E-Book Publishers Settle Price-Fixing Claims

August 30, 2012

Hachette Book Group, HarperCollins and Simon & Schuster to pay $69 Million Total to Resolve Conspiracy Allegations

AUGUSTA ? Attorney General William J. Schneider announced today that Maine, along with 54 attorneys general in other states, districts and U.S. territories, has reached an antitrust settlement with three of the largest book publishers in the United States. Hachette Book Group, Inc., HarperCollins Publishers L.L.C. and Simon & Schuster Inc. have agreed to pay a total of more than $69 million to consumers to resolve antitrust claims of an alleged unlawful conspiracy to fix the prices of electronic books (e-books). They have also agreed to change the way they price e-books going forward.

Consumers in Maine are expected to receive approximately $332, 527.

The settlement occurs in conjunction with a civil antitrust lawsuit filed in U.S. District Court for the Southern District of New York against Hachette, HarperCollins, and Simon & Schuster. The lawsuit alleges that the three settling publishers and others, including non-settling publishers Macmillan and Penguin (collectively, the ?Agency Five? publishers), ?conspired and agreed to increase retail E-book prices for all consumers? and ?agreed to eliminate E-book retail price competition between E-book outlets, such that retail prices to consumers would be the same regardless of the outlet patronized by the consumer.?

The lawsuit and today?s settlement stem from a two-year antitrust investigation conducted jointly by the Connecticut and Texas Attorneys General and U.S. Department of Justice?s Antitrust Division. That investigation developed evidence that the Agency Five conspired to end e-book retailers' freedom to compete on price by taking control of pricing from e-book retailers and substantially increasing the prices that consumers paid for e-books. As a result of this conduct, the States allege that consumers paid millions of dollars more for their e-books.

?Maine customers who paid inflated prices for e-books will receive restitution from these publishers,? said Attorney General Schneider. ?Under the terms of this settlement, the digital book market will have better competition among retailers and e-book prices that reflect market forces rather than price-fixing schemes.?

Under the proposed settlement agreement, which the court must approve, Hachette, HarperCollins and Simon & Schuster will compensate consumers who purchased e-books from any of the Agency Five during the period of April 1, 2010 through May 21, 2012. Payments will begin 30 days after the court approval of the settlement becomes final. The settling defendants will also pay approximately $7.5 million to the states for fees and costs.

In addition to paying the $69 million consumer compensation, Hachette, HarperCollins and Simon & Schuster have agreed to terminate their existing agency agreements with certain retailers, requiring the publishers to grant those retailers?such as Amazon and Barnes & Noble?the freedom to reduce the prices of their e-book titles. For two years they will be prohibited from making any new agreements that constrain retailers? ability to offer consumer discounts or other promotions which encourage the sale of e-books.

The proposed settlement agreement also precludes these three publishers from further conspiring or sharing competitively sensitive information with their competitors for five years. Also for five years, Hachette, HarperCollins and Simon & Schuster will be forbidden from agreeing to any kind of ?most favored nation clause?, which says that no other retailer can sell e-books for a lower price.

Another case against Penguin Group, Inc., Holtzbrinck Publishers LLC (dba Macmillan) and Apple, Inc. is pending in the Southern District of New York.

Assistant Attorney General Christina M. Moylan handled this matter for Attorney General Schneider?s Consumer Protection Division.