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Penguin Denies Wrongdoing In E-book Price Fixing Case Penguin Denies Wrongdoing In E-book Price Fixing Case

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Penguin Denies Wrongdoing In E-book Price Fixing Case

Penguin Group denied Justice Department charges on Wednesday that it conspired with other publishers and Apple to fix the prices for e-books.

Justice alleged in its lawsuit that five publishers plotted with Apple to set the prices for e-books. Three of the publishers have agreed to a settlement with the department, while Penguin, publisher Macmillan and Apple have so far refused to strike a deal.

"A responsible company does not choose a path of litigation with U.S. government agencies without carefully weighing the implications of that course of action," Penguin Group Chairman and CEO John Makinson said in a statement. "(W)e have done nothing wrong...The second, and equally powerful, reason for our decision to place this matter in the hands of a court is that we believed then, as we do now, that the agency model is the one that offers consumers the prospect of an open and competitive market for e-books."

The department alleges that the publishers and Apple agreed to transition from a wholesale model for selling e-books, which allowed retailers to set their own prices, to an "agency model," which allowed the publishers to set the price for how much their books would sell for from online retailers like Apple and Amazon.

The Consumer Electronics Association leapt to the defense of Apple. "Apple is an American crown jewel that other nations covet, yet our own government leads an attack on its entry into electronic books," the trade group said in a statement.

"More, the legal theory of attacking a new market entrant for anti-competitive pricing is surprising. Apple's iPad hardware and iBooks software have an estimated 10 to 15 percent of the market share in e-books. Our ambiguous antitrust laws are now being used to take on a new market entrant of just over two years as if they have the market power to set prices."

Makinson said the shift to an agency model was costly in the short-term but has paid off through increased sales and lower prices for e-books.

Macmillan did not respond to a request for comment, while an Apple spokesman said the company would not comment on the matter at this point.

Boston University law professor Keith Hylton argues that the decision by Apple not to settle the case likely means that the firm believes the Justice Department's evidence of a conspiracy is not that strong. "The evidence must be pretty darn contestable if Apple would expose itself to so much risk," Hylton said in an interview.

Consumer Federation of America Research Director Mark Cooper, however, disagrees. "This is a 'slam-dunk' case of collusive, anti-competitive behavior," he said in a statement. Cooper wrote the Senate Judiciary Antitrust Subcommittee last week to urge the panel to examine allegations that Apple and several major publishers had conspired to boost prices for e-books.

The subcommittee's ranking member, Sen. Mike Lee, R-Utah, said the case raises serious concerns.

"Although government regulators should not interfere with market forces absent a significant threat to competition, the allegations made in the complaint filed today by the Department of Justice raise serious concerns about the prices paid by consumers for e-books," Lee said. "Illegal price fixing harms consumers and must not be tolerated. I am confident the judicial process will properly resolve this matter and curtail any illegal actions that result in significant consumer harm."

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