Macmillan said Friday it had agreed to settle a lawsuit brought by the Department of Justice over the pricing of e-books, asserting that the potential costs of continuing to fight the action were too high.
The agreement means that all five major publishing houses have settled the charges brought by the government last spring.
Apple Inc., which is also a defendant, will continue to trial in June, according to the Department of Justice. A spokesperson said Friday it was declining comment/
In a letter addressed to authors, illustrators and agents, Macmillan’s chief executive, John Sargent, said the risks were too great to go it alone.
“Our company is not large enough to risk a worst case judgment,†he said. “In this action the government accused five publishers and Apple of conspiring to raise prices. As each publisher settled, the remaining defendants became responsible not only for their own treble damages, but also possibly for the treble damages of the settling publishers minus what they settled for). A few weeks ago I got an estimate of the maximum possible damage figure. I cannot share the breathtaking amount with you, but it was much more than the entire equity of our company.â€
In a suit filed last April, the Justice Department accused five major publishers and Apple of conspiring in e-mails and over lavish dinners to set the price of e-books at an artificially high level. The publishers had moved from a wholesale pricing model, which 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.â€
The defendants said they were trying to protect themselves from Amazon, which was pricing e-books books below their actual cost, putting financial pressure on the publishers that they said would drive them out of business over time.
Nevertheless, three big publishing houses - HarperCollins, Simon & Schuster and Hachette - settled with the government immed! iately. Penguin, Macmillan and Apple decided to fight the charges. But in December, to clear the way for its merger with Random House, Penguin settled too.
The terms of the Macmillian settlement mirrors that agreed to by the other publishers. Macmillan will immediately lift restrictions it has imposed on discounting and other promotions by e-book retailers and will be prohibited until December 2014 from entering into new agreements with similar restrictions. The publisher must also provide the government advance notification to the of any e-book ventures it plans to undertake jointly with other publishers.
