24518 Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 

please see the paragraph above entitled 

FOR FURTHER INFORMATION CONTACT. 

Statutory Background 

For more than two centuries, the 

Federal Government has recognized 

Indian tribes as domestic sovereigns that 

have unique government-to-government 

relationships with the United States. 

Congress has broad authority to legislate 

with respect to Indian tribes, however, 

and has exercised this authority to 

establish a complex jurisdictional 

scheme for the prosecution of crimes 

committed in Indian country. (The term 

‘‘Indian country’’ is defined in 18 U.S.C. 

1151.) Criminal jurisdiction in Indian 

country typically depends on several 

factors, including the nature of the 

crime; whether the alleged offender, the 

victim, or both are Indian; and whether 

a treaty, Federal statute, executive order, 

or judicial decision has conferred 

jurisdiction on a particular government. 

The Tribal Law and Order Act (TLOA) 

was enacted on July 29, 2010, as Title 

II of Public Law 111–211. The purpose 

of the TLOA is to help the Federal 

Government and tribal governments 

better address the unique public-safety 

challenges that confront tribal 

communities. Section 221(b) of the new 

law, now codified at 18 U.S.C. 1162(d), 

permits an Indian tribe with Indian 

country subject to State criminal 

jurisdiction under Public Law 280, P.L. 

83–280, 67 Stat. 588 (1953) to request 

that the United States accept concurrent 

jurisdiction to prosecute violations of 

the General Crimes Act and the Major 

Crimes Act within that tribe’s Indian 

country. 

Department of Justice Regulation 

Implementing 18 U.S.C. 1162(d) 

On December 6, 2011, 76 FR 76037 

the Department published final 

regulations that established the 

framework and procedures for a 

mandatory Public Law 280 tribe to 

request the assumption of concurrent 

Federal criminal jurisdiction within the 

Indian country of the tribe that is 

subject to Public Law 280. 28 CFR 

50.25. Among other provisions, the 

regulations provide that upon receipt of 

a tribal request the Office of Tribal 

Justice shall publish a notice in the 

Federal Register seeking comments 

from the general public. 

Request by the Hoopa Valley Tribe 

By a request dated January 17, 2012, 

the Hoopa Valley Tribe located in the 

State of California requested the United 

States to assume concurrent Federal 

jurisdiction to prosecute violations of 18 

U.S.C. 1152 (the General Crimes, or 

Indian Country Crimes, Act) and 18 

U.S.C. 1153 (the Major Crimes Act) 

within the Indian country of the tribe. 

This would allow the United States to 

assume concurrent criminal jurisdiction 

over offenses within the Indian country 

of the tribe without eliminating or 

affecting the State’s existing criminal 

jurisdiction. 

Solicitation of Comments 

This notice solicits public comments 

on the above request. 

Dated: April 17, 2012. 

Tracy Toulou, 

Director, Office of Tribal Justice. 

[FR Doc. 2012–9731 Filed 4–23–12; 8:45 am] 

BILLING CODE 4410–07–P 

DEPARTMENT OF JUSTICE 

Antitrust Division 

United States v. Apple, Inc., Hachette 

Book Group, Inc., HarperCollins 

Publishers L.L.C., Verlagsgruppe 

Georg Von Holtzbrinck Gmbh, 

Holtzbrinck Publishers, LLC D/B/A 

Macmillan, The Penguin Group, a 

Division of Pearson PLC, Penguin 

Group (USA), Inc., and Simon & 

Schuster, Inc.; Proposed Final 

Judgment and Competitive Impact 

Statement 

Notice is hereby given pursuant to the 

Antitrust Procedures and Penalties Act, 

15 U.S.C. 16(b)–(h), that a proposed 

Final Judgment, Stipulation and 

Competitive Impact Statement have 

been filed with the United States 

District Court for the Southern District 

of New York in United States of 

America v. Apple, Inc. et al., Civil 

Action No. 12–CIV–2826. On April 11, 

2012, the United States filed a 

Complaint alleging that the defendants 

agreed to raise the retail price of ebooks, in violation of Section 1 of the 

Sherman Act, 15 U.S.C. 1. The proposed 

Final Judgment, submitted at the same 

time as the Complaint, requires the 

settling defendants—Hachette Book 

Group, Inc., HarperCollins Publishers 

L.L.C., and Simon & Schuster, Inc.—to 

return pricing discretion to e-book 

retailers and comply with other 

obligations designed to end the 

anticompetitive effects of the 

conspiracy. 

Copies of the Complaint, proposed 

Final Judgment and Competitive Impact 

Statement are available for inspection at 

the Department of Justice, Antitrust 

Division, Antitrust Documents Group, 

450 Fifth Street NW., DC 20530, Suite 

1010 (telephone: 202–514–2481), on the 

Department of Justice’s Web site at 

http://www.justice.gov/atr, and at the 

Office of the Clerk of the United States 

District Court for the Southern District 

of New York. Copies of these materials 

may be obtained from the Antitrust 

Division upon request and payment of 

the copying fee set by Department of 

Justice regulations. 

Public comment is invited within 60 

days of the date of this notice. Such 

comments, and responses thereto, will 

be published in the Federal Register 

and filed with the Court. Comments 

should be directed to John R. Read, 

Chief, Litigation III Section, Antitrust 

Division, Department of Justice, 

Washington, DC 20530 (telephone: 202– 

307–0468). 

Patricia A. Brink, 

Director of Civil Enforcement. 

United States District Court for the Southern 

District of New York 

United States of America, Plaintiff, v. Apple, 

Inc., Hachette Book Group, Inc., 

Harpercollins Publishers L.L.C., 

Verlagsgruppe Georg Von Holtzbrinck 

GMBH, Holtzbrinck Publishers, LLC D/B/A 

Macmillan, The Penguin Group, A Division 

of Pearson PLC, Penguin Group (USA), 

Inc., and Simon & Schuster, Inc., 

Defendants. 

Civil Action No. 1:12–cv–02826 

Judge: Cote, Denise 

Date Filed: 04/11/2012 

Description: Antitrust 

Complaint 

The United States of America, acting 

under the direction of the Attorney 

General of the United States, brings this 

civil antitrust action against Defendants 

Apple, Inc. (‘‘Apple’’); Hachette Book 

Group, Inc. (‘‘Hachette’’); HarperCollins 

Publishers L.L.C. (‘‘HarperCollins’’); 

Verlagsgruppe Georg von Holtzbrinck 

GmbH and Holtzbrinck Publishers, LLC 

d/b/a Macmillan (collectively, 

‘‘Macmillan’’); The Penguin Group, a 

division of Pearson plc and Penguin 

Group (USA), Inc. (collectively, 

‘‘Penguin’’); and Simon & Schuster, Inc. 

(‘‘Simon & Schuster’’; collectively with 

Hachette, HarperCollins, Macmillan, 

and Penguin, ‘‘Publisher Defendants’’) 

to obtain equitable relief to prevent and 

remedy violations of Section 1 of the 

Sherman Act, 15 U.S.C. 1. 

Plaintiff alleges: 

I. Introduction 

1. Technology has brought 

revolutionary change to the business of 

publishing and selling books, including 

the dramatic explosion in sales of ‘‘ebooks’’—that is, books sold to 

consumers in electronic form and read 

on a variety of electronic devices, 

including dedicated e-readers (such as 

the Kindle or the Nook), multipurpose 

tablets, smartphones and personal 

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Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 24519 

computers. Consumers reap a variety of 

benefits from e-books, including 24- 

hour access to product with near-instant 

delivery, easier portability and storage, 

and adjustable font size. E-books also 

are considerably cheaper to produce and 

distribute than physical (or ‘‘print’’) 

books. 

2. E-book sales have been increasing 

rapidly ever since Amazon released its 

first Kindle device in November of 2007. 

In developing and then mass marketing 

its Kindle e-reader and associated ebook content, Amazon substantially 

increased the retail market for e-books. 

One of Amazon’s most successful 

marketing strategies was to lower 

substantially the price of newly released 

and bestselling e-books to $9.99. 

3. Publishers saw the rise in e-books, 

and particularly Amazon’s price 

discounting, as a substantial challenge 

to their traditional business model. The 

Publisher Defendants feared that lower 

retail prices for e-books might lead 

eventually to lower wholesale prices for 

e-books, lower prices for print books, or 

other consequences the publishers 

hoped to avoid. Each Publisher 

Defendant desired higher retail e-book 

prices across the industry before 

‘‘$9.99’’ became an entrenched 

consumer expectation. By the end of 

2009, however, the Publisher 

Defendants had concluded that 

unilateral efforts to move Amazon away 

from its practice of offering low retail 

prices would not work, and they 

thereafter conspired to raise retail ebook prices and to otherwise limit 

competition in the sale of e-books. To 

effectuate their conspiracy, the 

Publisher Defendants teamed up with 

Defendant Apple, which shared the 

same goal of restraining retail price 

competition in the sale of e-books. 

