Penguin agrees to $75M settlement in Apple iBooks price fixing lawsuit

Posted:
in iPod + iTunes + AppleTV edited January 2014
Book publisher Penguin announced on Wednesday it has reached a $75 million "comprehensive agreement" with U.S. State Attorneys General and private class plaintiffs over e-book price fixing allegations connected to Apple and its iBookstore for iOS.

If accepted, the settlement will resolve all antitrust claims against Penguin related to e-book pricing. In a press release, Penguin's parent company, Pearson, noted it had made a $40 million provision for settlement in its 2012 accounts.

books


Penguin already reached a separate settlement in December with the U.S. Department of Justice. Wednesday's latest agreement is related to the 33 individual states that joined in the antitrust suit.

The publisher also offered in April to end its e-book pricing agreements with Apple to appease regulators in the European Union. That deal allows retailers to set prices and discounts on digital books for two years.

Penguin was among five publishers who came under federal scrutiny after they agreed to a so-called "agency model" pricing agreement with Apple. Under that deal, the publishers were allowed to set fixed prices for content.

That was a change from the "wholesale model" preferred by online retailer Amazon, under which publishers suggest a price and booksellers are free to set their own prices and offer their own discounts. But publishers felt Amazon's low-margin strategy, in which the company would frequently undercut suggested prices, was harmful to the overall book selling business.While publishers have settled, Apple has held out, and the DOJ's civil trial is scheduled to begin on June 3.

Regulators, however, viewed the industry-wide switch to the "agency model" driven by Apple's iBookstore was harmful to consumers, prompting the antitrust lawsuits. While the publishers have reached settlements, Apple has chosen to stand its ground, and remains the subject of a DOJ complaint in the U.S. that is scheduled to go to a civil trial on June 3.

In court filings made last week, the DOJ accused Apple of being a facilitator in alleged collusion with major publishers to fix e-book prices. For its part, Apple has denied the allegations, saying it drafted separate consumer-friendly agreements with each publisher.

Last week the DOJ also published an email sent by late Apple co-founder Steve Jobs to then CEO of News Corp. James Murdoch. In the note, Jobs suggested that News Corp's HarperCollins simply "try" pricing titles at $12.99 and $14.99, but offered no assurance that the strategy would work.

"Heck, Amazon is selling these books at $9.99, and who knows, maybe they are right and we will fail even at $12.99," Jobs wrote. "But we're willing to try at the prices we've proposed. We are not willing to try at higher prices because we are pretty sure we'll all fail."

Following the announcement of Penguin's proposed $75 million settlement on Wednesday, Hagens Berman Sobol Shapiro, a consumer-rights law firm representing consumers in the case, issued a statement:

?This proposed settlement is a powerful demonstration of what is possible when federal, state and private class antitrust enforcement lawyers work together,? said Steve W. Berman, managing partner of Hagens Berman. ?In this case, the level of cooperation was unprecedented, and the results that we were able to deliver to the states and consumers demonstrate that.?
«1

Comments

  • Reply 1 of 34
    tallest skiltallest skil Posts: 42,841member


    Better tax that settlement twice.

  • Reply 2 of 34
    dasanman69dasanman69 Posts: 12,926member
    Better tax that settlement twice.

    Even with a 100% tax the money is going to the same place.

    It's also so much less having settled than to have fought it. /s
  • Reply 3 of 34
    gqbgqb Posts: 1,934member


    The publishers are caving not out of fear of the Feds, but from fear of Amazon's retribution for challenging their monopoly.

  • Reply 4 of 34
    solipsismxsolipsismx Posts: 19,566member
    Another [I]publisher[/I] settled. Clearly that means Apple is guilty¡
  • Reply 5 of 34
    solipsismxsolipsismx Posts: 19,566member
    gqb wrote: »
    The publishers are caving not out of fear of the Feds, but from fear of Amazon's retribution for challenging their monopoly.

    That seems plausible to me. That or they don't want the feds overturning some other stones.
  • Reply 6 of 34
    robin huberrobin huber Posts: 3,141member
    Apple needs to get off its idealistic high horse and put a lot more money into K Street. If they don't protect themselves the way other players do they will continue to be the go-to target for politicians.
  • Reply 7 of 34
    anonymouseanonymouse Posts: 6,558member

    Quote:

    Originally Posted by SolipsismX View Post





    That seems plausible to me. That or they don't want the feds overturning some other stones.


     


    They are settling because the publishing industry is on shaky ground already, thanks, in large part, to the control of Amazon over the industry. Rather face an even more draconian outcome, were they to lose, from a DoJ embarked on an irrational, myopic and possibly corrupt crusade, they are simply making a business decision to accept a penalty that won't destroy them immediately to avoid one that might.


