As expected, the Department of Justice late Friday filed a motion with Judge Denise Cote asking her to approve the final judgment that the government reached with Hachette, Simon & Schuster and HarperCollins in the DoJ lawsuit that charged the three with colluding with Apple to fix e-book prices. There are still several more steps to go before Judge Cote rules on the agreement, but the motions once again detail what actions the DoJ expects the publishers to take and a schedule for when those actions need to be implemented.
Under the agreement, the three publishers will have seven days after the judgment is finalized to terminate its agency model agreement with Apple and to enter into a new term of sale agreement. In addition, any other e-tailer that has an agreement with the three publishers that it feels, in the words of the DoJ, “impedes the E-book Retailer’s ability to set, alter, or reduce the Retail Price of any E-book or to offer price discounts,” can ask to be released from the agreement.
Similarly, under the heading of “prohibited conduct” for a period of two years, the three publishers “shall not restrict, limit, or impede an E-book Retailer’s ability to set, alter, or reduce the Retail Price of any E-book or to offer price discounts or any other form of promotions to encourage consumers to Purchase one or more E-books.” The agreement also prohibts the houses from entering into any so-called most favored nation (MFN) clauses with any e-tailer. Each of the three publishers must notify the DoJ about what sales option it agrees to with an e-tailer within seven days of selection. The publishers are also prohibited from retaliating against any e-tailer for discounting e-books to consumers.
Publishers are also prohibiting from talking to one another about “sensitive information” that includes:
1. its business plans or strategies;
2. its past, present, or future wholesale or retail prices or pricing strategies for books
sold in any format (e.g., print books, E-books, or audio books);
3. any terms in its agreement(s) with any retailer of books Sold in any format; or
4. any terms in its agreement(s) with any author.
Publishers will be allowed, however, to communicate “in a manner and through media consistent with common and reasonable industry practice, the cover prices or wholesale or retail prices of books sold in any format to potential purchasers of those books.” Publishers will also be permitted to communicate with each other in some other business areas including the enforcement of intellectual property or contract rights, or a purchase or sale of assets.
Other actions that are permitted under the agreement include allowing publishers to compensate a “retailer, including an E-book Retailer, for valuable marketing or other promotional services rendered.” And the three publishers can enter into agency agreements “provided that (1) such agreed restriction shall not interfere with the E-book Retailer’s ability to reduce the final price paid by consumers to purchase the Settling Defendant’s E-books by an aggregate amount equal to the total commissions the Settling Defendant pays to the E-book Retailer, over a period of at least one year, in connection with the Sale of the Settling Defendant’s E-books to consumers; (2) the Settling Defendant shall not restrict, limit, or impede the E-book Retailer’s use of the agreed funds to offer price discounts or any other form of promotions to encourage consumers to Purchase one or more E-books; and (3) the method of accounting for the E-book Retailer’s promotional activity does not restrict, limit, or impede the E-book Retailer from engaging in any form of retail activity or promotion.”
To ensure that the publishers are complying with the agreement, within 30 days after entry of the final judgment each publisher must designate its general counsel or chief legal officer, or an employee reporting directly to its general counsel or chief legal officer, as the antitrust compliance officer. Among the duties of the ACO is ensuring that certain employees undergo four hours of training annually “on the meaning and requirements of this Final Judgment and the antitrust laws.” The ACO also is charged with reporting any violations of the agreement and to conduct annual antitrust compliance audits.