NJ AG Announces Settlement With Publishers Over E-Book Price-Fixing Allegations

New Jersey Attorney General Jeffrey S. Chiesa

New Jersey Attorney General Jeffrey S. Chiesa

TRENTON – New Jersey Attorney General Jeffey S. Chiesa, along with 54 attorneys general in other states, districts and U.S. territories, announced Wednesday that they have reached an antitrust settlement with three of the largest book publishers in the United States. Hachette Book Group, Inc., HarperCollins Publishers, L.L.C. and Simon & Schuster, Inc. have agreed to pay a total of more than $69 million to consumers to resolve antitrust claims of an alleged unlawful conspiracy to fix the prices of electronic books (E-books). They have also agreed to change the way they price E-books going forward.

The settlement occurs in conjunction with a civil antitrust lawsuit filed today in U.S. District Court for the Southern District of New York against Hachette, HarperCollins, and Simon & Schuster. In the lawsuit the States allege that the three settling publishers and others, including non-settling publishers Macmillan and Penguin (collectively, the “Agency Five” publishers), “conspired and agreed to increase retail E-book prices for all consumers” and “agreed to eliminate E-book retail price competition between E-book outlets, such that retail prices to consumers would be the same regardless of the outlet patronized by the consumer.”

The lawsuit and the settlement stem from a two-year joint state and federal antitrust investigation. That investigation developed evidence that the Agency Five publishers conspired to end E-Book retailers’ freedom to compete on price by taking control of pricing from E-Book retailers and substantially increasing the prices that consumers paid for E-Books. As a result of this conduct, the States allege that consumers paid millions of dollars more for their e-books.

“Our legal action sends a strong message that competitors cannot get away with price-fixing,” Chiesa said. “Colluding to fix prices raises costs for customers, who, in this case, have paid millions of dollars more for some of the most popular E-Book titles. Today’s settlement with three publishers paves the way for restitution for consumers harmed by the scheme.” Chiesa added, “This settlement restores competition to the E-Book marketplace and ensures consumers are protected from collusion in their future purchases of E-Books.”

Under the proposed settlement agreement, which the court must approve, Hachette, HarperCollins and Simon & Schuster will compensate consumers who purchased E-books from any of the Agency Five publishers during the period of April 1, 2010 through May 21, 2012. Payments will begin 30 days after court approval of the settlement. Consumers in New Jersey are expected to receive an estimated $2.4 million in total compensation. The settling defendants will also pay approximately $7.5 million to the states for fees and costs.

In addition to paying the $69 million consumer compensation, Hachette, HarperCollins and Simon & Schuster have agreed to terminate their existing agency agreements with certain retailers, requiring the publishers to grant retailers–such as Amazon and Barnes & Noble–the freedom to reduce the prices of their E-book titles. For two years they will be prohibited from making any new agreements that constrain retailers’ ability to offer consumer discounts or other promotions which encourage the sale of e-Books.

Deputy Attorney’s General Jah-Juin Ho, Glenn Graham, and Joshua Rabinowitz of the Affirmative Civil Enforcement Practice Group represented the State in this matter.

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