Kindle News: U.S files antitrust suit against Apple and publishers not settling. DOJ A/G statement at press conference included. UPDATE5

"Justice Department formally charges Apple, big five publishers in e-book price fixing case"

That's Engadget's headline

It's short and to the point. The Kindle Forum had the Engadget article, and the Washington Post one below, by Bob Van Voris, was sent by Edward Boyhan and has MUCH more detail. I have to leave, so I'll just direct you to the stories and to the transcript or release of Attorney General Holder's statement today.

Essentially, The DOJ decided to sue Apple, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster over alleged e-book price-rigging.  Apple and Macmillian have already denied any wrongdoing, Engadget points out, saying that the agreements were enhancing competition in an industry previously dominated by Amazon (Oh, brother).

Fuller story: Washington Post with Bloomberg, by Bob Van Voris.

The Kindle Forum members also came up with the US Dept of Justice webpage for Attorney General Eric Holder's speech today at the Ebooks Press conference.

  Here it is in its entirety, as it's meant for all of us as a public service.:

' Today I’m joined by Acting Assistant Attorney General for the Antitrust Division Sharis Pozen, and Connecticut Attorney General George Jepsen, to announce the Justice Department’s latest progress in protecting American consumers from anticompetitive harm, ensuring fairness in the marketplace, and making certain that cutting-edge technologies are available at the lowest possible price.

In recent years, we have seen the rapid growth – and the many benefits – of electronic books. E-books are transforming our daily lives, and improving how information and content is shared. For the growing number of Americans who want to take advantage of this new technology, the Department of Justice is committed to ensuring that e-books are as affordable as possible.

As part of this commitment, the Department has reached a settlement with three of the nation’s largest book publishers – and will continue to litigate against Apple, and two additional leading publishers – for conspiring to increase the prices that consumers pay for e-books.

Earlier today, we filed a lawsuit in U.S. District Court for the Southern District of New York, against Apple and five different book publishers – Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster. In response to our allegations, three of these publishers – Hachette, HarperCollins and Simon & Schuster – agreed to a proposed settlement. If approved by the court, this settlement would resolve the Department’s antitrust concerns with these companies, and would require them to grant retailers – such as Amazon and Barnes & Noble – the freedom to reduce the prices of their e-book titles. The settlement also requires the companies to terminate their anticompetitive most-favored-nation agreements with Apple and other e-books retailers.

In addition, the companies will be prohibited for two years from placing constraints on retailers’ ability to offer discounts to consumers. They will also be prohibited from conspiring or sharing competitively sensitive information with their competitors for five years. And each is required to implement a strong antitrust compliance program. These steps are appropriate – and essential in ensuring a competitive marketplace.

Beginning in the summer of 2009, we allege that executives at the highest levels of the companies included in today’s lawsuit – concerned that e-book sellers had reduced prices – worked together to eliminate competition among stores selling e-books, ultimately increasing prices for consumers. As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles.

During regular, near-quarterly meetings, we allege that publishing company executives discussed confidential business and competitive matters – including Amazon’s e-book retailing practices – as part of a conspiracy to raise, fix, and stabilize retail prices. In addition, we allege that these publishers agreed to impose a new model which would enable them to seize pricing authority from bookstores; that they entered into agreements to pay Apple a 30 percent commission on books sold through its iBookstore; and that they promised – through contracts including most-favored-nation provisions – that no other e-book retailer would set a lower price. Our investigation even revealed that one CEO allegedly went so far as to encourage an e-book retailer to punish another publisher for not engaging in these illegal practices.

In advancing this critical investigation, I’d like to thank Attorney General Jepsen and Texas Attorney General Greg Abbott – along with our partners at the European Commission – for their hard work and close cooperation. Today’s action sends a clear message that the Department’s Antitrust Division continues to be open for business – and that we will not hesitate to do what is necessary to protect American consumers.

I am grateful for the outstanding leadership that Acting Assistant Attorney General Sharis Pozen has provided in this matter. Not only has she ensured a seamless transition in the Division’s senior leadership, she has proven that vigorous enforcement will remain its hallmark. I also want to commend her dedicated team, and thank each of the attorneys and investigators who worked so hard to make today’s announcement possible. Although this matter remains in its initial stages, it’s clear that, in all of you, the Department – and the American people – could have no stronger team of advocates.

At this time, I’d like to turn things over to Sharis, who will provide additional details on today’s action. '

Acting Asst. Atty General Sharis A Pozen speaks next
  She cites quotes from publishers in connection with openly conspiring among themselves to get Amazon to raise prices.

 She prefaced these with, "I would just like to give you a flavor of the egregiousness of the alleged behavior, which took place at the highest levels of these publishing companies by providing you with some statements from our complaint..."


Kindle-Edition blog subscribers
Again, Kindle-Edition subscribers can click on the links and once on the Web,
click Menu/Article-Mode and read these fairly comfortably.  I hope that will work well for most.

ApppleInsider talks about other aspects involved.  Simon & Schuster, Hachette and HarperCollins have already settled with the department to avoid the suit.  Apple, Macmillan, and Penguin are the holdouts.

From Reuters:

' The Justice Department complaint cites an email from an executive for an unnamed publisher pointing out the need for the publishers to work together to convince Amazon to raise prices.

"We've always known that unless other publishers follow us, there's no chance of success in getting Amazon to change its pricing practices," the executive wrote.

"Without a critical mass behind us, Amazon won't 'negotiate,' so we need to be more confident of how our fellow publishers will react," the executive said in the email. '

FULL TEXT of the DOJ case against Apple and the publishers, found by Larkspotter at the forum.  It's a 36-page pdf.

Wired's Tim Carmody reports DOJ Announces Terms of Settlement With Three Publishers in E-Book Suit.  He lists them and includes the proposed settlement doc.

Update 5 - Commenter Tom Semple writes that the Publishers Lunch site's Details From the DOJ's Lawsuit "summarizes some of the juicier details," so I'm adding it here while back briefly and am leaving again.
  Thanks, Tom!


Related articles
TIMELINE:  Ebook Pricing Wars - what DOJ would have seen.
Also, History of the e-book pricing wars



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More on raids in price-fixing probe. Publishers "explain" high ebook pricing.

The title should read, "...try to explain" the fixed higher-pricing of e-books.  See earlier article here on the raids.

The Guardian has a piece today on the raids, which includes quotes from some publishers trying to explain or defend the fixing of pricing so that prices are generally much higher and must be the same at all online bookstores needing Agreements with the Big 5, with no way for the online stores to offer sales or lower prices no matter what the case.  Random House has decided not to join Agency pricing in Europe during this time of probing questions.

Benedicte Page and Leigh Phillips report from Brussels, where they say that officials there have "refused to say how many or which publishers were targeted although a spokesman for Hachette, famed for its dictionaries, confirmed that it was among them.  The inquiry is understood to be focused on French companies."

Excerpts of particular interest, emphases and bracketed comments, mine:

' The EU competition spokeswoman, Amelia Torres, said: "We have suspicions of collusion to keep prices high.  But if our suspicions prove to be founded, this would have an impact across the EU because ebooks are sold across borders."  She added that the firms involved face fines if the commission finds "hard evidence".

The development comes on the heels of an investigation in January by the UK's Office of Fair Trading into whether arrangements between certain publishers and retailers over the sale of ebooks "may breach competition law".

Investigation teams have asked many of the biggest London publishing houses, including HarperCollins, Hachette and Penguin, for all records and documents relating to ebook sales.
. . .
Publishers see the agency model as crucial because it allows them to trade with Apple [which created the Agency plan and insists on it], which was already using it for iTunes, and also to control the price at which their ebooks are sold.
. . .
Ronald Blunden, Hachette's head of communications, denied that the company engaged in price fixing. "Emphatically no," he said. "We are dealing with distributors [such as Amazon] who have considerable clout.

"We found that in the US, electronic retailers began to apply large discounts on ebooks, driving the cost down.  Steadily the spread between the price of a printed book and an ebook became so substantial that we felt it was just unacceptable."

"It's important for the publisher to control the retail price," Blunden continued. "We don't want the items sold below cost, as the perceived value of books becomes damaged.  Once this happens, can we expect online retailers to absorb the cost of financing the editing and publishing of books?"

John Makinson, the Penguin group chief executive, argued that the "very important" agency model contributes to a competitive ebooks marketplace.  "To have vibrant competitive markets, it's important that Apple and the other digital vendors have a place in that market.  The agency model made it possible to have that choice," he said.

Makinson added that he saw "a certain irony" in an OFT [Office of Fair Traiding - UK] investigation designed to ensure competition and consumer choice.  "That in our view is what the agency agreement has provided," he said.

Their view of 'competition' is that the online booksellers must not be allowed to offer lower prices, which means online bookstore "Sales" are no longer possible and the customer cannot look for a lower price elsewhere as it would be fruitless.  Some consider this 'price fixing' while others consider it necessary publisher-control of book pricing, no matter how artificial or without reason.]

