MADIGAN SETTLES WITH TWO E-BOOK PUBLISHERS FOR PRICE-FIXING

(The following is a reformatted version of a press release
issued by the Office of Attorney General Lisa Madigan and
received via electronic mail. The release was confirmed by the
sender.) 
May 22, 2013 
MADIGAN SETTLES WITH TWO E-BOOK PUBLISHERS FOR PRICE-FIXING 
Publishers Conspired to Overcharge Consumers for e-Books 
Chicago -- Attorney General Lisa Madigan today joined 32 other
attorneys general in proposed antitrust settlements with Penguin
Group and Macmillan, the remaining two publishers accused of
conspiring to raise prices for e-books beginning in 2010. 
Penguin Group agreed to pay approximately $3.1 million to
Illinois residents who were overcharged in the scheme, and
Macmillan, which has a smaller share of the e-book market,
agreed to pay about $820,000. 
The settlements follow a 2012 lawsuit in which the states
alleged that five publishers, Hachette, HarperCollins,
Macmillan, Penguin Group and Simon & Schuster, colluded with
Apple to drive up the price of e-books beginning in 2010, when
Apple unveiled its first e-book reader, the iPad. 
Prior to Apple entering the e-book market in 2010, most new
bestsellers in this format cost $9.99 - a price set by the
leading e-book retailer, Amazon. The lawsuit alleged the
publishers colluded to increase e-book costs to $12.99 and
$14.99 when they struck a deal with Apple to sell their books
directly to readers, using its iBookstore as the vehicle for the
sales. Historically, publishers have sold their books to
retailers who in turn have sold them to readers. The deal with
Apple - a so-called agency model of distribution - allowed the
publishers to control the retail price and to sell the content
to consumers directly. For its part, the lawsuit alleged Apple
received a guaranteed 30 percent commission on all e-books that
were sold under the deal. 
“The publishers’ price-fixing scheme forced customers to pay
millions more than they otherwise would have,” Madigan said.
“These settlements will restore the money lost as a result of
Penguin and Macmillan’s collusion with other e-book publishers.” 
Like the three previous publishers to settle, Penguin and
Macmillan will compensate customers who purchased e-books from
any of the publishers from April 1, 2010, through May 21, 2012. 
Penguin will pay a total of $75 million nationwide. Macmillan
will pay $20 million. Payments or credits to consumers are
expected to begin 30 days after the court gives final approval
to the settlements. 
The attorneys general previously settled with Hachette,
HarperCollins and Simon & Schuster. From those settlements,
Illinois residents are expected to receive about $2.7 million in
refunds. If the Penguin and Macmillan settlements are approved
by the court, Illinois residents’ recovery would increase to a
total of $6.7 million. 
As part of the settlements, Penguin and Macmillan also are
required to change the way they price e-books going forward.
They must terminate the agency agreements with certain
retailers, such as Amazon and Barnes & Noble, which prevented
the retailers from reducing the prices of their e-book titles.
Until December 2014, Penguin and Macmillan will be prohibited
from making any new agreements that prevent retailers from
offering consumer discounts or other promotions that encourage
the sale of e-books. The proposed settlement agreements also
prohibit Penguin and Macmillan from further conspiring or
sharing competitively sensitive information with their
competitors for five years. 
Penguin and Macmillan also agreed to pay $7 million and $3
million, respectively, to the states for the cost of the
investigations and litigation. In addition, the settlements
would resolve a private class action against Penguin and
Macmillan that was brought by e-book purchasers from other
states. 
The antitrust case against the remaining defendant, Apple, Inc.,
is pending in the Southern District of New York. 
Bureau Chief Robert Pratt and Assistant Attorney General
Chadwick Brooker have handled these cases for Attorney General
Madigan’s Antitrust Bureau. 
Media Contact:
Natalie Bauer
(312) 814-3118
nbauer@atg.state.il.us
@ILAttyGeneral 
(bjh) NY 
#<873920.660640.3.5.0.0.76>#
 
 
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