Penguin Settles with Justice Department Amid Random House Merger

Penguin becomes the fourth major publisher to settle in the e-book price-fixing case

The Justice Department has settled with the Penguin Group, ending its case against the prominent book publisher that accused it of conspiring to fix prices in the e-book industry.

The Justice Department sued Apple and five major publishers in April for price-fixing, believing they had colluded to set prices at a higher rate to boost revenues.

Under the proposed settlement, Penguin will end its agreement with Apple and other e-book retailers. It won’t enter any new agreements that prevent a retailer from offering discounts or promotions and will notify the Justice Department if it is planning to enter any e-book ventures with other publishers.

In a statement, Penguin insisted upon its innocence.

 "Penguin has always maintained, and
continues to maintain, that it has done nothing wrong and has no case to answer.  Penguin continues to believe that the agency pricing model has encouraged competition among distributors of both eBooks and eBook readers and, in the company's view, continues to operate in the interest of consumers and authors."

However, the move comes less than two months after the parent companies of Penguin and Random House announced their plans to merge two of the industry’s biggest imprints. Under that deal, Bertelsmann, owner of Random House, would own 53 percent of the new company. Pearson, owner of Penguin, would control 47 percent.

This settlement will apply to the merged company, and in its public statement Penguin acknowledged the impending merger necessitated the settlement.

"It is also in everyone's interests that the proposed Penguin Random House company should begin life with a clean sheet of paper," the statement continued.

The Justice Department’s initial case alleged that the publishers and Apple felt budget retailers like Amazon had set e-book prices were too low. As a result, they signed contracts that boosted prices rather than entering deals based on competitive rates. They discussed the need to keep prices higher over the phone, via e-mail and other forms of communication.

The Justice Department has already settled with Hachette, HarperCollins and Simon & Schuster. The lone holdouts are Holtzbrinck Publishers LLC, better known as Macmillan, and Apple.