4. The Defendants’ conspiracy to limit 

e-book price competition came together 

as the Publisher Defendants were jointly 

devising schemes to limit Amazon’s 

ability to discount e-books and 

Defendant Apple was preparing to 

launch its electronic tablet, the iPad, 

and considering whether it should sell 

e-books that could be read on the new 

device. Apple had long believed it 

would be able to ‘‘trounce Amazon by 

opening up [its] own ebook store,’’ but 

the intense price competition that 

prevailed among e-book retailers in late 

2009 had driven the retail price of 

popular e-books to $9.99 and had 

reduced retailer margins on e-books to 

levels that Apple found unattractive. As 

a result of discussions with the 

Publisher Defendants, Apple learned 

that the Publisher Defendants shared a 

common objective with Apple to limit 

e-book retail price competition, and that 

the Publisher Defendants also desired to 

have popular e-book retail prices 

stabilize at levels significantly higher 

than $9.99. Together, Apple and the 

Publisher Defendants reached an 

agreement whereby retail price 

competition would cease (which all the 

conspirators desired), retail e-book 

prices would increase significantly 

(which the Publisher Defendants 

desired), and Apple would be 

guaranteed a 30 percent ‘‘commission’’ 

on each e-book it sold (which Apple 

desired). 

5. To accomplish the goal of raising ebook prices and otherwise limiting retail 

competition for e-books, Apple and the 

Publisher Defendants jointly agreed to 

alter the business model governing the 

relationship between publishers and 

retailers. Prior to the conspiracy, both 

print books and e-books were sold 

under the longstanding ‘‘wholesale 

model.’’ Under this model, publishers 

sold books to retailers, and retailers, as 

the owners of the books, had the 

freedom to establish retail prices. 

Defendants were determined to end the 

robust retail price competition in ebooks that prevailed, to the benefit of 

consumers, under the wholesale model. 

They therefore agreed jointly to replace 

the wholesale model for selling e-books 

with an ‘‘agency model.’’ Under the 

agency model, publishers would take 

control of retail pricing by appointing 

retailers as ‘‘agents’’ who would have no 

power to alter the retail prices set by the 

publishers. As a result, the publishers 

could end price competition among 

retailers and raise the prices consumers 

pay for e-books through the adoption of 

identical pricing tiers. This change in 

business model would not have 

occurred without the conspiracy among 

the Defendants. 

6. Apple facilitated the Publisher 

Defendants’ collective effort to end 

retail price competition by coordinating 

their transition to an agency model 

across all retailers. Apple clearly 

understood that its participation in this 

scheme would result in higher prices to 

consumers. As Apple CEO Steve Jobs 

described his company’s strategy for 

negotiating with the Publisher 

Defendants, ‘‘We’ll go to [an] agency 

model, where you set the price, and we 

get our 30%, and yes, the customer pays 

a little more, but that’s what you want 

anyway.’’ Apple was perfectly willing to 

help the Publisher Defendants obtain 

their objective of higher prices for 

consumers by ending Amazon’s ‘‘$9.99’’ 

price program as long as Apple was 

guaranteed its 30 percent margin and 

could avoid retail price competition 

from Amazon. 

7. The plan—what Apple proudly 

described as an ‘‘aikido move’’— 

worked. Over three days in January 

2010, each Publisher Defendant entered 

into a functionally identical agency 

contract with Apple that would go into 

effect simultaneously in April 2010 and 

‘‘chang[e] the industry permanently.’’ 

These ‘‘Apple Agency Agreements’’ 

conferred on the Publisher Defendants 

the power to set Apple’s retail prices for 

e-books, while granting Apple the 

assurance that the Publisher Defendants 

would raise retail e-book prices at all 

other e-book outlets, too. Instead of 

$9.99, electronic versions of bestsellers 

and newly released titles would be 

priced according to a set of price tiers 

contained in each of the Apple Agency 

Agreements that determined de facto 

retail e-book prices as a function of the 

title’s hardcover list price. All 

bestselling and newly released titles 

bearing a hardcover list price between 

$25.01 and $35.00, for example, would 

be priced at $12.99, $14.99, or $16.99, 

with the retail e-book price increasing in 

relation to the hardcover list price. 

8. After executing the Apple Agency 

Agreements, the Publisher Defendants 

all then quickly acted to complete the 

scheme by imposing agency agreements 

on all their other retailers. As a direct 

result, those retailers lost their ability to 

compete on price, including their ability 

to sell the most popular e-books for 

$9.99 or for other low prices. Once in 

control of retail prices, the Publisher 

Defendants limited retail price 

competition among themselves. 

Millions of e-books that would have 

sold at retail for $9.99 or for other low 

prices instead sold for the prices 

indicated by the price schedules 

included in the Apple Agency 

Agreements—generally, $12.99 or 

$14.99. Other price and non-price 

competition among e-book publishers 

and among e-book retailers also was 

unlawfully eliminated to the detriment 

of U.S. consumers. 

9. The purpose of this lawsuit is to 

enjoin the Publisher Defendants and 

Apple from further violations of the 

nation’s antitrust laws and to restore the 

competition that has been lost due to 

the Publisher Defendants’ and Apple’s 

illegal acts. 

10. Defendants’ ongoing conspiracy 

and agreement have caused e-book 

consumers to pay tens of millions of 

dollars more for e-books than they 

otherwise would have paid. 

11. The United States, through this 

suit, asks this Court to declare 

Defendants’ conduct illegal and to enter 

injunctive relief to prevent further 

injury to consumers in the United 

States. 

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24520 Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 

1Non-trade e-books include electronic versions of 

children’s picture books and academic textbooks, 

reference materials, and other specialized texts that 

typically are published by separate imprints from 

trade books, often are sold through separate 

channels, and are not reasonably substitutable for 

trade e-books. 

II. Defendants 

12. Apple, Inc. has its principal place 

of business at 1 Infinite Loop, 

Cupertino, CA 95014. Among many 

other businesses, Apple, Inc. distributes 

e-books through its iBookstore. 

13. Hachette Book Group, Inc. has its 

principal place of business at 237 Park 

Avenue, New York, NY 10017. It 

publishes e-books and print books 

through publishers such as Little, 

Brown, and Company and Grand 

Central Publishing. 

14. HarperCollins Publishers L.L.C. 

has its principal place of business at 10 

E. 53rd Street, New York, NY 10022. It 

publishes e-books and print books 

through publishers such as Harper and 

William Morrow. 

15. Holtzbrinck Publishers, LLC 

d/b/a Macmillan has its principal place 

of business at 175 Fifth Avenue, New 

York, NY 10010. It publishes e-books 

and print books through publishers such 

as Farrar, Straus and Giroux and St. 

Martin’s Press. Verlagsgruppe Georg von 

Holtzbrinck GmbH owns Holtzbrinck 

Publishers, LLC d/b/a Macmillan and 

has its principal place of business at 

Ga ̈nsheidestra+e 26, Stuttgart 70184, 

Germany. 

16. Penguin Group (USA), Inc. has its 

principal place of business at 375 

Hudson Street, New York, NY 10014. It 

publishes e-books and print books 

through publishers such as The Viking 

Press and Gotham Books. Penguin 

Group (USA), Inc. is the United States 

affiliate of The Penguin Group, a 

division of Pearson plc, which has its 

principal place of business at 80 Strand, 

London WC2R 0RL, United Kingdom. 

17. Simon & Schuster, Inc. has its 

principal place of business at 1230 

Avenue of the Americas, New York, NY 

10020. It publishes e-books and print 

books through publishers such as Free 

Press and Touchstone. 

III. Jurisdiction, Venue, and Interstate 

Commerce 

18. Plaintiff United States of America 

brings this action pursuant to Section 4 

of the Sherman Act, 15 U.S.C. 4, to 

obtain equitable relief and other relief to 

prevent and restrain Defendants’ 

violations of Section 1 of the Sherman 

Act, 15 U.S.C 1. 

19. This Court has subject matter 

jurisdiction over this action under 

Section 4 of the Sherman Act, 15 U.S.C. 

4, and 28 U.S.C. 1331, 1337(a), and 

1345. 

20. This Court has personal 

jurisdiction over each Defendant and 

venue is proper in the Southern District 

of New York under Section 12 of the 

Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 

1391, because each Defendant transacts 

business and is found within the 

Southern District of New York. The U.S. 

component of each Publisher Defendant 

is headquartered in the Southern 

District of New York, and acts in 

furtherance of the conspiracy occurred 

in this District. Many thousands of the 

Publisher Defendants’ e-books are and 

have been sold in this District, 

including through Defendant Apple’s 

iBookstore. 

21. Defendants are engaged in, and 

their activities substantially affect, 

interstate trade and commerce. The 

Publisher Defendants sell e-books 

throughout the United States. Their ebooks represent a substantial amount of 

interstate commerce. In 2010, United 

States consumers paid more than $300 

million for the Publisher Defendants’ ebooks, including more than $40 million 

for e-books licensed through Defendant 

Apple’s iBookstore. 

