Judge approves e-book settlement despite Apple’s objections

{mosads}DOJ’s Antitrust Division sued Apple and five publishers in April, accusing them of colluding to raise the price of e-books. Apple and two publishers, Macmillan and Penguin Group, are fighting the charges. But the other three publishers — Hachette, HarperCollins and Simon & Schuster — agreed to settle with the government.

According to the Justice Department’s lawsuit, Apple and the five publishers were unhappy that Amazon was driving down the price of e-books. Amazon had set the price of all of its e-books at $9.99.

Justice officials said the company executives conspired to set up a new business model, called the agency model, which raised the price of many e-books by $2 to $3.

Under agency pricing, the publishers, not bookstores, set the retail price of e-books. 

The settlement with the three publishers requires them to abandon their agency-pricing agreements with Apple and other retailers and bars them from setting up similar agreements for two years. The publishers will also be prohibited for five years from entering into any “most-favored nation” agreements, which guaranteed Apple the best prices on the books. 

The settlement’s critics argued that the agency model helped to free the e-book market from Amazon’s dominance. Under the old model, Amazon controlled about 90 percent of the market, but after the publishers instituted the new pricing scheme, Amazon’s share fell to 60 percent.

Apple also argued that the court should not accept the settlement until after Apple and the remaining publishers have had their day in court.

But Denise Cote, a judge for the U.S. District Court of Southern New York, concluded that courts have only limited power to overturn settlements that companies agree to with the government.

She wrote that the settlement’s restrictions appear “wholly appropriate” given the alleged anti-competitive conduct.

“The decree is directed narrowly towards undoing the price-fixing conspiracy, ensuring that price-fixing does not immediately reemerge, and ensuring compliance,” the judge wrote.

Gina Talamona, a Justice Department spokeswoman, said the department is “pleased the court found the proposed settlement to be in the public interest and that consumers will start to benefit from the restored competition in this important industry.”

Apple did not immediately respond to a request to comment. The company has indicated it plans to appeal the ruling.

The trial for Apple and the other publishers has yet to begin.