As time ticks down, publishers and Authors Guild slam ebook settlement

On Wednesday, the Authors Guild, publishers Penguin and Macmillan, and Apple (s AAPL) filed their opposition to the Department of Justice’s proposed ebook pricing settlement with Hachette, HarperCollins(s NWS) and Simon & Schuster(s CBS). I covered Apple’s response yesterday. Here’s a summary of the filings from Penguin, Macmillan and the Authors Guild.

Like Apple, Penguin and Macmillan are fighting the DOJ in court (the trial is set for June 2013) and are not part of the proposed settlement. They had asked and received permission from Judge Denise Cote to file their opposition to the settlement. The Authors Guild is seeking to act as an amicus curiae, or “friend of the court,” in the proposed settlement and filed an amicus brief.


“The Emperor has no clothes,” Penguin writes in its filing (PDF). Elaborating on the metaphor, Penguin explains that the Department of Justice claims that agency pricing caused an increase in ebook prices but “has offered no empirical evidence to clothe this claim.” If the DOJ has “systematically [examined] actual pricing,” Penguin says, it must share those findings with the Court and the public, but it has not done so. Meanwhile, Penguin notes “numerous industry participants” stated in their public comments that ebook prices have actually decreased under agency.

Penguin undertook an analysis of its own “pre-agency, month-by-month pricing” of new ebook releases as priced and sold by Amazon in the year before agency pricing was enacted. “What we found is that over 62% of the ebook titels for books with hardcover list prices over $20 (the typical range for bestsellers and other popular trade fiction) were priced by Amazon above $9.99, with many priced in the $14 to $15 dollar range.” (There are accompanying exhibits and data, but Penguin requested they be sealed and they are not available publicly.) Penguin acknowledges that the pricing of ebooks is “complex,” but says it is “absolutely clear…that the price of new release Penguin ebooks did not unvaryingly move from $9.99 to $12.99 post-agency.” Furthermore, it says that since its agency agreements with Apple and Amazon also include price ceilings, “many of these ebook prices would have been less under the agency model.”


Macmillan echoes Penguin in its statement that the DOJ has not offered “a single economic study or analysis showing why its mandated pricing scheme is necessary.” (Filing as PDF) Macmillan says “the size of Amazon’s market share is at the center of this proceeding regardless of whose narrative the Court accepts,” and while the “government’s narrative” is that Amazon achieved its “monopoly” through “superior competition,” the narrative shared by Macmillan and others is that Amazon engaged in predatory pricing. Macmillan says “the Tunney Act requires the government to show, and the Court to find if it is to approve the proposed settlement, that the settlement will not result in an Amazon market share that is contrary to the public interest,” but that the DOJ has not done so. “The issue is whether, lawfully or otherwise, Amazon will be able to use the judicially compelled discounting to grow its market share to a level that is not in the public interest.”

The Authors Guild

Like attorney Bob Kohn, who filed his motion earlier this week, the Authors Guild argues (filing as PDF) that the DOJ defines the ebook market too “narrowly” and disregards interrelated markets like e-reading devices — but “the realistic effects of the Proposed Judgment’s flawed remedy…reach far beyond the narrow new-release ebook market that the DOJ alleges.” Among the “critical players” that would be harmed are “traditional bookstores,” which remain “critical showrooms.” The Authors Guild believes that “of all possible remedies to the alleged collusion, requiring three large publishers to allow Amazon to sell ebooks at a loss is among the most destructive of competition that one could imagine.” The Guild requests a hearing and concludes that “the DOJ’s goal of undoing alleged collusion can be achieved with far less risk to competition.”