IV. Co-Conspirators 

22. Various persons, who are known 

and unknown to Plaintiff, and not 

named as defendants in this action, 

including senior executives of the 

Publisher Defendants and Apple, have 

participated as co-conspirators with 

Defendants in the offense alleged and 

have performed acts and made 

statements in furtherance of the 

conspiracy. 

V. The Publishing Industry and 

Background of the Conspiracy 

A. Print Books 

23. Authors submit books to 

publishers in manuscript form. 

Publishers edit manuscripts, print and 

bind books, provide advertising and 

related marketing services, decide when 

a book should be released for sale, and 

distribute books to wholesalers and 

retailers. Publishers also determine the 

cover price or ‘‘list price’’ of a book, and 

typically that price appears on the 

book’s cover. 

24. Retailers purchase print books 

directly from publishers, or through 

wholesale distributors, and resell them 

to consumers. Retailers typically 

purchase print books under the 

‘‘wholesale model.’’ Under that model, 

retailers pay publishers approximately 

one-half of the list price of books, take 

ownership of the books, then resell 

them to consumers at prices of the 

retailer’s choice. Publishers have sold 

print books to retailers through the 

wholesale model for over 100 years and 

continue to do so today. 

B. E-books 

25. E-books are books published in 

electronic formats. E-book publishers 

avoid some of the expenses incurred in 

producing and distributing print books, 

including most manufacturing expenses, 

warehousing expenses, distribution 

expenses, and costs of dealing with 

unsold stock. 

26. Consumers purchase e-books 

through Web sites of e-book retailers or 

through applications loaded onto their 

reading devices. Such electronic 

distribution allows e-book retailers to 

avoid certain expenses they incur when 

they sell print books, including most 

warehousing expenses and distribution 

expenses. 

27. From its very small base in 2007 

at the time of Amazon’s Kindle launch, 

the e-book market has exploded, 

registering triple-digit sales growth each 

year. E-books now constitute at least ten 

percent of general interest fiction and 

non-fiction books (commonly known as 

‘‘trade’’ books 1) sold in the United 

States and are widely predicted to reach 

at least 25 percent of U.S. trade books 

sales within two to three years. 

D. Publisher Defendants and ‘‘The $9.99 

Problem’’ 

28. The Publisher Defendants 

compete against each other for sales of 

trade e-books to consumers. Publishers 

bid against one another for print- and 

electronic-publishing rights to content 

that they expect will be most successful 

in the market. They also compete 

against each other in bringing those 

books to market. For example, in 

addition to price-setting, they create 

cover art and other on-book sales 

inducements, and also engage in 

advertising campaigns for some titles. 

29. The Publisher Defendants are five 

of the six largest publishers of trade 

books in the United States. They 

publish the vast majority of their newly 

released titles as both print books and 

e-books. Publisher Defendants compete 

against each other in the sales of both 

trade print books and trade e-books. 

30. When Amazon launched its 

Kindle device, it offered newly released 

and bestselling e-books to consumers for 

$9.99. At that time, Publisher 

Defendants routinely wholesaled those 

e-books for about that same price, which 

typically was less than the wholesale 

price of the hardcover versions of the 

same titles, reflecting publisher cost 

savings associated with the electronic 

format. From the time of its launch, 

Amazon’s e-book distribution business 

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Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 24521 

has been consistently profitable, even 

when substantially discounting some 

newly released and bestselling titles. 

31. To compete with Amazon, other ebook retailers often matched or 

approached Amazon’s $9.99-or-less 

prices for e-book versions of new 

releases and New York Times 

bestsellers. As a result of that 

competition, consumers benefited from 

Amazon’s $9.99-or-less e-book prices 

even if they purchased e-books from 

competing e-book retailers. 

32. The Publisher Defendants feared 

that $9.99 would become the standard 

price for newly released and bestselling 

e-books. For example, one Publisher 

Defendant’s CEO bemoaned the 

‘‘wretched $9.99 price point’’ and 

Penguin USA CEO David Shanks 

worried that e-book pricing ‘‘can’t be 

$9.99 for hardcovers.’’ 

33. The Publisher Defendants 

believed the low prices for newly 

released and bestselling e-books were 

disrupting the industry. The Amazonled $9.99 retail price point for the most 

popular e-books troubled the Publisher 

Defendants because, at $9.99, most of 

these e-book titles were priced 

substantially lower than hardcover 

versions of the same title. The Publisher 

Defendants were concerned these lower 

e-book prices would lead to the 

‘‘deflation’’ of hardcover book prices, 

with accompanying declining revenues 

for publishers. The Publisher 

Defendants also worried that if $9.99 

solidified as the consumers’ expected 

retail price for e-books, Amazon and 

other retailers would demand that 

publishers lower their wholesale prices, 

further compressing publisher profit 

margins. 

34. The Publisher Defendants also 

feared that the $9.99 price point would 

make e-books so popular that digital 

publishers could achieve sufficient scale 

to challenge the major incumbent 

publishers’ basic business model. The 

Publisher Defendants were especially 

concerned that Amazon was well 

positioned to enter the digital 

publishing business and thereby 

supplant publishers as intermediaries 

between authors and consumers. 

Amazon had, in fact, taken steps to do 

so, contracting directly with authors to 

publish their works as e-books—at a 

higher royalty rate than the Publisher 

Defendants offered. Amazon’s move 

threatened the Publisher Defendants’ 

traditional positions as the gate-keepers 

of the publishing world. The Publisher 

Defendants also feared that other 

competitive advantages they held as a 

result of years of investments in their 

print book businesses would erode and, 

eventually, become irrelevant, as e-book 

sales continued to grow. 

E. Publisher Defendants Recognize They 

Cannot Solve ‘‘The $9.99 Problem’’ 

Alone 

35. Each Publisher Defendant knew 

that, acting alone, it could not compel 

Amazon to raise e-book prices and that 

it was not in its economic self-interest 

to attempt unilaterally to raise retail ebook prices. Each Publisher Defendant 

relied on Amazon to market and 

distribute its e-books, and each 

Publisher Defendant believed Amazon 

would leverage its position as a large 

retailer to preserve its ability to compete 

and would resist any individual 

publisher’s attempt to raise the prices at 

which Amazon sold that publisher’s ebooks. As one Publisher Defendant 

executive acknowledged Amazon’s 

bargaining strength, ‘‘we’ve always 

known that unless other publishers 

follow us, there’s no chance of success 

in getting Amazon to change its pricing 

practices.’’ In the same email, the 

executive wrote, ‘‘without a critical 

mass behind us Amazon won’t 

‘negotiate,’ so we need to be more 

confident of how our fellow publishers 

will react. * * *’’ 

36. Each Publisher Defendant also 

recognized that it would lose sales if 

retail prices increased for only its ebooks while the other Publisher 

Defendants’ e-books remained 

competitively priced. In addition, 

higher prices for just one publisher’s 

e-books would not change consumer 

perceptions enough to slow the erosion 

of consumer-perceived value of books 

that all the Publisher Defendants feared 

would result from Amazon’s $9.99 

pricing policy. 

VI. Defendants’ Unlawful Activities 

37. Beginning no later than September 

2008, the Publisher Defendants’ senior 

executives engaged in a series of 

meetings, telephone conversations and 

other communications in which they 

jointly acknowledged to each other the 

threat posed by Amazon’s pricing 

strategy and the need to work 

collectively to end that strategy. By the 

end of the summer of 2009, the 

Publisher Defendants had agreed to act 

collectively to force up Amazon’s retail 

prices and thereafter considered and 

implemented various means to 

accomplish that goal, including moving 

under the guise of a joint venture. 

Ultimately, in late 2009, Apple and the 

Publisher Defendants settled on the 

strategy that worked—replacing the 

wholesale model with an agency model 

that gave the Publisher Defendants the 

power to raise retail e-book prices 

themselves. 

38. The evidence showing conspiracy 

is substantial and includes: 

• Practices facilitating a horizontal 

conspiracy. The Publisher Defendants 

regularly communicated with each other 

in private conversations, both in person 

and on the telephone, and in emails to 

each other to exchange sensitive 

information and assurances of solidarity 

to advance the ends of the conspiracy. 

• Direct evidence of a conspiracy. 

The Publisher Defendants directly 

discussed, agreed to, and encouraged 

each other to collective action to force 

Amazon to raise its retail e-book prices. 

• Recognition of illicit nature of 

communications. Publisher Defendants 

took steps to conceal their 

communications with one another, 

including instructions to ‘‘double 

delete’’ email and taking other measures 

to avoid leaving a paper trail. 

• Acts contrary to economic interests. 

