* Barnes & Noble says loss of agency pricing damaging
* Three publishers had settled; Apple and two others will
By Phil Wahba
June 7 Barnes & Noble Inc has objected
to the U.S. government's proposed settlement of its price-fixing
lawsuit against top publishers, saying it would harm book
sellers and "millions and millions" of book buyers.
The top U.S. bookstore chain, which has been battling with
Amazon.com Inc in the growing e-books market, said in a
complaint filed with the U.S. Justice Department on Thursday
that the settlement would lead to "higher overall average e-book
and hardback prices and less choice, both in how to obtain books
and in what books are available."
Barnes & Noble's share price fell 3 percent on Thursday,
closing at $15.42.
In an antitrust lawsuit in April, the Justice Department
sued Apple Inc and two publishers, saying they, and
three other publishers with which it simultaneously settled,
conspired to fix the prices of electronic books to break
Amazon's dominance in the market.
Apple had successfully convinced 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, the
government said at the time.
Apple also allegedly extracted promises from the publishers
that they would not allow rival retailers to discount their
e-books, a so-called "most-favored nation" deal.
The strategy upended the "wholesale model" in which
retailers pay for the product and charge what they like.
Barnes & Noble, which operates nearly 700 bookstores, said
that before the adoption of agency pricing, it was "losing
substantial money in an effort to compete with Amazon's pricing
and was unable to gain significant market share."
Amazon, which got a headstart in the e-book market with its
Kindle e-reader, had used the wholesale model to generally
charge $9.99 for its e-books.
The settlement the government reached in April with three of
the publishers would allow Amazon to resume discounting books,
and terminate their most-favored nation contracts with Apple.
Amazon said at the time that it planned to lower prices on books
associated with its Kindle e-reader.
AMAZON RISES AGAIN?
Barnes & Noble said in its comments on Thursday that the
adoption of agency pricing had lowered Amazon's share of the
e-book market to 60 percent from 90 percent. Barnes & Noble
claims to have 27 percent.
Barnes & Noble has had to contend with Amazon's aggressive
pricing on its Kindle devices. It has invested heavily,
including on advertising for its Nook devices, to compete and
that spending has weighed on the bookseller's earnings.
Sales in Barnes & Noble's Nook business, including e-books
and the devices, rose 38 percent to $542 million during the
holiday quarter, which ended Jan. 28, easily outpacing the 4.2
percent rise in physical book sales during that period.
Barnes & Noble said the end loser of the proposed settlement
would be the American public, saying they would experience
higher overall average e-book and hardback prices and less
choice in books and how to obtain them.
It also said the proposed settlement "will injure innocent
third parties, including Barnes & Noble, independent bookstores,
authors and non-defendant publishers."
The three publishers who agreed to settle are News Corp's
HarperCollins Publishers Inc, CBS Corp's Simon
& Schuster Inc and Lagardere SCA's Hachette Book
Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck
GmbH, and Pearson Plc's Penguin Group, have said they
plan to fight the Justice Department charges, along with Apple.
Justice Department spokeswoman Gina Talamona said that the
department had no immediate response to the Barnes & Noble
comments. "The department will respond to all of the comments in
a filing with the court," she said.
HarperCollins could not immediately be reached for comment
while Hachette and Simon & Schuster declined comment.