Macmillan Settles in DOJ Ebook Price Fixing Case

Apple is now the last man standing in the U.S. Department of Justice antitrust case against publishers for allegedly colluding to artificially set the price of ebooks now that Macmillan has struck a settlement deal. The publisher had said it wouldn't settle with the DOJ, but clearly has had a change of heart.

MacMillan bows out of ebook antitrust lawsuitMacMillan bows out of ebook antitrust lawsuit

In a letter to authors, agents and illustrators, Macmillan CEO John Sargent said the company reversed its decision and agreed to a settlement "because the potential penalties became too high to risk even the possibility of an unfavorable outcome."

He said Macmillan held out for so long because of concerns that the level of discounts the settlement called for would be harmful to the industry. Since the other five big publishers had already caved to the DOJs demands, not striking a deal would now have a negative impact on Macmillan's sales, too, since its ebooks would be priced higher than its competition.

Mr. Sargent added,

As each publisher settled, the remaining defendants became responsible not only for their own treble damages, but also possibly for the treble damages of the settling publishers (minus what they settled for). A few weeks ago I got an estimate of the maximum possible damage figure. I cannot share the breathtaking amount with you, but it was much more than the entire equity of our company.

Apple, Macmillan, Simon & Schuster, Harper Collins, Penguin, and Hachette were all targeted in an DOJ investigation into accusations that they collaborated to artificially raise the price of ebooks, which ultimately led to a lawsuit against the companies in April 2012. The companies were accused of forcing resellers to let publishers set book pricing instead of retailers controlling how much customers paid.

Apple and the publishers denied any wrong doing, but by August Simon & Schuster, Hachette, and HarperCollins had already agreed to a settlement with the DOJ to avoid going to court. Apple, Macmillan, and Penguin all said they would fight the DOJ in court, but later Penguin agreed to a settlement, too.

Apple called the settlements "fundamentally unfair, unlawful, and unprecedented," and went on to deny that the companies worked together to artificially raise ebook prices. The Mac, iPhone and iPad maker added that Amazon was artificially lowering ebook prices to gain monopoly control over the market.

Despite the decision to settle with the DOJ, Mr. Sargent said he was hopeful his company would've won at trial, but added, "Outcomes are hard to predict with certainty, particularly in a civil case with a low burden of proof."

Macmillan didn't have to admit guilt as part of the settlement, and retailers will be able to lower the prices on the publisher's books soon.

With Macmillan out of the fight, only Apple is left in the lawsuit. The company hasn't said yet if it plans to move forward and face off in court or if it, too, will agree to a settlement.