$75 Million Settlement with Penguin Group Inc. to Resolve E-book Price-fixing Allegations

$75 Million Settlement with Penguin Group Inc. to Resolve E-book Price-fixing Allegations

33-State Settlement Resolves Claims That Penguin Colluded With Other Major Publishers And Apple Inc. To Fix The Prices Of Electronic Books

NEW YORK--New York State Attorney General Eric T. Schneiderman today joined 32 other states in announcing an antitrust settlement with Penguin Group (USA) Inc. The settlement requires Penguin to pay $75 million to resolve the States' claims that Penguin colluded with other major publishers and Apple Inc. to fix the prices of electronic books (E-books). NY consumers are eligible for refunds of about 11.7 million from this and previous settlements.

The agreement with Penguin must be approved by the U.S. District Court for the Southern District of New York. Following court approval, consumers nationwide – including those represented by the attorneys general of the 33 states and territories and those represented by private counsel in a related class action – will receive $75 million in compensation. In addition, injunctive provisions included in the settlement ensure that E-book retailers will have greater freedom to reduce prices of E-book titles going forward.

"E-book consumers are protected by our laws and efforts to circumvent those protections will not be tolerated by my office. Today’s and earlier settlements provide restitution to consumers harmed by the price fixing of E-books orchestrated by the five publishers and Apple," said Attorney General Schneiderman. "The settlements provide injunctive relief designed to prevent future anticompetitive conduct by E-book retailers and to restore competition to the E-book market."

It was alleged by the states in the lawsuit that the 5 E-book publishers and Apple agreed in 2010 to go to any agency model for the sale of E-books. By using the agency model the publishers were able to set the prices of E-books and prevent discounting by E-book retailers like Amazon. Amazon had been selling many NY Times bestsellers at a $9.99 price point. The publishers and Apple-who entered the E-book business in 2010 wanted E-books sold at a higher more profitable price point.

The states had previously settled with four other E-book publishers. The settlements reached with Hachette Book Group Inc., HarperCollins Publishers L.L.C., and Simon & Schuster Inc., in August 2012, required the payment of a total of $69 million in consumer compensation. An agreement reached with Holtzbrinck Publishers LLC d/b/a Macmillan earlier this year resulted in a payment of $20 million on behalf of consumers. As a result of these five settlements consumers nationwide will receive a total of $164 million. New York E-book purchasers will receive approximately $11.7 million in compensation from the settlements.

The states' antitrust action against Apple, Inc. based on the same allegations remains pending in the United States District Court for the Southern District of New York with a trial scheduled in June 2013.

For restitution purposes, most consumers will get a notice directly from their E-book retailers. In fact, as to the first 3 settlements-totaling $69 mill, these settlements have already been approved by the court and consumers have been notified that they are eligible for refunds from the first three settlements.

States and territories participating in the settlement are: Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, DC, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Missouri, Nebraska, New Mexico, New York, North Dakota, Ohio, Pennsylvania, Puerto Rico, South Dakota, Tennessee, Texas, Utah Vermont, Virginia, West Virginia and Wisconsin.

On behalf of New York State Attorney General’s Office, this case was handled by Assistant Attorney General Linda J. Gargiulo and Robert Hubbard, under the supervision of Executive Deputy Attorney General for Economic Justice Karla G. Sanchez.