Scott Turow Responds to DOJ Agency Model Suit

By Jason Boog Comment

The Department of Justice sued five major publishers and Apple this week, alleging that they colluded to fix eBook prices.

The decision generated responses around the industry. Authors Guild president Scott Turow wrote:

The settlement provides a gigantic obstacle to Amazon’s competitors in the e-book business by allowing Amazon to function without making a profit, something that leaves that market forbidding to anyone else who might think of entering, and a bad business for those already there. Today’s low Kindle book prices will last only as long as it takes Amazon to re-establish its monopoly.  It is hard to believe that the Justice Department has somehow persuaded itself that this solution fosters competition or is good for readers in the long run.

This GalleyCat editor wrote an essay at NPR:

“Trapped inside Amazon’s low price prison, publishers channeled MacGyver and cobbled together a temporary fix out of duct tape, a Swiss Army knife and Apple’s brand new iPad. To everyone’s surprise this ramshackle solution survived two years and changed the eBook landscape forever. This wasn’t the first time the industry needed a quick and dirty price fix. During the Great Depression, publishers faced off against another seemingly invincible retail juggernaut: Macy’s Department Stores.”

Penguin Group chairman John Makinson also published a long statement about why his company will fight the lawsuit in court. We’ve published the complete statement below…

Statement from John Makinson, Chairman of Penguin Group, on the US Department of Justice Lawsuit

You may have seen that the US Department of Justice, and a number of state Attorneys-General, brought civil antitrust actions today against Penguin Group, the international publishing company, and several other parties.

A responsible company does not choose a path of litigation with US Government agencies without carefully weighing the implications of that course of action.  Nonetheless, countless hours discussing this issue with colleagues here at Penguin, as well as with our parent company, Pearson plc, have not led any of us to the view that we should settle this matter. Indeed, alone among the publishers party to the investigations that resulted in today’s announcements, we have held no settlement discussions with the DOJ or the states.

We have held strongly to this view for two, and only two, reasons.  The first is that we have done nothing wrong.  The decisions that we took, many them of them costly and difficult, were taken by Penguin alone.

We have had the opportunity to study the complaint released by the DOJ today and nothing in this lengthy document causes us to veer from that position.  The document contains a number of material misstatements and omissions, which we look forward to having the opportunity to correct in court.

The second, and equally powerful, reason for our decision to place this matter in the hands of a court is that we believed then, as we do now, that the agency model is the one that offers consumers the prospect of an open and competitive market for e-books. We understood that the shift to agency would be very costly to Penguin and its shareholders in the short-term, but we reasoned that the prevention of a monopoly in the supply of e-books had to be in the best interests, not just of Penguin, but of consumers, authors and booksellers as well.

We are of course in the business of making money for our shareholders, but our purpose as a company is to make entertaining and intelligent books for readers of all ages and tastes. We shall not achieve either of those objectives in the absence of competition or choice. The decision we took in January 2010 to move Penguin’s e-book business to agency pricing has been vindicated by the very rapid subsequent growth in the volume of e-books sold by agency publishers, and by the benefit to consumers of the steep decline in the price of e-book readers that has resulted from this open competition.

Any other decision would have been a disservice in the long term to our staff and our shareholders, but also to the writers, booklovers, retailers and agents whom we serve.