Earlier today, the U.S. Department of Justice (“DoJ”) announced in a press release that it had reached a settlement with three of the parties in its e-book price fixing investigation (Hachette Book Group (USA), HarperCollins Publishers L.L.C. and Simon & Schuster Inc.) and would continue its litigation against Apple Inc., Holtzbrinck Publishers LLC (operating as Macmillan) and Penguin Group (USA), filing a civil antitrust lawsuit in New York.
The DoJ alleges that Apple and the publishers in this case conspired to “end e-book retailers’ freedom to compete on price, take control of pricing from e-book retailers (such as Amazon and Barnes & Noble) and substantially increase the prices that consumers pay for e-books.”
In making the announcement, U.S. Attorney General Eric Holder said:
“As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles. … We allege that executives at the highest levels of these companies–concerned that e-book sellers had reduced prices–worked together to eliminate competition among stores selling e-books, ultimately increasing prices for consumers.”
According to the DoJ, it cooperated closely with the European Commission, as well as state authorities in Connecticut and Texas to “uncover the publishers’ illegal conspiracy”.
The core of the DoJ’s allegations is that Apple and the five publishers involved sought to eliminate price competition among retailers selling e-books by entering into agreements that eliminated price competition between competing booksellers. In particular, the DoJ alleges that the publishers introduced a new model, agreed upon by them, under which they took control of pricing authority from retailers and raised e-book prices (rather than, as previously, selling wholesale to retailers allowing them to set prices).
Also interesting are allegations by the DoJ that the parties periodically met in “private dining rooms of upscale Manhattan restaurants used to discuss confidential business and competitive matters” including Amazon’s e-book’s retailing policies.
The proposed settlement agreement with Hachette, HarperCollins and Simon & Schuster includes commitments to terminate their agreements with Apple and e-book retailers, prohibitions on preventing retailers from reducing e-book prices, restrictions on exchanging competitively sensitive information with competitors in the future and implement antitrust compliance programs.
In Canada, the Competition Act makes three categories of agreements between competitors “per se” illegal (i.e., without requiring that any adverse market effects be proven): (i) price-fixing agreements (agreements to fix, maintain, increase or control the price for the supply of a product), (ii) market allocation/division agreements (agreements to allocate sales, territories, customers or markets for the production or supply of a product) and (iii) output/supply restriction agreements (agreements to fix, maintain, control, prevent, lessen or eliminate the production or supply of a product).
Other types of agreements between competitors are potentially subject to review under a second and separate non-criminal reviewable matters provision (section 90.1).
For the DoJ’s press release, complaint and Attorney General’s remarks see: DoJ.
For more about Canada’s conspiracy (cartel) laws see:
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