     


    This isn't about admitting guilt, it's about caving to bullying because they can't afford the resources to fight it. Thankfully, Apple does.

  • Reply 8 of 34
    MacProMacPro Posts: 17,066member
    anonymouse wrote: »
    They are settling because the publishing industry is on shaky ground already, thanks, in large part, to the control of Amazon over the industry. Rather face an even more draconian outcome, were they to lose, from a DoJ embarked on an irrational, myopic and possibly corrupt crusade, they are simply making a business decision to accept a penalty that won't destroy them immediately to avoid one that might.

    This isn't about admitting guilt, it's about caving to bullying because they can't afford the resources to fight it. Thankfully, Apple does.

    Possibly this explains Soli's sarcasm. I think we are all on the same page here.
  • Reply 9 of 34
    gordiogordio Posts: 69member


    I'm still confused how this is illegal?  If you wanna sell with a different model, why is that illegal?  If it works, it'll sell.  if it doesn't work, it won't sell.


     


    Tesla sells directly to consumers.  Apple sells directly to consumers.  But Dell sells via a middle man (i.e. best buy) and Chevys sell via local dealerships as middle men.  One isn't more illegal than the other.  They should be free to sell it how they want.


     


    Okay, so usually when a corporation messes up, I'm in favor of punishing them.  But the whole ebook price fixing thing, I really don't see anything wrong here, especially b/c there's competition and not a monopoly.  I don't even think customers even care.  The only people who seem to be upset at this is greedy divisions of the government.

  • Reply 10 of 34
    dasanman69dasanman69 Posts: 12,926member
    gqb wrote: »
    The publishers are caving not out of fear of the Feds, but from fear of Amazon's retribution for challenging their monopoly.

    I just don't buy that. These are very well connected deep pocket having publishers that have white shoe law firms on retainer capable of handling a federal case. I don't believe they settled because it was more costly to fight but because it was more costly to lose.
  • Reply 11 of 34
    dasanman69dasanman69 Posts: 12,926member
    gordio wrote: »
    I'm still confused how this is illegal?  If you wanna sell with a different model, why is that illegal?  If it works, it'll sell.  if it doesn't work, it won't sell.

    Tesla sells directly to consumers.  Apple sells directly to consumers.  But Dell sells via a middle man (i.e. best buy) and Chevys sell via local dealerships as middle men.  One isn't more illegal than the other.  They should be free to sell it how they want.

    Okay, so usually when a corporation messes up, I'm in favor of punishing them.  But the whole ebook price fixing thing, I really don't see anything wrong here, especially b/c there's competition and not a monopoly.  I don't even think customers even care.  The only people who seem to be upset at this is greedy divisions of the government.

    What's illegal is that allegedly the publishers got together and forced Amazon to go with the agency model as well.
  • Reply 12 of 34
    anonymouse is 100% right. The settlements are less an admission of liability than they are a yielding before the cost run up even more. The book industry is in dire straights.
  • Reply 13 of 34
    MacProMacPro Posts: 17,066member
    gordio wrote: »
    I'm still confused how this is illegal?  If you wanna sell with a different model, why is that illegal?  If it works, it'll sell.  if it doesn't work, it won't sell.

    Tesla sells directly to consumers.  Apple sells directly to consumers.  But Dell sells via a middle man (i.e. best buy) and Chevys sell via local dealerships as middle men.  One isn't more illegal than the other.  They should be free to sell it how they want.

    Okay, so usually when a corporation messes up, I'm in favor of punishing them.  But the whole ebook price fixing thing, I really don't see anything wrong here, especially b/c there's competition and not a monopoly.  I don't even think customers even care.  The only people who seem to be upset at this is greedy divisions of the government.

    Slightly off topic ... Add to the crazy mix car dealers objecting to the Tesla sales tactics whereby they cut out the beloved car salesman / dealership business model! I was just reading about this and trying not to laugh too hard especially where they claimed this wasn't in the best interests of the public!
  • Reply 14 of 34
    gordiogordio Posts: 69member

    Quote:

    Originally Posted by digitalclips View Post





    Slightly off topic ... Add to the crazy mix car dealers objecting to the Tesla sales tactics whereby they cut out the beloved car salesman / dealership business model! I was just reading about this and trying not to laugh too hard especially where they claimed this wasn't in the best interests of the public!


    I know what your'e referring to.  Some state is trying to sue Tesla for not selling via local dealers.  That is still on going.


    [quote]


    What's illegal is that allegedly the publishers got together and forced Amazon to go with the agency model as well.[/quote]


    Are you sure about this?  I think Amazon still uses the wholesale model (I may be wrong about this)

  • Reply 15 of 34
    extremeskaterextremeskater Posts: 2,248member

    Quote:

    Originally Posted by Tallest Skil View Post


    Better tax that settlement twice.