It would have been contrary to the 

economic interests of any Publisher 

Defendant acting alone to attempt to 

impose agency on all of its retailers and 

then raise its retail e-book prices. For 

example, Penguin Group CEO John 

Makinson reported to his parent 

company board of directors that ‘‘the 

industry needs to develop a common 

strategy’’ to address the threat ‘‘from 

digital companies whose objective may 

be to disintermediate traditional 

publishers altogether’’ because it ‘‘will 

not be possible for any individual 

publisher to mount an effective 

response,’’ and Penguin later admitted 

that it would have been economically 

disadvantaged if it ‘‘was the only 

publisher dealing with Apple under the 

new business model.’’ 

• Motive to enter the conspiracy, 

including knowledge or assurances that 

competitors also will enter. The 

Publisher Defendants were motivated by 

a desire to maintain both the perceived 

value of their books and their own 

position in the industry. They received 

assurances from both each other and 

Apple that they all would move together 

to raise retail e-book prices. Apple was 

motivated to ensure that it would not 

face competition from Amazon’s lowprice retail strategy. 

• Abrupt, contemporaneous shift 

from past behavior. Prior to January 23, 

2010, all Publisher Defendants sold 

their e-books under the traditional 

wholesale model; by January 25, 2010, 

all Publisher Defendants had 

irrevocably committed to transition all 

of their retailers to the agency model 

(and Apple had committed to sell ebooks on a model inconsistent with the 

way it sells the vast bulk of the digital 

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media it offers in its iTunes store). On 

April 3, 2010, as soon as the Apple 

Agency Agreements simultaneously 

became effective, all Publisher 

Defendants immediately used their new 

retail pricing authority to raise the retail 

prices of their newly released and 

bestselling e-books to the common 

ostensible maximum prices contained in 

their Apple Agency Agreements. 

A. The Publisher Defendants Recognize 

a Common Threat 

39. Starting no later than September 

of 2008 and continuing for at least one 

year, the Publisher Defendants’ CEOs (at 

times joined by one non-defendant 

publisher’s CEO) met privately as a 

group approximately once per quarter. 

These meetings took place in private 

dining rooms of upscale Manhattan 

restaurants and were used to discuss 

confidential business and competitive 

matters, including Amazon’s e-book 

retailing practices. No legal counsel was 

present at any of these meetings. 

40. In September 2008, Penguin 

Group CEO John Makinson was joined 

by Macmillan CEO John Sargent and the 

CEOs of the other four large publishers 

at a dinner meeting in ‘‘The Chef’s Wine 

Cellar,’’ a private room at Picholene. 

One of the CEOs reported that business 

matters were discussed. 

41. In January 2009, the CEO of one 

Publisher Defendant, a United States 

subsidiary of a European corporation, 

promised his corporate superior, the 

CEO of the parent company, that he 

would raise the future of e-books and 

Amazon’s potential role in that future at 

an upcoming meeting of publisher 

CEOs. Later that month, at a dinner 

meeting hosted by Penguin Group CEO 

John Makinson, again in ‘‘The Chef’s 

Wine Cellar’’ at Picholene, the same 

group of publisher CEOs met once more. 

42. On or about June 16, 2009, Mr. 

Makinson again met privately with 

other Publisher Defendant CEOs and 

discussed, inter alia, the growth of ebooks and Amazon’s role in that growth. 

43. On or about September 10, 2009, 

Mr. Makinson once again met privately 

with other Publisher Defendant CEOs 

and the CEO of one non-defendant 

publisher in a private room of a 

different Manhattan restaurant, Alto. 

They discussed the growth of e-books 

and complained about Amazon’s role in 

that growth. 

44. In addition to the CEO dinner 

meetings, Publisher Defendants’ CEOs 

and other executives met in-person, 

one-on-one to communicate about ebooks multiple times over the course of 

2009 and into 2010. Similar meetings 

took place in Europe, including 

meetings in the fall of 2009 between 

executives of Macmillan parent 

company Verlagsgruppe Georg von 

Holtzbrinck GmbH and executives of 

another Publisher Defendant’s parent 

company. Macmillan CEO John Sargent 

joined at least one of these parent 

company meetings. 

45. These private meetings provided 

the Publisher Defendants’ CEOs the 

opportunity to discuss how they 

collectively could solve ‘‘the $9.99 

problem.’’ 

B. Publisher Defendants Conspire To 

Raise Retail E-Book Prices Under the 

Guise of Joint Venture Discussions 

46. While each Publisher Defendant 

recognized that it could not solve ‘‘the 

$9.99 problem’’ by itself, collectively 

the Publisher Defendants accounted for 

nearly half of Amazon’s e-book 

revenues, and by refusing to compete 

with one another for Amazon’s 

business, the Publisher Defendants 

could force Amazon to accept the 

Publisher Defendants’ new contract 

terms and to change its pricing 

practices. 

47. The Publisher Defendants thus 

conspired to act collectively, initially in 

the guise of joint ventures. These 

ostensible joint ventures were not meant 

to enhance competition by bringing to 

market products or services that the 

publishers could not offer unilaterally, 

but rather were designed as 

anticompetitive measures to raise 

prices. 

48. All five Publisher Defendants 

agreed in 2009 at the latest to act 

collectively to raise retail prices for the 

most popular e-books above $9.99. One 

CEO of a Publisher Defendant’s parent 

company explained to his corporate 

superior in a July 29, 2009 email 

message that ‘‘[i]n the USA and the UK, 

but also in Spain and France to a lesser 

degree, the ‘top publishers’ are in 

discussions to create an alternative 

platform to Amazon for e-books. The 

goal is less to compete with Amazon as 

to force it to accept a price level higher 

than 9.99 . * * * I am in NY this week 

to promote these ideas and the 

movement is positive with [the other 

four Publisher Defendants].’’ (Translated 

from French). 

49. Less than a week later, in an 

August 4, 2009 strategy memo for the 

board of directors of Penguin’s ultimate 

parent company, Penguin Group CEO 

John Makinson conveyed the same 

message: 

Competition for the attention of readers 

will be most intense from digital companies 

whose objective may be to disintermediate 

traditional publishers altogether. This is not 

a new threat but we do appear to be on a 

collision course with Amazon, and possibly 

Google as well. It will not be possible for any 

individual publisher to mount an effective 

response, because of both the resources 

necessary and the risk of retribution, so the 

industry needs to develop a common 

strategy. This is the context for the 

development of the Project Z initiatives [joint 

ventures] in London and New York. 

C. Defendants Agree To Increase and 

Stabilize Retail E-Book Prices by 

Collectively Adopting an Agency Model 

50. To raise e-book prices, the 

Publisher Defendants also began to 

consider in late 2009 selling e-books 

under an ‘‘agency model’’ that would 

take away Amazon’s ability to set low 

retail prices. As one CEO of a Publisher 

Defendant’s parent company explained 

in a December 6, 2009 email message, 

‘‘[o]ur goal is to force Amazon to return 

to acceptable sales prices through the 

establishment of agency contracts in the 

USA * * *. To succeed our colleagues 

must know that we entered the fray and 

follow us.’’ (Translated from French). 

51. Apple’s entry into the e-book 

business provided a perfect opportunity 

for collective action to implement the 

agency model and use it to raise retail 

e-book prices. Apple was in the process 

of developing a strategy to sell e-books 

on its new iPad device. Apple initially 

contemplated selling e-books through 

the existing wholesale model, which 

was similar to the manner in which 

Apple sold the vast majority of the 

digital media it offered in its iTunes 

store. On February 19, 2009, Apple Vice 

President of Internet Services Eddy Cue 

explained to Apple CEO Steve Jobs in 

an email, ‘‘[a]t this point, it would be 

very easy for us to compete and I think 

trounce Amazon by opening up our own 

ebook store.’’ In addition to considering 

competitive entry at that time, though, 

Apple also contemplated illegally 

dividing the digital content world with 

Amazon, allowing each to ‘‘own the 

category’’ of its choice—audio/video to 

Apple and e-books to Amazon. 

52. Apple soon concluded, though, 

that competition from other retailers— 

especially Amazon—would prevent 

Apple from earning its desired 30 

percent margins on e-book sales. 

Ultimately, Apple, together with the 

Publisher Defendants, set in motion a 

plan that would compel all non-Apple 

e-book retailers also to sign onto agency 

or else, as Apple’s CEO put it, the 

Publisher Defendants all would say, 

‘‘we’re not going to give you the books.’’ 

53. The executive in charge of Apple’s 

inchoate e-books business, Eddy Cue, 

telephoned each Publisher Defendant 

and Random House on or around 

December 8, 2009 to schedule 

exploratory meetings in New York City 

on December 15 and December 16. 

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Hachette and HarperCollins took the 

lead in working with Apple to capitalize 

on this golden opportunity for the 

Publisher Defendants to achieve their 

goal of raising and stabilizing retail ebook prices above $9.99 by collectively 

imposing the agency model on the 

industry. 

