publishers and Apple. The companies moved to dismiss the e-book consumer class action lawsuit last week, but the judge hearing the case rejected the motion.

All of the lawsuits allege that Apple and the publishers conspired to monopolize the e-book market in order to push Amazon’s Kindle e-reader out, while driving up prices for consumers.

According to the DOJ, Apple received favorable terms as a reward for its participation in the alleged price-fixing scheme with the e-book publishers. Those terms included contracts containing a “most-favored nation” clause, which is designed to protect a buyer from wholesale price fluctuations.

The DOJ says in its lawsuit that Apple’s most-favored nation clause was different in that it was not designed to protect Apple’s ability to compete, but “was designed to protect Apple from having to compete on price at all, while still maintaining Apple’s 30-percent margin.”

In addition, the DOJ released new evidence last week in the form of a letter from Apple co-founder Steve Jobs trying to persuade a publisher with cold feet about joining the e-book price-fixing conspiracy to change its position.

Within three days of receiving the letter, the publisher and its co-conspirators agreed to an e-book price-fixing scheme and signed a deal with Apple based on that scheme, the DOJ says.

No details on the publishers’ settlement with the DOJ have been released, which court documents suggest is still being worked out.

UPDATE: Credits went out to Kindle and Nook customers from the e-book price fixing class action settlement starting March 24, 2014. Credits from other e-book retailers are expected to be distributed soon.

UPDATE 3: Apple Inc. announced June 16, 2014, that it had reached an undisclosed class action lawsuit settlement in the e-book antitrust litigation.