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Publishers Object to U.S. Request in Apple E-Book Case

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Aug. 8 (Bloomberg) -- Publishers who previously settled an antitrust lawsuit with the U.S. Justice Department over pricing of electronic books filed an objection to the government’s bid to force Apple Inc. to terminate existing contracts with them.

HarperCollins Publishers LLC, Hachette Book Group Inc., Simon & Schuster Inc. and two others claimed in the objection yesterday that they would be punished by the proposed order. The government’s proposal would force Apple to find new ways of making deals with publishers to distribute e-books.

The proposal would “effectively eliminate the use of the agency model” for selling and distributing e-books for a period of five years, the publishers said in the filing in federal court in Manhattan. Under the agency model, publishers, not retailers, set book prices.

“The provisions do not impose any limitation on Apple’s pricing behavior at all,” lawyers for the publishers wrote. “Rather, under the guise of punishing Apple, they effectively punish the settling defendants by prohibiting agreements with Apple using an agency model.”

U.S. District Judge Denise Cote ruled in July that Cupertino, California-based Apple, the world’s largest technology company, violated U.S. antitrust law by fixing e-book prices.

Five Publishers

The five publishers were also defendants in the lawsuit, which was brought by the U.S. government and 33 state attorneys general. The publishers, Verlagsgruppe Georg von Holtzbrinck GmbH’s Macmillan unit, CBS Corp.’s Simon & Schuster, Lagardere SCA’s Hachette Book Group, Pearson Plc’s Penguin unit and News Corp.’s HarperCollins, settled with the government for a total of at least $164 million.

A sixth publisher, Random House Inc., didn’t sign an agency agreement with Apple and wasn’t involved in the U.S. suit. Penguin was merged with Random House this year.

Apple introduced e-books in 2010 to boost the appeal of the newly unveiled iPad tablet as a reading device.

Gina Talamona, a spokeswoman for the Justice Department, said in an e-mail that the proposed court order doesn’t modify the terms of the settlement reached with the publishers.

If approved by the court, the order “would prohibit Apple from entering agreements that limit retail price competition during a reset period,” she said.

The case is U.S. v. Apple Inc., 12-cv-02826, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Christie Smythe in Manhattan at csmythe1@bloomberg.net; Patricia Hurtado in New York at pathurtado@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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