54. It appears that Hachette and 

HarperCollins communicated with each 

other about moving to an agency model 

during the brief window between Mr. 

Cue’s first telephone calls to the 

Publisher Defendants and his visit to 

meet with their CEOs. On the morning 

of December 10, 2009, a HarperCollins 

executive added to his calendar an 

appointment to call a Hachette 

executive at 10:50 a.m. At 11:01 a.m., 

the Hachette executive returned the 

phone call, and the two spoke for six 

minutes. Then, less than a week later in 

New York, both Hachette and 

HarperCollins executives told Mr. Cue 

in their initial meetings with him that 

they wanted to sell e-books under an 

agency model, a dramatic departure 

from the way books had been sold for 

over a century. 

55. The other Publisher Defendants 

also made clear to Apple that they 

‘‘certainly’’ did not want to continue 

‘‘the existing way that they were doing 

business,’’ i.e., with Amazon promoting 

their most popular e-books for $9.99 

under a wholesale model. 

56. Apple saw a way to turn the 

agency scheme into a highly profitable 

model for itself. Apple determined to 

give the Publisher Defendants what they 

wanted while shielding itself from retail 

price competition and realizing margins 

far in excess of what e-book retailers 

then averaged on each newly released or 

bestselling e-book sold. Apple realized 

that, as a result of the scheme, ‘‘the 

customer’’ would ‘‘pay[] a little more.’’ 

57. On December 16, 2009, the day 

after both companies’ initial meetings 

with Apple, Penguin Group CEO John 

Makinson had a breakfast meeting at a 

London hotel with the CEO of another 

Publisher Defendant’s parent company. 

Consistent with the Publisher 

Defendants’ other efforts to conceal their 

activities, Mr. Makinson’s breakfast 

companion wrote to his U.S. 

subordinate that he would recount 

portions of his discussion with Mr. 

Makinson only by telephone. 

58. By the time Apple arrived for a 

second round of meetings during the 

week of December 21, 2009, the agency 

model had become the focus of its 

discussions with all of the Publisher 

Defendants. In these discussions, Apple 

proposed that the Publisher Defendants 

require all retailers of their e-books to 

accept the agency model. Apple thereby 

sought to ensure that it would not have 

to compete on retail prices. The 

proposal appealed to the Publisher 

Defendants because wresting pricing 

control from Amazon and other e-book 

retailers would advance their collusive 

plan to raise retail e-book prices. 

59. The Publisher Defendants 

acknowledged to Apple their common 

objective to end Amazon’s $9.99 

pricing. As Mr. Cue reported in an email 

message to Apple’s CEO Steve Jobs, the 

three publishers with whom he had met 

saw the ‘‘plus’’ of Apple’s position as 

‘‘solv[ing the] Amazon problem.’’ The 

‘‘negative’’ was that Apple’s proposed 

retail prices—topping out at $12.99 for 

newly released and bestselling ebooks—were a ‘‘little less than [the 

publishers] would like.’’ Likewise, Mr. 

Jobs later informed an executive of one 

of the Publisher Defendant’s corporate 

parents that ‘‘[a]ll major publishers’’ had 

told Apple that ‘‘Amazon’s $9.99 price 

for new releases is eroding the value 

perception of their products in 

customer’s minds, and they do not want 

this practice to continue for new 

releases.’’ 

60. As perhaps the only company that 

could facilitate their goal of raising 

retail e-book prices across the industry, 

Apple knew that it had significant 

leverage in negotiations with Publisher 

Defendants. Apple exercised this 

leverage to demand a thirty percent 

commission—a margin significantly 

above the prevailing competitive 

margins for e-book retailers. The 

Publisher Defendants worried that the 

combination of paying Apple a higher 

commission than they would have liked 

and pricing their e-books lower than 

they wanted might be too much to bear 

in exchange for Apple’s facilitation of 

their agreement to raise retail e-book 

prices. Ultimately, though, they 

convinced Apple to allow them to raise 

prices high enough to make the deal 

palatable to them. 

61. As it negotiated with the Publisher 

Defendants in December 2009 and 

January 2010, Apple kept each 

Publisher Defendant informed of the 

status of its negotiations with the other 

Publisher Defendants. Apple also 

assured the Publisher Defendants that 

its proposals were the same to each and 

that no deal Apple agreed to with one 

publisher would be materially different 

from any deal it agreed to with another 

publisher. Apple thus knowingly served 

as a critical conspiracy participant by 

allowing the Publisher Defendants to 

signal to one another both (a) which 

agency terms would comprise an 

acceptable means of achieving their 

ultimate goal of raising and stabilizing 

retail e-book prices, and (b) that they 

could lock themselves into this 

particular means of collectively 

achieving that goal by all signing their 

Apple Agency Agreement. 

62. Apple’s Mr. Cue emailed each 

Publisher Defendant between January 4, 

2010, and January 6, 2010 an outline of 

what he tabbed ‘‘the best approach for 

e-books.’’ He reassured Penguin USA 

CEO David Shanks and other Publisher 

Defendant CEOs that Apple adopted the 

approach ‘‘[a]fter talking to all the other 

publishers.’’ Mr. Cue sent substantively 

identical email messages and proposals 

to each Publisher Defendant. 

63. The outlined proposal that Apple 

circulated after consulting with each 

Publisher Defendant contained several 

key features. First, as Hachette and 

HarperCollins had initially suggested to 

Apple, the publisher would be the 

principal and Apple would be the agent 

for e-book sales. Consumer pricing 

authority would be transferred from 

retailers to publishers. Second, Apple’s 

proposal mandated that every other 

retailer of each publisher’s e-books— 

Apple’s direct competitors—be forced to 

accept the agency model as well. As Mr. 

Cue wrote, ‘‘all resellers of new titles 

need to be in agency model.’’ Third, 

Apple would receive a 30 percent 

commission for each e-book sale. And 

fourth, each Publisher Defendant would 

have identical pricing tiers for e-books 

sold through Apple’s iBookstore. 

64. On January 11, 2010, Apple 

emailed its proposed e-book distribution 

agreement to all the Publisher 

Defendants. As with the outlined 

proposals Apple sent earlier in January, 

the proposed e-book distribution 

agreements were substantially the same. 

Also on January 11, 2010, Apple 

separately emailed to Penguin and two 

other Publisher Defendants charts 

showing how the Publisher Defendant’s 

bestselling e-books would be priced at 

$12.99—the ostensibly maximum price 

under Apple’s then-current price tier 

proposal—in the iBookstore. 

65. The proposed e-book distribution 

agreement mainly incorporated the 

principles Apple set out in its email 

messages of January 4 through January 

6, with two notable changes. First, 

Apple demanded that the Publisher 

Defendants provide Apple their 

complete e-book catalogs and that they 

not delay the electronic release of any 

title behind its print release. Second, 

and more important, Apple replaced the 

express requirement that each publisher 

adopt the agency model with each of its 

retailers with an unusual most favored 

nation (‘‘MFN’’) pricing provision. That 

provision was not structured like a 

standard MFN in favor of a retailer, 

ensuring Apple that it would receive the 

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best available wholesale price. Nor did 

the MFN ensure Apple that the 

Publisher Defendants would not set a 

higher retail price on the iBookstore 

than they set on other Web sites where 

they controlled retail prices. Instead, the 

MFN here required each publisher to 

guarantee that it would lower the retail 

price of each e-book in Apple’s 

iBookstore to match the lowest price 

offered by any other retailer, even if the 

Publisher Defendant did not control that 

other retailer’s ultimate consumer price. 

That is, instead of an MFN designed to 

protect Apple’s ability to compete, this 

MFN was designed to protect Apple 

from having to compete on price at all, 

while still maintaining Apple’s 30 

percent margin. 

66. The purpose of these provisions 

was to work in concert to enforce the 

Defendants’ agreement to raise and 

stabilize retail e-book prices. Apple and 

the Publisher Defendants recognized 

that coupling Apple’s right to all of their 

e-books with its right to demand that 

those e-books not be priced higher on 

the iBookstore than on any other Web 

site effectively required that each 

Publisher Defendant take away retail 

pricing control from all other e-book 

retailers, including stripping them of 

any ability to discount or otherwise 

price promote e-books out of the 

retailer’s own margins. Otherwise, the 

retail price MFN would cause Apple’s 

iBookstore prices to drop to match the 

best available retail price of each e-book, 

and the Publisher Defendants would 

receive only 70 percent of those reduced 

retail prices. Price competition by other 

retailers, if allowed to continue, thus 

likely would reduce e-book revenues to 

levels the Publisher Defendants could 

not control or predict. 

67. In negotiating the retail price MFN 

with Apple, ‘‘some of [the Publisher 

Defendants]’’ asserted that Apple did 

not need the provision ‘‘because they 

would be moving to an agency model 

with [the other e-book retailers,]’’ 

regardless. Ultimately, though, all 

Defendants agreed to include the MFN 

commitment mechanism. 

