Reading you under the table since 2012

The DOJ Settlement and Why We Should Care

by

Joanna Volpe

Listen, what I’m attempting here is to provide a brief, boiled-down explanation of the more notable points regarding the potential impact of the recent DOJ proposed settlement.  This post is not in itself intended as a comprehensive explanation, but merely to provide a starting place for authors and writers as to how this settlement can affect them.  For further elaboration, I encourage you to click on the provided links throughout the post.

The facts in brief:

Much has been written about the recent antitrust lawsuit commenced by the US Department of Justice against Apple Inc, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster, claiming the publishers colluded to fix eBook prices. They’re alleging that the CEOs all met to discuss how to respond to steeply discounted ebooks, particularly by Amazon.

If you want the detailed version, you can read the complaint here and the competitive impact statement here.

The result of those supposed meetings was the Agency Model, which basically says that instead of the traditional wholesale method (where publishers set a recommended price and retailers buy products at the wholesale price and can discount as they see fit), the publisher will set the price and the retailer must sell it at that price but will get a commission (in this case 30%).

(Here’s an interesting and detailed explanation of the Agency Model complete with pictures.)

 

Now, the agency model in itself is not illegal. It’s the alleged collusion that’s illegal.

After the DOJ filed the suit, three of the publishers agreed to a settlement: Hachette, HarperCollins, and Simon&Schuster. (One important thing to note is that just because they agreed to settle, it doesn’t necessarily mean they’re guilty. More likely the companies can’t or don’t want to endure the hardship and cost of the law suit.)

If you want to read the detailed version of the settlement agreement, it’s here.

And here’s a great post from Dear Author breaking down what the settlement means.

Simply, the settlement gets rid of the Agency Model, the settling publishers (Harper, Hachette and Simon & Schuster) have to sever their contract with Apple, and they have to renegotiate their contracts with each ebook distributor.

Apple, Macmillan, and Penguin have decided to defend themselves against the allegations made in the law suit. For them, the Agency Model still holds until the law suit is determined.

 

How does this affect you as an author:

Here’s the thing: I don’t know if the publishers colluded. And whether or not they did doesn’t matter in terms of the settlement. It’s not relevant to the legality of the Agency Model.

However, this settlement is not a good idea.

One of the terms of the settlement permits retailer discounting with the proviso that the aggregate amount of discounts that a retailer may give for any individual publisher’s titles may not exceed the aggregate amount of commissions that said retailer receives from that particular publisher.

This means that the ebook retailer is going to lump ALL of the titles for Publisher X into the TOTAL AMOUNT EARNED at the end of the year.  And the discount that the ebook retailer takes can be taken from ANYWHERE in that total amount, not evenly spread across the titles.  The publishers will have NO control over this, only the retailers will. So one author’s book may be sold for $.50, while another’s is sold for $9.99.  While in the grand scheme of things for a retailer that means nothing to their profits, but for each individual author that can affect their royalties substantially, and thus their livelihood.

Though this is just one example, there are a number of other negative settlement terms that I encourage you to read more about—again, start here.

It’s also worth noting that the entire point of antitrust law suits in general is to prevent activity that would stifle competition in a given industry.  Under the Agency Model, the publishing industry witnessed positive market affect and growth; competition increased, including new competitors in the marketplace and diversity in pricing of ebooks.  See the link below to the letter written by Simon Lipskar (President of Writers House) to the DOJ for data that supports this.

 

What you can do:

There’s a sixty day period where the public can voice their opinion on the settlement. The cutoff date is June 25th. This means between now and June 25th YOU can write a letter to the Department of Justice to make your voice heard if you feel strongly on this issue.

I am working on my own letter now.

Although there are no clear cut rules about what you can/should put in your letter, here are some things to keep in mind if you do decide to write:

What should I put in my letter?

A clear, professional statement about how this settlement can negatively impact the greater industry using facts.

 

What should I avoid putting in my letter?

Pleading based on your personal finances, circumstances and career.

 

Since the settlement has been announced there have been a lot of these letters written, and even posted and published, by leading industry professionals.  This affects us all: publishers, agents, booksellers, authors.

Here are some of those letters if you are looking for inspiration, guidance or clarity:

Mark Coker, CEO of Smashwords (Smashwords is an ebook publishing and distribution platform for ebook authors, publishers, agents and readers.)

Peter Glassman, owner and operator of Books of Wonder

Simon Lipskar, President of Writer’s House

Mike Shatzkin, Leading Publishing Industry Consultant

Scott Turow, President of Author’s Guild and bestselling author

Bob Kohn, President of eMusic

UPDATE!  Read the PW article on Barnes & Noble’s response to the settlement terms here.  ““The proposed regulatory provisions of the settlement are not in the public interest.”

Should you choose to write, your letter can be emailed to John Read at John.read@usdoj.gov or mailed to:

John R. Read

Chief, Litigation III Section

Antitrust Division

US Department of Justice

450  5th Street NW, Suite 4000

Washington, DC 20530

Joanna Volpe is a literary agent who represents all brands of fiction, from picture books to adult. When she’s not reading, she’s either cooking, playing video games, or hanging out with her husband and chihuahua on Long Island.

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24 Comments

  1. Posted June 7, 2012 at 6:34 am | Permalink

    Jo, THANK YOU for this important post! You did a fabulous job of explaining the settlement and why writers need to act to make their voices heard. Thanks also for including the links to so many resources to help us write strong, well-informed letters. I will start working on my letter ASAP!

  2. Posted June 7, 2012 at 8:04 am | Permalink

    Thanks for this post, Jo!

  3. Beth Miller
    Posted June 7, 2012 at 9:52 am | Permalink

    Thank you, Jo– the more people who see this information, and act on it, the better!

  4. Loretta
    Posted June 7, 2012 at 9:58 am | Permalink

    Thank you for this clearly written explanation. I could not find anything this straightforward. Will start composing my letter now…

  5. andrea
    Posted June 7, 2012 at 11:23 am | Permalink

    If you think that maybe the Agency model is (at least in part) a tool used by publishers to slow down the adoption of ebooks (as they have greater control of the paper-book market), then also check out this post by author David Gaughran::

    http://davidgaughran.wordpress.com/2012/05/15/an-open-letter-to-the-doj-from-someone-who-actually-cares-about-writers-and-readers/

  6. Susan
    Posted June 8, 2012 at 11:26 am | Permalink

    Wow, I’d barely known anything about this whole lawsuit. Thanks for posting this! Incredible…

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3 Trackbacks

  1. By Friday Links « Writing and Rambling on June 8, 2012 at 12:16 pm

    […] The DOJ Settlement and Why We Should Care – A look at how the DOJ ruling regarding e-book pricing affects writers. […]

  2. By Industry News-June10 » RWA-WF on June 10, 2012 at 7:05 pm

    […] DoJ suit continues to draw impassioned responses. Agent Joanna Volpe views it from the perspective of her author clients.  Barnes & Noble says the proposed settlement punishes consumers. Writer/publisher Bob Mayer […]

  3. By pictures and frames on June 14, 2014 at 1:22 pm

    pictures and frames

    The DOJ Settlement and Why We Should Care

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