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Penguin in Multi-Million Dollar Settlement with ABA
Jim Milliot -- 10/7/97
Proceeds from agreement in the discount dispute will go to ABA members
Penguin Books USA has agreed to make a substantial one-time payment to the American Booksellers Association to settle the ABA's complaint that Penguin offered discounts to some customers and not to others. The ABA alleged that the discounts violated the 1995 consent decree that Penguin signed to settle price discrimination charges.

In particular, the dispute was over discounts related to payment of receivables that only some Penguin customers received, and over other issues arising from a 1995 consent order between the parties. In 1995 and 1996 Penguin and other major U.S. publishers reached consent orders with the ABA in which they agreed to treat all retail booksellers similarly as to pricing, credit, and promotional reimbursement terms.

Under terms of the agreement, both sides were prohibited from discussing the details of the deal until 5:00 p.m. Friday Oct. 3, after PW had gone to press. Penguin will be paying less than the $163 million it had set aside to deal with discounting scheme, but the payment is believed to be well into eight figures.

While not agreeing that the consent order was violated, Penguin agreed to a payment to the ABA and its independent bookstore members, who will receive proportional shares based upon past purchases of Penguin books. Penguin will also make modifications to the consent order to ensure the equal availability of pricing, credit and promotional reimbursement terms, and promises that in the future no booksellers will receive cash discounts relating to payment of receivables unless those terms are offered to all booksellers. The new agreement is subject to approval by the same court that entered the 1995 consent order.

Commenting on the settlement, Penguin president Michael Lynton said the agreement is "one of several steps Penguin Books is taking to restore the integrity of our collection system and ensure that an equal treatment policy is adhered to. The agreement also enables Penguin Books to avoid a protracted proceeding under the 1995 consent order." Lynton said that among the moves Penguin has made to improve its collection system is to install tighter financial controls and to give its sales force a better understanding of what is legal and illegal to offer accounts. Lynton said the most important aspect of the deal was that it closed the entire discounting matter with the ABA.

ABA president Barbara Bonds Thomas, owner of Toad Hall Books, said the settlement "should send a strong signal to the industry that the hard-fought rights of our members for equal treatment cannot be ignored."

Penguin has blamed the unauthorized discounting on Christine Galatro, its former manager of the credit and collection department, along with several conspirators. Penguin has reached a settlement with Jerome Bedell, owner of an independent collection agency, for Bedell to repay Penguin at least $1 million. The publisher continues to pursue litigation against Galatro, while Galatro's former supervisor, Anthony Ponzo, remains suspended with pay.
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