September 24, 2018

Media Decoder Blog: Awaiting Merger With Random House, Penguin Settles E-Book Case

Penguin, trying to ensure a clean slate before its planned merger with Random House, announced on Tuesday that it was settling a lawsuit brought by the Justice Department over the pricing of e-books.

In a statement, the company said, “Penguin has always maintained, and continues to maintain, that it has done nothing wrong and has no case to answer.”

Nevertheless, the company said, it was agreeing to settle because of the impending merger of Random House, a division of the German media company Bertelsmann, and Penguin, a division of the English conglomerate Pearson. That deal, in which Bertelsmann will assume 53 percent control of the new company, was announced in October. The publishing industry is beginning to consolidate to try to better meet the online challenge from Amazon.

The company wrote in its statement, “It is also in everyone’s interests that the proposed Penguin Random House company should begin life with a clean sheet of paper.”

In April, the Justice Department filed a lawsuit accusing five major publishing houses and Apple of conspiring to fix the price of e-books. These five had moved from a wholesale pricing model that allowed retailers to charge what they wanted to a system that allowed publishers to begin setting their own e-book prices, a model known as “agency pricing.”

The publishers had looked for a way to prevent Amazon from pricing books below their actual cost, which they said would hurt the industry over time. But the government said the publishers conspired in e-mails, in telephone conversations and at lavish dinners to keep e-book prices artificially high.

Three big publishing houses — HarperCollins, Simon Schuster and Hachette — settled with the Justice Department, but Penguin, Macmillan and Apple decided to fight the charges, until Penguin reversed course on Tuesday.

In the terms of a settlement that a judge approved in September, the three publishers that settled agreed to end contracts with Apple and with e-book retailers that contained restrictions on their ability to set prices, and agreed not to make such restrictive contracts for the next two years.

In May, when Penguin filed its response in United States District Court in New York, it said that Amazon treated books as “widgets.” It described Amazon as “predatory” and “monopolist,” and said that the government’s case was based on “innuendo.”

Penguin said that it still believed that agency pricing was legitimate. “Penguin continues to believe that the agency pricing model has encouraged competition among distributors of both eBooks and eBook readers and, in the company’s view, continues to operate in the interest of consumers and author,” the company said in its statement.

The terms of the settlement were not available, but people with knowledge of the details said that they were the same as those received by the other three publishers.


This post has been revised to reflect the following correction:

Correction: December 18, 2012

Because of an editing error, an earlier version of this post carried an erroneous byline.

Article source: http://mediadecoder.blogs.nytimes.com/2012/12/18/awaiting-merger-with-random-house-penguin-settles-ebook-case/?partner=rss&emc=rss

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