68. On January 16, 2010, Apple, via 

Mr. Cue, offered revised terms to the 

Publisher Defendants that again were 

identical in substance. Apple modified 

its earlier proposal in two significant 

ways. First, in response to publisher 

requests, it added new maximum 

pricing tiers that increased permissible 

e-book prices to $16.99 or $19.99, 

depending on the book’s hardcover list 

price. Second, Apple’s new proposal 

mitigated these price increases 

somewhat by adding special pricing 

tiers for e-book versions of books on the 

New York Times fiction and non-fiction 

bestseller lists. For e-book versions of 

bestsellers bearing list prices of $30 or 

less, Publisher Defendants could set a 

price up to $12.99; for bestsellers 

bearing list prices between $30 and $35, 

the e-book price cap would be $14.99. 

In conjunction with the revised 

proposal, Mr. Cue set up meetings for 

the next week to finalize agreements 

with the Publisher Defendants. 

69. Each Publisher Defendant 

required assurances that it would not be 

the only publisher to sign an agreement 

with Apple that would compel it either 

to take pricing authority from Amazon 

or to pull its e-books from Amazon. The 

Publisher Defendants continued to fear 

that Amazon would act to protect its 

ability to price e-books at $9.99 or less 

if any one of them acted alone. 

Individual Publisher Defendants also 

feared punishment in the marketplace if 

only its e-books suddenly became more 

expensive at retail while other 

publishers continued to allow retailers 

to compete on price. As Mr. Cue noted, 

‘‘all of them were very concerned about 

being the only ones to sign a deal with 

us.’’ Penguin explicitly communicated 

to Apple that it would sign an e-book 

distribution agreement with Apple only 

if at least three of the other ‘‘major[]’’ 

publishers did as well. Apple supplied 

the needed assurances. 

70. While the Publisher Defendants 

were discussing e-book distribution 

terms with Apple during the week of 

January 18, 2010, Amazon met in New 

York City with a number of prominent 

authors and agents to unveil a new 

program under which copyright holders 

could take their e-books directly to 

Amazon—cutting out the publisher— 

and Amazon would pay royalties of up 

to 70 percent, far in excess of what 

publishers offered. This announcement 

further highlighted the direct 

competitive threat Amazon posed to the 

Publisher Defendants’ business model. 

The Publisher Defendants reacted 

immediately. For example, Penguin 

USA CEO David Shanks reported being 

‘‘really angry’’ after ‘‘hav[ing] read 

[Amazon’s] announcement.’’ After 

thinking about it for a day, Mr. Shanks 

concluded, ‘‘[o]n Apple I am now more 

convinced that we need a viable 

alternative to Amazon or this nonsense 

will continue and get much worse.’’ 

Another decisionmaker stated he was 

‘‘p****d’’ at Amazon for starting to 

compete directly against the publishers 

and expressed his desire ‘‘to screw 

Amazon.’’ 

71. To persuade one of the Publisher 

Defendants to stay with the others and 

sign an agreement, Apple CEO Steve 

Jobs wrote to an executive of the 

Publisher Defendant’s corporate parent 

that the publisher had only two choices 

apart from signing the Apple Agency 

Agreement: (i) Accept the status quo 

(‘‘Keep going with Amazon at $9.99’’); 

or (ii) continue with a losing policy of 

delaying the release of electronic 

versions of new titles (‘‘Hold back your 

books from Amazon’’). According to 

Jobs, the Apple deal offered the 

Publisher Defendants a superior 

alternative path to the higher retail ebook prices they sought: ‘‘Throw in with 

Apple and see if we can all make a go 

of this to create a real mainstream ebooks market at $12.99 and $14.99.’’ 

72. In addition to passing information 

through Apple and during their private 

dinners and other in-person meetings, 

the Publisher Defendants frequently 

communicated by telephone to 

exchange assurances of common action 

in attempting to raise the retail price of 

e-books. These telephone 

communications increased significantly 

during the two-month period in which 

the Publisher Defendants considered 

and entered the Apple Agency 

Agreements. During December 2009 and 

January 2010, the Publisher Defendants’ 

U.S. CEOs placed at least 56 phone calls 

to one another. Each CEO, including 

Penguin’s Shanks and Macmillan’s 

Sargent, placed at least seven such 

phone calls. 

73. The timing, frequency, duration, 

and content of the Publisher Defendant 

CEOs’ phone calls demonstrate that the 

Publisher Defendants used them to seek 

and exchange assurances of common 

strategies and business plans regarding 

the Apple Agency Agreements. For 

example, in addition to the telephone 

calls already described in this 

complaint: 

• Near the time Apple first presented 

the agency model, one Publisher 

Defendant’s CEO used a telephone 

call—ostensibly made to discuss a 

marketing joint venture—to tell Penguin 

USA CEO David Shanks that ‘‘everyone 

is in the same place with Apple.’’ 

• After receiving Apple’s January 16, 

2010 revised proposal, executives of 

several Publisher Defendants responded 

to the revised proposal and meetings by, 

again, seeking and exchanging 

confidential information. For example, 

on Sunday, January 17, one Publisher 

Defendant’s CEO used his mobile phone 

to call another Publisher Defendant’s 

CEO and talk for approximately ten 

minutes. And on the morning of January 

19, Penguin USA CEO David Shanks 

had an extended telephone conversation 

with the CEO of another Publisher 

Defendant. 

• On January 21, 2010, the CEO of 

one Publisher Defendant’s parent 

company instructed his U.S. 

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subordinate via email to find out 

Apple’s progress in agency negotiations 

with other publishers. Four minutes 

after that email was sent, the U.S. 

executive called another Publisher 

Defendant’s CEO, and the two spoke for 

over eleven minutes. 

• On January 22, 2010, at 9:30 a.m., 

Apple’s Cue met with one Publisher 

Defendant’s CEO to make what Cue 

hoped would be a ‘‘final go/no-go 

decision’’ about whether the Publisher 

Defendant would sign an agreement 

with Apple. Less than an hour later, the 

Publisher Defendant’s CEO made phone 

calls, two minutes apart, to two other 

Publisher Defendants’ CEOs, including 

Macmillan’s Sargent. The CEO who 

placed the calls admitted under oath to 

placing them specifically to learn if the 

other two Publisher Defendants would 

sign with Apple prior to Apple’s iPad 

launch. 

• On the evening of Saturday, January 

23, 2010, Apple’s Cue emailed his boss, 

Steve Jobs, and noted that Penguin USA 

CEO David Shanks ‘‘want[ed] an 

assurance that he is 1 of 4 before 

signing.’’ The following Monday 

morning, at 9:46 a.m., Mr. Shanks called 

another Publisher Defendant’s CEO and 

the two talked for approximately four 

minutes. Both Penguin and the other 

Publisher Defendant signed their Apple 

Agency Agreements later that day. 

74. On January 24, 2010, Hachette 

signed an e-book distribution agreement 

with Apple. Over the next two days, 

Simon & Schuster, Macmillan, Penguin, 

and HarperCollins all followed suit and 

signed e-book distribution agreements 

with Apple. Within these three days, the 

Publisher Defendants agreed with Apple 

to abandon the longstanding wholesale 

model for selling e-books. The Apple 

Agency Agreements took effect 

simultaneously on April 3, 2010 with 

the release of Apple’s new iPad. 

75. The final version of the pricing 

tiers in the Apple Agency Agreements 

contained the $12.99 and $14.99 price 

points for bestsellers, discussed earlier, 

and also established prices for all other 

newly released titles based on the 

hardcover list price of the same title. 

Although couched as maximum retail 

prices, the price tiers in fact established 

the retail e-book prices to be charged by 

Publisher Defendants. 

76. By entering the Apple Agency 

Agreements, each Publisher Defendant 

effectively agreed to require all of their 

e-book retailers to accept the agency 

model. Both Apple and the Publisher 

Defendants understood the Agreements 

would compel the Publisher Defendants 

to take pricing authority from all nonApple e-book retailers. A February 10, 

2010 presentation by one Publisher 

Defendant applauded this result 

(emphasis in original): ‘‘The Apple 

agency model deal means that we will 

have to shift to an agency model with 

Amazon which [will] strengthen our 

control over pricing.’’ 

77. Apple understood that the final 

Apple Agency Agreements ensured that 

the Publisher Defendants would raise 

their retail e-book prices to the 

ostensible limits set by the Apple price 

tiers not only in Apple’s forthcoming 

iBookstore, but on Amazon.com and all 

other consumer sites as well. When 

asked by a Wall Street Journal reporter 

at the January 27, 2010 iPad unveiling 

event, ‘‘Why should she buy a book for 

* * * $14.99 from your device when 

she could buy one for $9.99 from 

Amazon on the Kindle or from Barnes 

& Noble on the Nook?’’ Apple CEO 

Steve Jobs responded, ‘‘that won’t be the 

case * * *. the prices will be the same.’’ 

