Federal Judge Approves Settlement in Ebook Price Fixing Case

Posted on September 7, 2012

The New York Times reports that a federal judge has now approved the ebook price fixing case settlement between the Justice Department and the three settling book publishers. The judge totally rejected objections to the settlement raised by the Authors Guild, the ABA and Barnes and Noble, among others.

So, what happens next? The three settling publishers -- HarperCollins, Hachette and Simon and Schuster have one week to end their contracts with Apple. For the next two years, the publishers may no longer enter into contracts with ebook retailers such as Amazon.com which will restrict the retailer's ability to set prices. Nor can the contracts have "most favored nation" clauses which say no other retailers can sell ebooks at a lower price: that restriction is in place for the next five years.

Amazon.com is now free to lower the price of ebooks to $9.99 -- or lower, if it chooses to do so. It will still have to pay the normal wholesale rate to the publishers, just as it does on physical books.

Apple, Penguin Group USA and Macmillan refused to settle. Their cases are expected to go to trial next summer. If they get a jury of ebook lovers, they are going to have a tough time justifying entering into contracts that guaranteed that consumers would pay higher prices for ebooks than Amazon wanted to charge. It's not a jury-friendly case for the publishers, that's for sure.

You can read Judge Denise L. Cote's full opinion here.