    I know you were joking but a settlement is not considered earned income. It's looked at as being "made whole" so the IRS can not consider it earned income.

  • Reply 16 of 34
    lilgto64lilgto64 Posts: 1,147member

    Quote:

    Originally Posted by Gordio View Post


    I'm still confused how this is illegal?  If you wanna sell with a different model, why is that illegal?  If it works, it'll sell.  if it doesn't work, it won't sell.


     


    Tesla sells directly to consumers.  Apple sells directly to consumers.  But Dell sells via a middle man (i.e. best buy) and Chevys sell via local dealerships as middle men.  One isn't more illegal than the other.  They should be free to sell it how they want.


     


    Okay, so usually when a corporation messes up, I'm in favor of punishing them.  But the whole ebook price fixing thing, I really don't see anything wrong here, especially b/c there's competition and not a monopoly.  I don't even think customers even care.  The only people who seem to be upset at this is greedy divisions of the government.



     


    I may be wrong here but I think at its core the issue really is along these lines.


     


    You make Widgets and sell them wholesale to Amazon for a price that you and Amazon have negotiated - you suggest to Amazon what you think a fair retail price is - but after Amazons buys x million Widgets from you they are free to price them however they like, including below their cost if so inclined. 


     


    I want to sell your Widgets as well but am not interested in selling them for anything less than a 30% profit - and having a competitor willing to sell them at a 1% profit or at a loss means not only that I am unlikely to sell any but then my entire business will be suspect of inflated prices. 


     


    You and I get together and work out a deal whereby I can make my 30% profit and agree not to undercut the retail price of your Widgets that I sell to anything less than your suggested retail - provided that you also go to Amazon and refuse to allow them to continue selling your Widgets at or below cost and follow the same pricing that I will use. 


     


    And that last bit is the sticking point. 


     


    If you enter into 12 different agreements with 12 different retailers and give them all different wholesale prices based on their volume - and they each set their retail price according to their own devices, there is nothing wrong with that. 


     


    Should also not be a problem if all those 12 deals required they have a minimum price. 


     


    What people don't like is if you get together with 1 of those 12 and secretly agree to a pricing model that will be required by all the others. 


     


    Then again - from a consumer point of view - how would you ever know what pricing model was used or who had agreements with whom? Whether you are talking about state minimum on alcohol or tabacco (how is that NOT price fixing) or new cars, or commission on real estate. Whether any of these are formal written agreements, or unspoken traditions, etc.

  • Reply 17 of 34
    dasanman69dasanman69 Posts: 12,926member
    gordio wrote: »
    I know what your'e referring to.  Some state is trying to sue Tesla for not selling via local dealers.  That is still on going.
    What's illegal is that allegedly the publishers got together and forced Amazon to go with the agency model as well.
    Are you sure about this?  I think Amazon still uses the wholesale model (I may be wrong about this)

    I thought the same thing but then I was given this link.

    http://www.engadget.com/2010/04/01/amazon-agrees-to-agency-pricing-model-with-two-more-publishers/
  • Reply 18 of 34
    tbelltbell Posts: 3,146member

    Quote:

    Originally Posted by dasanman69 View Post





    I just don't buy that. These are very well connected deep pocket having publishers that have white shoe law firms on retainer capable of handling a federal case. I don't believe they settled because it was more costly to fight but because it was more costly to lose.


     


     


    It is quite possible the publishers are guilty, but Apple is not. Afterall, the publishers are all competitors with one another. Apple does not compete with the publishers, but with retailers like Amazon. So, if the publishers all got together and agreed to strike a deal with Apple, that would be illegal. Apple, however, in entering into the agreements would not have done anything illegal. 


     


    Moreover, Apple is trying to strike one deal with all the publishers to keep the App Store simple. Nothing wrong with that either. 

  • Reply 19 of 34
    charlitunacharlituna Posts: 7,159member
    Apple needs to get off its idealistic high horse and put a lot more money into K Street. If they don't protect themselves the way other players do they will continue to be the go-to target for politicians.

    And then they will be bashed for their lobbying, paying off folks etc
  • Reply 20 of 34
    jungmarkjungmark Posts: 6,507member
    lilgto64 wrote: »

    And that last bit is the sticking point. 

    If you enter into 12 different agreements with 12 different retailers and give them all different wholesale prices based on their volume - and they each set their retail price according to their own devices, there is nothing wrong with that. 

    Should also not be a problem if all those 12 deals required they have a minimum price. 

    What people don't like is if you get together with 1 of those 12 and secretly agree to a pricing model that will be required by all the others. 

    Actually what's illegal is if you and all 12 get together and hash out a deal. Like you said, you can hash out 12 individual deals with the same terms.
Sign In or Register to comment.