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Macmillan and Penguin: we've 'done no wrong,' DOJ may allow Amazon to 'recover the monopoly position' (update)

iPad iBooks update

Three book publishers quickly settled this morning after news of the Department of Justice's ebook antitrust suit broke. One of the remaining publishers, Macmillan, has denied any wrongdoing, and company CEO John Sargent published an open letter today explaining the company's position. Stating unequivocally that Macmillan did not collude or engage in illegal behavior, Sargent portrays the company's decision to move forward with the agency model as his alone:

The government's charge is that Macmillan's CEO colluded with other CEO's in changing to the agency model. I am Macmillan's CEO and I made the decision to move Macmillan to the agency model. After days of thought and worry, I made the decision on January 22nd, 2010 a little after 4:00 AM, on an exercise bike in my basement. It remains the loneliest decision I have ever made, and I see no reason to go back on it now.

Sargent goes on to say that though the company had engaged in talks with the DOJ, it had elected not to settle because the terms were too extreme and "could have allowed Amazon to recover the monopoly position it had been building before our switch to the agency model." Amazon's dominance in the ebook space, fueled by loss-leading $9.99 pricing, has been cited as a driving factor behind the alleged collusion between publishers and Apple. Sargent also quotes Authors Guild President Scott Turow, who last month expressed fears that Amazon's dominance in the ebook market prohibited competition, and was bad for both consumers and publishers.

For its part, Amazon has wasted no time in stating its intentions in the wake of the morning's developments. In a statement to CNET, a company spokesperson called the settlements a "big win for Kindle owners," going on to say that "we look forward to being allowed to lower prices on more Kindle books."

Update: Penguin Group chairman John Makinson has released a similar statement, and says that the DOJ's complaint "contains a number of material misstatements and omissions, which we look forward to having the opportunity to correct in court." Read the full text below:

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 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.

The Verge
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