U.S. reaches e-books settlement with Penguin

WASHINGTON Wed Dec 19, 2012 7:30am IST

Penguin books are seen in a used bookshop in central London October 29, 2012. REUTERS/Stefan Wermuth/Files

Penguin books are seen in a used bookshop in central London October 29, 2012.

Credit: Reuters/Stefan Wermuth/Files

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WASHINGTON (Reuters) - The U.S. Justice Department said on Tuesday it has reached a settlement with Pearson Plc's (PSON.L) Penguin Group in the government's investigation of alleged price-setting in the e-book market.

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

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.

Hachette, HarperCollins and Simon & Schuster opted to settle with the Justice Department in April but Apple, Penguin and MacMillan said they would fight the allegations.

News Corp. (NWSA.O) owns HarperCollins Publishers Inc, CBS Corp (CBS.N) owns Simon & Schuster Inc and Lagardere SCA (LAGA.PA) owns Hachette Book Group. Macmillan is a unit of Verlagsgruppe Georg von Holtzbrinck GmbH.

Many people in the book publishing and selling industry accuse Amazon of deeply discounting books to sell them below cost in order to drive other e-book sellers out of business, and then raise prices.

Under the terms of the settlement announced on Tuesday, Penguin will drop any agreements with Apple and other ebook sellers that prevents price discounting. It will not be allowed to reinstate the deals for two years.

The settlement terms were similar to ones that the Justice Department reached with the other three publishers in April.

The impetus for the settlement could well be a joint venture of Penguin and Random House announced in October by Penguin owner Pearson's (PSON.L) and Random House owner Bertelsmann.

That deal is also aimed at gaining the upper hand in the publishers' relationship with Amazon and Apple.

The publisher settlements with the Justice Department have been unpopular with bookseller Barnes & Noble Inc (BKS.N) and the American Booksellers Association, which represents independent stores. Both have argued the settlements would strengthen Amazon's dominance. (Reporting by David Ingram and Diane Bartz; editing by Andrew Hay)

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