Macmillan Settles With the Department of Justice on E-Book Pricing

imgres-2Macmillan, the last publishing house holdout, announced today that it will settle with the Department of Justice in the e-book pricing case. In the lawsuit, the DOJ accused the major publishers and Apple of conspiring to set e-book prices.

“We settled because the potential penalties became too high to risk even the possibility of an unfavorable outcome,” CEO John Sargent said in an email announcement that went out this morning to the publishing community. Mr. Sargent explained the two reasons that the publishing house hadn’t settled earlier. The first reason was that the company had thought that by not settling, the company could help the industry. But when the other five of the Big Six publishers agreed to settle, Macmillan realized that that wasn’t the case. Hachette Book Group, HarperCollins Publishers and Simon & Schuster settled in September 2012, and Penguin settled in December as part of its merger with Random House (who agreed to its settlement terms). The case was to go to court in June.

“We felt that if only three of the big six publishers were required to discount and we stood firm, those problems might be avoided,” Mr. Sargent wrote. “But when Random House agreed to be bound by the Penguin settlement, it became clear that all five of the other big six publishers would be allowing the whole agent’s commission to be used as discount, and Macmillan’s stand-alone selling at full agency price would have no impact on the overall marketplace.”

The other reason that it held out as long as it did was that the company didn’t believe it was at fault.

“I had an old-fashioned belief that you should not settle if you have done no wrong,” Mr. Sargent wrote. “As it turns out, that is indeed old-fashioned.”

Ultimately, the company realized that if it didn’t win, it would be responsible for too large a sum.

“Our company is not large enough to risk a worst case judgment,” Mr. Sargent wrote. “A few weeks ago I got an estimate of the maximum possible damage figure. I cannot share the breathtaking amount with you, but it was much more than the entire equity of our company.”

Macmillan Settles With the Department of Justice on E-Book Pricing