78. Apple understood that the retail 

price MFN was the key commitment 

mechanism to keep the Publisher 

Defendants advancing their conspiracy 

in lockstep. Regarding the effect of the 

MFN, Apple executive Pete Alcorn 

remarked in the context of the European 

roll-out of the agency model in the 

spring of 2010: 

I told [Apple executive Keith Moerer] that 

I think he and Eddy [Cue] made it at least 

halfway to changing the industry 

permanently, and we should keep the pads 

on and keep fighting for it. I might regret that 

later, but right now I feel like it’s a giant win 

to keep pushing the MFN and forcing people 

off the [A]mazon model and onto ours. If 

anything, the place to give is the pricing— 

long run, the mfn is more important. The 

interesting insight in the meeting was Eddy’s 

explanation that it doesn’t have to be that 

broad—any decent MFN forces the model. 

79. Within the four months following 

the signing of the Apple Agency 

Agreements, and over Amazon’s 

objections, each Publisher Defendant 

had transformed its business 

relationship with all of the major e-book 

retailers from a wholesale model to an 

agency model and imposed flat 

prohibitions against e-book discounting 

or other price competition on all nonApple e-book retailers. 

80. For example, after it signed its 

Apple Agency Agreement, Macmillan 

presented Amazon a choice: adopt the 

agency model or lose the ability to sell 

e-book versions of new hardcover titles 

for the first seven months of their 

release. Amazon rejected Macmillan’s 

ultimatum and sought to preserve its 

ability to sell e-book versions of newly 

released hardcover titles for $9.99. To 

resist Macmillan’s efforts to force it to 

accept either the agency model or 

delayed electronic availability, Amazon 

effectively stopped selling Macmillan’s 

print books and e-books. 

81. When Amazon stopped selling 

Macmillan titles, other Publisher 

Defendants did not view the situation as 

an opportunity to gain market share 

from a weakened competitor. Instead, 

they rallied to support Macmillan. For 

example, the CEO of one Publisher 

Defendant’s parent company instructed 

the Publisher Defendant’s CEO that 

‘‘[Macmillan CEO] John Sargent needs 

our help!’’ The parent company CEO 

explained, ‘‘M[acm]illan have been 

brave, but they are small. We need to 

move the lines. And I am thrilled to 

know how A[mazon] will react against 

3 or 4 of the big guys.’’ 

82. The CEO of one Publisher 

Defendant’s parent company assured 

Macmillan CEO John Sargent of his 

company’s support in a January 31, 

2010 email: ‘‘I can ensure you that you 

are not going to find your company 

alone in the battle.’’ The same parent 

company CEO also assured the head of 

Macmillan’s corporate parent in a 

February 1 email that ‘‘others will enter 

the battle field!’’ Overall, Macmillan 

received ‘‘hugely supportive’’ 

correspondence from the publishing 

industry during Macmillan’s effort to 

force Amazon to accept the agency 

model. 

83. As its battle with Amazon 

continued, Macmillan knew that, 

because the other Publisher Defendants, 

via the Apple Agency Agreements, had 

locked themselves into forcing agency 

on Amazon to advance their 

conspiratorial goals, Amazon soon 

would face similar edicts from a united 

front of Publisher Defendants. And 

Amazon could not delist the books of all 

five Publisher Defendants because they 

together accounted for nearly half of 

Amazon’s e-book business. Macmillan 

CEO John Sargent explained the 

company’s reasoning: ‘‘we believed 

whatever was happening, whatever 

Amazon was doing here, they were 

going to face—they’re going to have 

more of the same in the future one way 

or another.’’ Another Publisher 

Defendant similarly recognized that 

Macmillan was not acting unilaterally 

but rather was ‘‘leading the charge on 

moving Amazon to the agency model.’’ 

84. Amazon quickly came to fully 

appreciate that not just Macmillan but 

all five Publisher Defendants had 

irrevocably committed themselves to the 

agency model across all retailers, 

including taking control of retail pricing 

and thereby stripping away any 

opportunity for e-book retailers to 

compete on price. Just two days after it 

stopped selling Macmillan titles, 

Amazon capitulated and publicly 

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24526 Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 

announced that it had no choice but to 

accept the agency model, and it soon 

resumed selling Macmillan’s e-book and 

print book titles. 

D. Defendants Further the Conspiracy 

by Pressuring Another Publisher To 

Adopt the Agency Model 

85. When a company takes a procompetitive action by introducing a new 

product, lowering its prices, or even 

adopting a new business model that 

helps it sell more product at better 

prices, it typically does not want its 

competitors to copy its action, but 

prefers to maintain a first-mover or 

competitive advantage. In contrast, 

when companies jointly take collusive 

action, such as instituting a coordinated 

price increase, they typically want the 

rest of their competitors to join them in 

that action. Because collusive actions 

are not pro-competitive or consumer 

friendly, any competitor that does not 

go along with the conspirators can take 

more consumer friendly actions and see 

its market share rise at the expense of 

the conspirators. Here, the Defendants 

acted consistently with a collusive 

arrangement, and inconsistently with a 

pro-competitive arrangement, as they 

sought to pressure another publisher 

(whose market share was growing at the 

Publisher Defendants’ expense after the 

Apple Agency Contracts became 

effective) to join them. 

86. Penguin appears to have taken the 

lead in these efforts. Its U.S. CEO, David 

Shanks, twice directly told the 

executives of the holdout major 

publisher about his displeasure with 

their decision to continue selling ebooks on the wholesale model. Mr. 

Shanks tried to justify the actions of the 

conspiracy as an effort to save brickand-mortar bookstores and criticized the 

other publisher for ‘‘not helping’’ the 

group. The executives of the other 

publisher responded to Mr. Shanks’s 

complaints by explaining their 

objections to the agency model. 

87. Mr. Shanks also encouraged a 

large print book and e-book retailer to 

punish the other publisher for not 

joining Defendants’ conspiracy. In 

March 2010, Mr. Shanks sent an email 

message to an executive of the retailer 

complaining that the publisher ‘‘has 

chosen to stay on their current model 

and will allow retailers to sell at 

whatever price they wish.’’ Mr. Shanks 

argued that ‘‘[s]ince Penguin is looking 

out for [your] welfare at what appears to 

be great costs to us, I would hope that 

[you] would be equally brutal to 

Publishers who have thrown in with 

your competition with obvious disdain 

for your welfare * * *. I hope you make 

[the publisher] hurt like Amazon is 

doing to [the Publisher Defendants].’’ 

88. When the third-party retailer 

continued to promote the non-defendant 

publisher’s books, Mr. Shanks applied 

more pressure. In a June 22, 2010 email 

to the retailer’s CEO, Mr. Shanks 

claimed to be ‘‘baffled’’ as to why the 

retailer would promote that publisher’s 

books instead of just those published by 

‘‘people who stood up for you.’’ 

89. Throughout the summer of 2010, 

Apple also cajoled the holdout 

publisher to adopt agency terms in line 

with those of the Publisher Defendants, 

including on a phone call between 

Apple CEO Steve Jobs and the holdout 

publisher’s CEO. Apple flatly refused to 

sell the holdout publisher’s e-books 

unless and until it agreed to an agency 

relationship substantially similar to the 

arrangement between Apple and the 

Publisher Defendants defined by the 

Apple Agency Agreements. 

E. Conspiracy Succeeds at Raising and 

Stabilizing Consumer E-book Prices 

90. The ostensible maximum prices 

included in the Apple Agency 

Agreements’ price schedule represent, 

in practice, actual e-book prices. Indeed, 

at the time the Publisher Defendants 

snatched retail pricing authority away 

from Amazon and other e-book retailers, 

not one of them had built an internal 

retail pricing apparatus sufficient to do 

anything other than set retail prices at 

the Apple Agency Agreements’ 

ostensible caps. Once their agency 

agreements took effect, the Publisher 

Defendants raised e-book prices at all 

retail outlets to the maximum price 

level within each tier. Even today, two 

years after the Publisher Defendants 

began setting e-book retail prices 

according to the Apple price tiers, they 

still set the retail prices for the 

electronic versions of all or nearly all of 

their bestselling hardcover titles at the 

ostensible maximum price allowed by 

those price tiers. 

91. The Publisher Defendants’ 

collective adoption of the Apple Agency 

Agreements allowed them (facilitated by 

Apple) to raise, fix, and stabilize retail 

e-book prices in three steps: (a) They 

took away retail pricing authority from 

retailers; (b) they then set retail e-book 

prices according to the Apple price 

tiers; and (c) they then exported the 

agency model and higher retail prices to 

the rest of the industry, in part to 

comply with the retail price MFN 

included in each Apple Agency 

Agreement. 

92. Defendants’ conspiracy and 

agreement to raise and stabilize retail ebook prices by collectively adopting the 

agency model and Apple price tiers led 

to an increase in the retail prices of 

newly released and bestselling e-books. 

