Of the handful of massive publishers including Hachette, HarperCollins, Simon & Schuster, MacMillan, Penguin, and Apple, several have agreed to settlement terms with the US government. Not wishing to carry the case any longer than they have to, Hachette, HarperCollins and Simon & Schuster have agreed to file terms for a proposed settlement. This settlement will have them doing a list of actions to stay out of further litigation via the Department of Justice while the rest of the defendants continue the case. The Department of Justice aims to “ensure that e-books are affordable as possible” in this case by defending the law which prohibits conspiring by companies to keep prices on products artificially high.
Settling publishers will be required to adhere by a list of rules and actions immediately upon accepting their terms. The Department of Justice delivered these rules earlier today after a press conference which announced their initial case against five of the “big six” as well as Apple. Hachette, HarperCollins and Simon & Schuster will have to move forward with the following points:
• Terminate its current contracts with Apple within seven days of the court’s acceptance of the settlement;
• Terminate any other contracts with e-book retailers that restrict the retailer’s ability to set final prices for books or contain a “most favored nation” provision prohibiting price competition, as soon as possible;
• Renegotiate contracts with Apple and other retailers, with a two-year prohibition on any contract that prevents retailers from discounting retail prices (see below);
• Notify the Department of Justice before entering into any joint ventures between it and another publisher related to e-books;
• Designate an antitrust compliance officer and provide the DOJ with a copy of its agreements with any e-book retailers quarterly for five years.
These rules and the agreement the Department of Justice is attempting to work with here have publishers prohibited from setting hard floors on discounts for products they wholesale out to retailers. As the Department of Justice states:
“These provisions do not dictate a particular business model, such as agency or wholesale, but prohibit Settling Defendants from forbidding a retailer from competing on price and using some of its commission to offer consumers a better value, either through a promotion or a discount.” – DOJ
Retailers must be able to have staggered negotiations with publishers, according to the DOJ’s agreement here, so that they aren’t running into multiple publishers seeking similar agreements all at the same time. Check out the timeline below for the pre-cursors to this story – this isn’t the first suit!
Full documentation for the suit, released in full by the DOJ: