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AG: More Refunds Coming From Penguin E-Book Price-Fixing Agreement

Press release from the Office of Tennessee Attorney General Robert Cooper; May 22, 2013:

Tennesseans who bought electronic books (E-books) from Penguin Group (USA) Inc. in the past two years may be eligible for a refund as part of a multistate price-fixing agreement, Attorney General Bob Cooper announced today. Consumers in Tennessee along with 33 other states and territories will receive a total of $75 million in restitution.

Today’s agreement is the latest in a widespread investigation into allegations some of the largest publishers agreed with one another and some distributors to artificially set the prices of E-books sold in the United States.

The agreement with Penguin must be approved by the U.S. District Court for the Southern District of New York. When finalized, the agreement with Penguin will grant E-book outlets greater freedom to reduce the prices of their E-book titles.

Tennessee has previously settled with four other publishers–Hachette Book Group Inc., HarperCollins Publishers L.L.C., Simon & Schuster Inc., and Holtzbrinck Publishers LLC d/b/a Macmillan–for allegations relating to the same conduct.

An antitrust action based on the same allegations against Apple Inc., meanwhile, remains pending with a trial scheduled for June 3.

Specifically, the complaint states, the publishers agreed to increase retail E-book prices for all consumers and to eliminate E-book retail price competition between E-book outlets regardless of where the consumers bought their E-books.

“We hope this agreement will help stop anyone who attempts to gouge consumers in the future by artificially inflating prices for goods and services,” Attorney General Cooper said. “As a result of this activity, consumers paid millions more than they should have in a naturally competitive marketplace.”

The lawsuit and today’s settlement stem from a two-year antitrust investigation conducted by the states and U.S. Department of Justice’s Antitrust Division. That investigation developed evidence that the 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. The States contend that the publishers prevented retail price competition resulting in consumers paying millions of dollars more for their e-books. Under the proposed settlement agreement, the publishers will compensate consumers who purchased E-books from any of the publishers cited during the period between April 1, 2010 through May 21, 2012.

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State AG Joins Lawsuit Against Apple, Electronic Book Publishers

Press release from the Office of Attorney General of Tennessee; April 11, 2012:

Tennessee Attorney General Bob Cooper and 15 state attorneys general today filed suit against three of the nation’s largest book publishers and Apple Inc. , alleging they colluded to fix the sales prices of electronic books (e-books). The suit was filed today in U.S. District Court in Austin, Texas. It cites the defendants for violating the States’ antitrust laws and the federal Sherman Antitrust Act.

“The ultimate result with price-fixing is that consumers pay more than they would have in a free marketplace,” Attorney General Cooper said. “Our joint lawsuit alleges three of the nation’s largest publishing companies worked together to gain control of retail prices, allowing publishers to raise the price of e-books.”

The States’ antitrust action stems from a two-year investigation in conjunction with the states attorneys general and the Department of Justice, into allegations that the defendants conspired to raise e-book prices. For years, retailers traditionally sold e-books through a wholesale distribution model, under which retailers rather than publishers set e-books’ sales prices. However, the investigation alleged revealed that Penguin, Simon & Schuster and Macmillan conspired with other publishers and Apple to artificially raise prices by imposing a distribution model in which the publishers set the prices for bestsellers at $12.99 and $14.99.

When Apple prepared to enter the e-book market, the publishers and Apple agreed to adopt an agency distribution model as a mechanism to allow them to fix prices. To enforce their price-fixing scheme, the publishers and Apple relied on contract terms that forced all e-book outlets to sell their products at the same price. Because the publishers agreed to use the same prices, retail price competition was eliminated. According to the States’ enforcement action, the coordinated agreement to fix prices resulted in e-book customers paying more than $100 million in overcharges.

Today’s action seeks to reverse the effects of the defendants’ anti-competitive conduct as well as pay damages for customers who paid artificially inflated prices for e-books.

The states have reached an agreement in principle with Harper Collins and Hachette to provide significant consumer restitution nationwide and injunctive relief.

Those participating in today’s enforcement action include Alaska, Arizona, Colorado, Connecticut, Illinois, Iowa, Maryland, Missouri, Ohio, Pennsylvania, South Dakota, Tennessee, Texas, Vermont and West Virginia.