Prior to the Defendants’ conspiracy, 

consumers benefited from price 

competition that led to $9.99 prices for 

newly released and bestselling e-books. 

Almost immediately after Apple 

launched its iBookstore in April 2010 

and the Publisher Defendants imposed 

agency model pricing on all retailers, 

the Publisher Defendants’ e-book prices 

for most newly released and bestselling 

e-books rose to either $12.99 or $14.99. 

93. Defendants’ conspiracy and 

agreement to raise and stabilize retail ebook prices by collectively adopting the 

agency model and Apple price tiers for 

their newly released and bestselling ebooks also led to an increase in average 

retail prices of the balance of Publisher 

Defendants’ e-book catalogs, their socalled ‘‘backlists.’’ Now that the 

Publisher Defendants control the retail 

prices of e-books—but Amazon 

maintains control of its print book retail 

prices—Publisher Defendants’ e-book 

prices sometimes are higher than 

Amazon’s prices for print versions of 

the same titles. 

VII. Violation Alleged 

94. Beginning no later than 2009, and 

continuing to date, Defendants and their 

co-conspirators have engaged in a 

conspiracy and agreement in 

unreasonable restraint of interstate trade 

and commerce, constituting a violation 

of Section 1 of the Sherman Act, 15 

U.S.C. 1. This offense is likely to 

continue and recur unless the relief 

requested is granted. 

95. The conspiracy and agreement 

consists of an understanding and 

concert of action among Defendants and 

their co-conspirators to raise, fix, and 

stabilize retail e-book prices, to end 

price competition among e-book 

retailers, and to limit retail price 

competition among the Publisher 

Defendants, ultimately effectuated by 

collectively adopting and adhering to 

functionally identical methods of selling 

e-books and price schedules. 

96. For the purpose of forming and 

effectuating this agreement and 

conspiracy, some or all Defendants did 

the following things, among others: 

a. Shared their business information, 

plans, and strategies in order to 

formulate ways to raise retail e-book 

prices; 

b. Assured each other of support in 

attempting to raise retail e-book prices; 

c. Employed ostensible joint venture 

meetings to disguise their attempts to 

raise retail e-book prices; 

d. Fixed the method of and formulas 

for setting retail e-book prices; 

e. Fixed tiers for retail e-book prices; 

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Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 24527 

f. Eliminated the ability of e-book 

retailers to fund retail e-book price 

decreases out of their own margins; and 

g. Raised the retail prices of their 

newly released and bestselling e-books 

to the agreed prices—the ostensible 

price caps—contained in the pricing 

schedule of their Apple Agency 

Agreements. 

97. Defendants’ conspiracy and 

agreement, in which the Publisher 

Defendants and Apple agreed to raise, 

fix, and stabilize retail e-book prices, to 

end price competition among e-book 

retailers, and to limit retail price 

competition among the Publisher 

Defendants by fixing retail e-book 

prices, constitutes a per se violation of 

Section 1 of the Sherman Act, 15 U.S.C. 

1. 

98. Moreover, Defendants’ conspiracy 

and agreement has resulted in obvious 

and demonstrable anticompetitive 

effects on consumers in the trade ebooks market by depriving consumers of 

the benefits of competition among ebook retailers as to both retail prices and 

retail innovations (such as e-book clubs 

and subscription plans), such that it 

constitutes an unreasonable restraint on 

trade in violation of Section 1 of the 

Sherman Act, 15 U.S.C. 1. 

99. Where, as here, defendants have 

engaged in a per se violation of Section 

1 of the Sherman Act, no allegations 

with respect to the relevant product 

market, geographic market, or market 

power are required. To the extent such 

allegations may otherwise be necessary, 

the relevant product market for the 

purposes of this action is trade e-books. 

The anticompetitive acts at issue in this 

case directly affect the sale of trade ebooks to consumers. No reasonable 

substitute exists for e-books. There are 

no technological alternatives to e-books, 

thousands of which can be stored on a 

single small device. E-books can be 

stored and read on electronic devices, 

while print books cannot. E-books can 

be located, purchased, and downloaded 

anywhere a customer has an internet 

connection, while print books cannot. 

Industry firms also view e-books as a 

separate market segment from print 

books, and the Publisher Defendants 

were able to impose and sustain a 

significant retail price increase for their 

trade e-books. 

100. The relevant geographic market 

is the United States. The rights to 

license e-books are granted on territorial 

bases, with the United States typically 

forming its own territory. E-book 

retailers typically present a unique 

storefront to U.S. consumers, often with 

e-books bearing different retail prices 

than the same titles would command on 

the same retailer’s foreign Web sites. 

101. The Publisher Defendants 

possess market power in the market for 

trade e-books. The Publisher Defendants 

successfully imposed and sustained a 

significant retail price increase for their 

trade e-books. Collectively, they create 

and distribute a wide variety of popular 

e-books, regularly comprising over half 

of the New York Times fiction and nonfiction bestseller lists. Collectively, they 

provide a critical input to any firm 

selling trade e-books to consumers. Any 

retailer selling trade e-books to 

consumers would not be able to forgo 

profitably the sale of the Publisher 

Defendants’ e-books. 

102. Defendants’ agreement and 

conspiracy has had and will continue to 

have anticompetitive effects, including: 

a. Increasing the retail prices of trade 

e-books; 

b. Eliminating competition on price 

among e-book retailers; 

c. Restraining competition on retail 

price among the Publisher Defendants; 

d. Restraining competition among the 

Publisher Defendants for favorable 

relationships with e-book retailers; 

e. Constraining innovation among ebook retailers; 

f. Entrenching incumbent publishers’ 

favorable position in the sale and 

distribution of print books by slowing 

the migration from print books to ebooks; 

g. Making more likely express or tacit 

collusion among publishers; and 

h. Reducing competitive pressure on 

print book prices. 

103. Defendants’ agreement and 

conspiracy is not reasonably necessary 

to accomplish any procompetitive 

objective, or, alternatively, its scope is 

broader than necessary to accomplish 

any such objective. 

VIII. Request For Relief 

104. To remedy these illegal acts, the 

United States requests that the Court: 

a. Adjudge and decree that 

Defendants entered into an unlawful 

contract, combination, or conspiracy in 

unreasonable restraint of interstate trade 

and commerce in violation of Section 1 

of the Sherman Act, 15 U.S.C. 1; 

b. Enjoin the Defendants, their 

officers, agents, servants, employees and 

attorneys and their successors and all 

other persons acting or claiming to act 

in active concert or participation with 

one or more of them, from continuing, 

maintaining, or renewing in any 

manner, directly or indirectly, the 

conduct alleged herein or from engaging 

in any other conduct, combination, 

conspiracy, agreement, understanding, 

plan, program, or other arrangement 

having the same effect as the alleged 

violation or that otherwise violates 

Section 1 of the Sherman Act, 15 U.S.C. 

1, through fixing the method and 

manner in which they sell e-books, or 

otherwise agreeing to set the price or 

release date for e-books, or collective 

negotiation of e-book agreements, or 

otherwise collectively restraining retail 

price competition for e-books; 

c. Prohibit the collusive setting of 

price tiers that can de facto fix prices; 

d. Declare null and void the Apple 

Agency Agreements and any agreement 

between a Publisher Defendant and an 

e-book retailer that restricts, limits, or 

impedes the e-book retailer’s ability to 

set, alter, or reduce the retail price of 

any e-book or to offer price or other 

promotions to encourage consumers to 

purchase any e-book, or contains a retail 

price MFN; 

e. Reform the agreements between 

Apple and Publisher Defendants to 

strike the retail price MFN clauses as 

void and unenforceable; and 

f. Award to Plaintiff its costs of this 

action and such other and further relief 

as may be appropriate and as the Court 

may deem just and proper. 

Dated: April 11, 2012 

For Plaintiff 

United States of America: 

l/s/Sharis A. Pozenlll 

Sharis A. Pozen, 

Acting Assistant Attorney General for 

Antitrust. 

l/s/Joseph F. Waylandlll 

Joseph F. Wayland, 

Deputy Assistant Attorney General. 

l/s/Gene Kimmelmanlll 

Gene Kimmelman, 

Chief Counsel for Competition Policy and 

Intergovernmental Relations. 

l/s/Patricia A. Brinklll 

Patricia A. Brink, 

Director of Civil Enforcement. 

Mark W. Ryan, 

Director of Litigation, 

mark.w.ryan@usdoj.gov. 

l/s/John R. Readlll 

John R. Read, 

Chief. 

David C. Kully, 

Assistant Chief, Litigation III Section, 

david.kully@usdoj.gov. 

l/s/Daniel McCuaiglll 

Daniel McCuaig, 

Nathan P. Sutton, 

Mary Beth Mcgee, 

Owen M. Kendler, 

William H. Jones II, 

Stephen T. Fairchild, 

Attorneys for the United States, