Judge approves U.S. settlement with publishers over e-books

WASHINGTON Fri Sep 7, 2012 4:44am IST

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WASHINGTON (Reuters) - A judge approved on Thursday a Justice Department settlement with three publishers accused of conspiring with Apple Inc and other publishers to push up the prices of electronic books.

U.S. District Judge Denise Cote in Manhattan said comments on the settlement were "voluminous and overwhelmingly negative," but there was no excuse for price-fixing.

The Justice Department had accused Apple and five publishers in April of illegally colluding on prices as part of an effort to fight internet retailer Amazon.com Inc's dominance of e-books.

The publishers who agreed to settle are News Corp's HarperCollins Publishers Inc, CBS Corp's Simon & Schuster Inc and Lagardere SCA's Hachette Book Group.

Apple; Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH; and Pearson Plc's Penguin Group have vowed to fight the Justice Department's lawsuit with a trial due to start on June 3 next year.

The proposed settlement was unpopular with bookseller Barnes & Noble Inc and the American Booksellers Association, which represents independent stores, with both arguing that it would strengthen Amazon's dominance.

Many people in the book publishing and selling industry accuse Amazon of selling books below cost to drive other e-book sellers out of business, and then raising prices. But these concerns were not adequate to prevent approval of the deal struck with the Justice Department, wrote Cote.

"Even if Amazon was engaged in predatory pricing, this is no excuse for price-fixing," she said in her 45-page opinion.

Apple is accused of convincing the five publishers to use the "agency model," that allows publishers to set the price of e-books, and in turn Apple would take a 30 percent cut.

Under the settlement, the three settling publishers agreed not to use the agency model for two years, instead allowing retailers to pay for e-books and then charge what they like.

Speaking at an event in California to unveil new Kindle Fire tablet computers, Amazon executive Jay Marine said the settlement was "great for customers." He said the prices of e-books would go down "soon."

Electronic books more than doubled in popularity in 2011, with e-books sales making up 15 percent of the market last year compared to 6 percent in 2010, according to a report by the Association of American Publishers and the Book Industry Study Group.

While e-books increased in strength, bringing in more than $2 billion in 2011, the majority of publishers' revenue still came from print books, with $11.1 billion in 2011.

The lawsuit is USA v. Apple Inc, et al, U.S. District Court for the Southern District of New York, case No. 12-cv-2826.

(Reporting by Diane Bartz; Editing by Kevin Drawbaugh and Tim Dobbyn)