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Despite $69M Deal, E-Book Pricing Policies Still Unwritten

By Peter Suciu E-Commerce Times ECT News Network
Aug 30, 2012 11:54 AM PT

Hachette Book Group, HarperCollins Publishers and Simon & Schuster have agreed to pay a total of more than US$69 million to consumers to resolve antitrust claims of alleged unlawful conspiracy to fix the prices of electronic books. The three companies further agreed to change the way their e-books will be priced.

Despite $69M Deal, E-Book Pricing Policies Still Unwritten

The three publishers settled with 55 attorneys general in nearly every U.S. state and the District of Columbia, as well as several territories.

"While publishers are entitled to their profits, consumers are equally entitled to a fair and open marketplace," said Connecticut Attorney General George Jepsen on Thursday. "This settlement will provide restitution to those customers who were harmed by this price-fixing scheme, but it also will restore competition in the e-book market for consumers' long-term benefit."

This is the latest turn in a lawsuit that stemmed from a two-year investigation conducted in part by the U.S. Department of Justice's Antitrust Division. This settlement does appear to close the case with the three aforementioned publishers.

"We believe this is a fair settlement," said Adam Rothberg, a spokesperson for Simon & Schuster. "We're pleased to now have put this matter behind us, and moving forward, to continuing our work with authors and accounts to grow the market for books of all formats -- and to take advantage of the many opportunities afforded us by publishing in the digital era."

And Then There Were 3

However, three other parties include publishers Penguin and MacMillan, as well as Apple, and a case remains pending in the Southern District of New York. The question now is what happens next.

"A couple of things are at work here. First and foremost is the argument about whether Apple and the six publishers fixed the pricing of e-books in order to challenge Amazon but which, in fact, were essentially anticompetitive," said Charles King, principal analyst at Pund-IT.

"The three who settled apparently decided that the payout -- $69 million spread across 50 states -- was less onerous than pursuing a legal case that could result in higher legal costs and penalties, as well as monopoly sanctions," he told the E-Commerce Times.

"Those are the literal risks facing Apple and the three remaining publishers being investigated by the DoJ, but they could also suffer the public humiliation and professional impact of being legally branded as monopolists," King added.

Yet it is very unclear what the public might make of this.

"Apple is so beloved by so many people that the company may be able to ride out even a conviction by repeating their novel claim that they were simply trying to halt the loss-leader book pricing by Amazon that Apple claims is corroding the e-book market," King explained.

"But I doubt that the publishers that are sticking with the suit will fare as well," he continued. "To date, the success of online commerce has mainly proved that American consumers love their bargains, so it seems unlikely that they will harbor much sympathy for those colluding to keep the prices of goods artificially high."

Price of E-Books

The other part of the equation is what the settlement even means. How will e-book pricing policies change? This is still an unknown, especially with the New York case is still pending.

"The devil is in the details," said Billy Pidgeon, principal analyst at M2 Research. "There are a lot of issues with the pricing of digital media. There are expectations that digital should be priced more cheaply as there are no manufacturers. But this really hasn't been the case."

Given that the three publishers have settled, it could be expected that pricing will sort itself out. But consumers shouldn't expect to suddenly see prices fall for that next hot bestseller.

"The market will work itself out there," Pidgeon told the E-Commerce Times. "As far as competition, there really needs to be fixed pricing on these items -- but let's face it, there is price collusion in every industry."

What could happen is that Amazon will be charged the same for e-books as smaller retailers, but Amazon could still offer better pricing to customers. If that's the case, has much really changed?

"Amazon can still compete with margins, but publishers can't or shouldn't give Amazon a better deal," emphasized Pidgeon. "This is still going to be Byzantine in how it is worked out."

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