In comments filed this week in federal court, retailer Barnes & Noble argued that the court should scrap the Department of Justice’s price-fixing settlement with three publishers. “The proposed regulatory provisions of the settlement are not in the public interest,” the brief concludes. “Given the widespread consequences of its unprecedented regulations, the lack of any factual basis to conclude that these regulations provide reasonably adequate remedies for the harms alleged the Complaint, and the harm that the regulations will inflict on innocent third parties, including Barnes & Noble, independent booksellers, authors, and non-defendant publishers, the proposed settlement should be substantially modified or rejected entirely.”
Citing the Tunney Act, which requires a court to reject a proposed final judgment that is not in the “public interest,” and advises the court to “pay special attention to the potential of any remedy to inflict harm upon third parties,” the B&N brief urges the court to reject the DoJ’s proposed settlement with three publishers, HarperCollins, Hachette, and Simon & Schuster. The Tunney Act also requires that the Government present some “factual basis” for the proposed remedies—a bar, the brief suggests, the DoJ has not cleared.
“The basis for this proposed settlement is the Complaint, alleging that certain publishers have colluded to lower their own profits and increase their payments to e-book distributors such as Barnes & Noble,” lawyers state. “If that is a valid theory of collusion, and if the aim here is to end collusion, the proposed settlement should enjoin collusion and punish the purported colluders.”
Instead, B&N argues, the proposed settlement imposes a new “regulatory regime” that will “injure innocent third parties, including Barnes & Noble, independent bookstores, authors, and non-defendant publishers; hurt competition in an emerging industry; and ultimately harm consumers.”
The proposed settlement would end “agency arrangements that are commonplace in many industries," the B&N brief observes, and "that have brought more competition to the sale of e-books,” and would create “complex compliance issues” requiring oversight by the Division and the Court. “While the Division traditionally, and appropriately, seeks to prevent future violations and permit the market to determine prices, the proposed settlement seeks to substitute regulation for market forces.”
Gene DeFelice, v-p, general counsel and secretary for B&N issued this statement: "We want the American public to know that the proposed settlement is clearly not in their best interest, because it inappropriately support an online monopolist and discourages competition."
Two publishers, Penguin and Macmillan, have not settled, and are fighting the DoJ charges. In closing, the B&N brief makes a point also stressed by Penguin and Macmillan—that the DoJ’s view of the e-book market is misguided, and its actions potentially harmful. “It is important to note that the e-book industry is nascent,” the B&N brief states. “Without the benefit of a historical industry track record, the Government cannot predict what effects its regulations will have on the industry, and thus it is ill-equipped to regulate the sale of e-books. In addition, any regulation of this new and evolving industry will have more pronounced, and lasting, effects than one of an established industry.”