It’s the Final Countdown for Book Publishers

 

Daddy Department of Justice is hyper-regulating the E-book trade for the settling defendants in the suit between Apple, et. al and the U.S. Department of Justice. But, is settling worth the loss of E-book freedom and being in time-out from now until five years from the date of the final judgment, to only be fed and watered by the DOJ?

The case was brought to court by the U.S. Department of Justice for the violation of the Sherman Act, as Apple Inc, and publishers, Hachette Book Group, Inc., HarperCollins Publishers L.L.C., The Penguin Group, Macmillan, and Simon & Schuster, Inc. The Sherman Act states that it is illegal to make an agreement or conspiracy that would restrain commerce/trade across states. The Act also states that those who conspire in these anti-trust agreements are committing a felony, and could face fines and imprisonment as deemed appropriate by the court.

The three publishers who decided to settle under the terms laid out by the DOJ, versus fighting for their rights to e-book freedom in court, include Hachette, Harpercollins, and Simon & Schuster. However, while they are not formally pleading guilty, by settling they are subject to rules laid forth by the DOJ that make it practically impossible to conduct trade agreements in the E-book industry for the next five years.

What we have here are three book publishers who would rather bow down to the U.S. DOJ than fight an ugly battle in court, understandably so, until you read what the DOJ is proposing under the terms of this settlement agreement, including but NOT limited to:

  • Ending any and all agreements with Apple regarding sale of E-books that were made prior to the complaint filed by the DOJ
  • Notifying the Department of Justice 60 days in advance prior to forming a joint venture/business arrangement regarding the “sale, development, or promotion of E-books in the United States in which a settling defendant and at least one other E-book Publisher are participants or partial or complete owners”
  • After seven days of the final judgment’s approval, submitting any agreement that was made, renewed or extended on or after the first of the year between those that settled (i.e. Hachette, HarperCollins, and S&S) and on a quarterly basis submitting similar agreements that take place after the settling agreement

And, if that isn’t bad enough, the settling defendants can’t restrict or limit an E-book retailers ability to 1)set 2)alter or 3)reduce the retail price of ANY E-book or offer discounts and promotions where they see fit. This means that retailers of E-books are given the freedom to decide prices and promotion strategies for E-books, and the settling publishers can’t do a single thing about it.

And just when you thought it was over for them, the DOJ proposes that settling defendants, or their parent company, cannot communicate directly or indirectly to any other E-book publisher as it relates to business plans, past, present, or future prices for books sold IN ANY FORMAT, or terms of agreement for retailers of books IN ANY FORMAT, or agreements with any author. So, the days of a simple email over how much the next great American novelist is making or terms of agreements with Barnes & Noble over the price of Catcher and the Rye, would now be a violation of the settling agreement. The only thing they can talk about are potential mergers or acquisitions.

Oh, and these defendants have to notify these E-book retailers in writing of all such agreements made, just so everyone knows who is making the rules. It’s the Department of Justice, by the way.

All the above information doesn’t even hint on the anti-trust compliance that these companies have to go through: designate an Antitrust Compliance Officer, printing out copies of the final judgment for ANYONE remotely connected to E-books inhouse, training on antitrust laws, annual audits, and terminating employees, and compliance inspection “from time to time.”

While it makes sense to limit price agreement in an attempt to prevent an Amazonian $9.99 monopoly of the E-book industry, it is grossly unfair to the settling defendants to adhere to the rules of conduct, despite the lack of the guilty plea. It will be interesting to see what happens to E-book prices since the E-book industry is now strong armed by Amazon and the Department of Justice. However, what will be more interesting is to see how Apple and the other defendants fight Uncle Sam to retain their rights.

These publishing companies, however, have parent and sister companies in the U.K., who don’t have the same legal rules of conduct as the U.S. so, it will be even more interesting to see what the U.K. does as far as E-book prices and conduct, without getting their U.S. companies in trouble.

And here we thought the world was ending in December, but for these book publishers, they might as well consider April 11 the day of the Apocalypse.

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