National Association of College Stores Says Proposed Settlement in E-book Pricing Case Is Over-Broad

Says settlement would hamper competition in textbook pricing

OBERLIN, Ohio, July 24, 2012 /PRNewswire-USNewswire/ -- The National Association of College Stores (NACS) has requested that the Department of Justice and the U.S District Court for the Southern District of New York implement a clearer definition of e-books in the proposed settlement in U.S. v. Apple Inc. et al. so as not to hinder competition in the e-textbook arena. In the complaint, the Department of Justice accused Apple and five publishers of conspiring to fix the prices of trade e-books. The proposed settlement agreement is with Hachette Book Group, Inc., HarperCollins Publishers L.L.C. and Simon & Schuster, Inc.

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According to NACS' comment, the definition of "e-books" should confirm that certain categories of e-books, particularly e-textbooks, are excluded from the Final Judgment in order to serve the public interest and comply with the federal Tunney Act, which details procedures that must be followed whenever the U.S. proposes to settle a civil antitrust suit.

In its response, filed July 23, the Department of Justice said that e-textbooks do not need to be excluded from the final judgment "because none of the Settling Defendants sell e-textbooks, and the Complaint already makes it clear that 'e-books' in the context of this case do not encompass 'non-trade e-books' such as 'academic textbooks.'" 

However, NACS legal counsel Marc Fleischaker, of Arent Fox LLP, counters that the Justice Department's response is unpersuasive as a matter of fact and law. "Factually, the terms 'academic textbook' and 'e-textbook' are not used consistently, so without an explicit definition in the settlement agreement, interpretation of the document will be difficult and could cause publishers to hesitate to experiment in the higher education marketplace. Are "the Odyssey" or "The Grapes of Wrath" academic books when sold for use in a classroom?"

Fleischaker also noted that while none of the named Defendants included in the Settlement Agreement is primarily an academic publisher, all of them publish books used in higher education.  "It is simply not factually persuasive to say that none of the settling Defendants is an academic publisher," Fleischaker noted, "or that none of them will publish 'e-textbooks' during the years that the Settlement Agreement remains in effect." 

As a legal matter, Fleischaker noted that "the Court should evaluate the relationship between the alleged illegal conduct and harm that was alleged. Since no illegal activity was alleged regarding books used in higher education, it is wrong for the Settlement Agreement potentially to include such books. Doing so is not in the public interest because it restricts freedom of competition and contract in a market in which the publishers and Apple have done nothing illegal."

NACS' filing emphasizes that the settlement, as it is currently worded, could threaten emerging opportunities in the e-textbook market, including the possible exclusion of an agency model for the sale of e-textbooks that could potentially lower course materials costs for students.

"As a result, NACS continues to encourage the Court to reject the Settlement Agreement unless an adequate definition of the types of e-books intended to be included is added to the Agreement.  Only by making such a change can the Court ensure that legal conduct in markets uninvolved with the alleged price-fixing conspiracy is not improperly impacted. The language as it is written could reduce, rather than enhance, competition."

NACS' formal comment can be accessed here.

About NACS
Headquartered in Oberlin, Ohio, the National Association of College Stores (NACS) is the professional trade association representing college stores. NACS represents more than 3,100 collegiate retailers that serve America's college students while supporting the academic missions of higher education institutions. Go to http://www.nacs.org/

SOURCE National Association of College Stores