Judge approves DOJ settlement in e-book case

Associated Press Modified: September 6, 2012 at 7:00 pm •  Published: September 6, 2012

SAN FRANCISCO (AP) — A federal judge has approved the U.S. Justice Department's settlement with a trio of electronic book publishers accused of conspiring in a price-fixing scheme orchestrated by the late Steve Jobs.

Among other things, the agreement requires the publishers — Hachette, HarperCollins and Simon & Schuster — to abandon the pricing system that they had conceived with Apple before it released its iPad tablet in 2010. The change is supposed to come within the next week.

The ruling released Thursday cast aside the strident objections of Apple, other book publishers, book sellers and authors who argued the settlement will empower Internet retailing giant Amazon.com Inc. to destroy the "literary ecosystem" with rampant discounting that most competitors can't afford to match.

Those worries were repeatedly raised in court filings about the settlement. More than 90 percent of the 868 public comments about the settlement opposed the agreement.

Apple Inc. and two of the objecting publishers, Macmillan and the Penguin Group, also had argued it would be unfair to approve the settlement before they have a chance to fight the government's price-fixing allegations in a trial scheduled to begin next June.

But U.S. District Judge Denise Cote in New York decided the settlement "appears reasonably calculated to restore retail price competition to the market."

In its objections, Apple had raised the specter of appealing if Cote approved the settlement. Apple had no immediate comment Thursday on Cote's decision.

In a statement, the Justice Department said it is "pleased the court found the proposed settlement to be in the public interest and that consumers will start to benefit from the restored competition in this important industry."

Cote's ruling comes nearly five months after the Justice Department filed an antitrust lawsuit alleging Apple worked with the largest digital book publishers to rig a system designed to counteract Amazon.com's pricing practices. The approach, known as "the agency model," calls for book publishers, rather than retailers, to establish the prices of each title.

Under the agency model, merchants make their money through a commission. In Apple's case, that translated into the standard 30 percent cut it collects on most products sold through its iTunes stores.

The publishers' switch to the agency model came just before Jobs unveiled the iPad in January 2010. Before he died 11 months ago, Jobs confided to his biographer, Walter Isaacson, that he had convinced the major publishers that the agency model would be the best solution for all the key players in the rapidly growing e-book market.

"We told the publishers, 'We'll go to the agency model, where you set the price, and we get our 30 percent,'" Jobs told Isaacson. "And, yes, the customer pays a little more, but that's what you want anyway."

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