Novelist Nick Harkaway, author of The Gone-Away World, agreed. "If the agency model is really a problem under EU law, the law is the problem, not the industry," he said. "Otherwise you fall back into a situation where Amazon controls the market.  This is not to demonise Amazon, but they are a massive portion of the physical market and if their wholesale model also dominates the digital book market, it becomes much harder to negotiate with them." '

The Bookseller's deputy editor, Philip Jones, feels that if you let the market decide, then ebooks will become "too cheap" and they'll be unable to pay authors, editors or all the infrastructure that sustains the industry."

Yes, if an industry or individual companies (as we saw with digital music and with companies still limiting themselves to distributing physical copies of DVDs) cannot find a way to adjust to a vastly changing world, they won't be able to sustain the infrastructure as it stands.  The answer is not unceasing efforts to Stop the World from moving naturally (and insisting customers just pay up, and up) but to modify their infrastructure to reflect the real world and evolving technology, no matter how upsetting it may all be for them to have to change anything.

Read more at The Guardian story.

EARLIER BLOG ARTICLES ON THE E-BOOK PRICING WARS, WITH SOURCING
A Kindle World Blog history of articles on the e-book pricing wars


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"EU raids publishers in ebook price-fixing probe" - UPDATE

EU raids publishers in ebook price-fixing probe
That's the headline in a story from The Telegraph today, written by Rupert Neate.

The drama continues with the wording, "European investigators raided several major publishers on Wednesday as the worldwide probe into allegations of price-fixing of ebooks stepped up a gear."  The actual wording is more important than usual so I'll do more quoting than paraphrasing.   The bracketed comments are mine.

' The European Commission said its agents had "reason to believe" that several unnamed companies across Europe "may have violated EU antitrust rules that prohibit cartels and other restrictive business practices".

The raids comes after the Office of Fair Trading (OFT) last month launched a similar probe into the prices of ebooks, which can cost more than twice as much as their printed cousins. [Exactly.]

The OFT's investigation focuses on publishers' ability to set ebook prices using "agency" pricing.
. . .
The discrepancy has led to some electronic books costing far more than a hardback version of the same book.
. . .
Earlier this year, Amazon said sales of ebooks for its Kindle ereader had overtaken paperback sales in the US for the first time. A similar investigation is under way in the US.

An EU Competition Commission spokesman refused to name the publishing houses raided, but said investigators were "working closely with the OFT".

Penguin, the publisher owned by Pearson, and Harper Collins, which is owned by News Corporation, are both being investigated by the OFT, but were not raided by EU investigators.

Harry Potter publisher Bloomsbury, which has declared 2011 "the year of the ebook", refused to state whether or not it had been raided.

Publishers refused to comment on the legality of the agency pricing model. '

The Harry Potter books have never been made available on e-books, however, because the author doesn't want them available in that format.

But, this was really quick action, relatively speaking.  Some thought it would take a year before any actual investigation.

UPDATE - 02/03/11, 11:37 AM (Original posting 3/2/11 at 11:52 PM PST)
The Bookseller has a far more detailed story about it by Philip Jones and Barbara Casassus.
I saw a brief post by Paul Biba on this, dated yesterday, at Teleread.com from probably an earlier article and searched Bookseller for a story just now.

I'll add a few excerpts here, as it's very long, and you should read the full article at the Bookseller site:

' . In some cases laptops and smartphones of senior executives have been seized.
  . a spokeswoman added separately that it did not have "any proof". It said that it carried out "unannounced inspections" at publishing companies in several member states.
  . French publisher Hachette Livre confirmed that an inspection had been conducted beginning on Tuesday (1st March) and continuing Wednesday at its Paris headquarters. [See story for other companies.]
  . The AFP reported the following quote from Amelia Torres, spokeswoman for Competition Commissioner Joaquin Almunia: "The competition services Tuesday conducted inspections in publishing houses in several European Union countries due to suspicion of anti-competition practices in the pricing of e-books.  We are not naming the publishing houses nor the countries because we are just at the beginning of the inquiry.  We are not accusing anyone and we do not have any proof."
  . "The Commission officials were accompanied by their counterparts from the relevant national competition authorities.  Unannounced inspections are a preliminary step into suspected anti-competitive practices.  The fact that the Commission carries out such inspections does not mean that the companies are guilty of anti-competitive behaviour nor does it prejudge the outcome of the investigation itself.  The Commission respects the rights of defence, in particular the right of companies to be heard in antitrust proceedings.
    "There is no legal deadline to complete inquiries into anti-competitive conduct... '

  Much more at the Bookseller article.


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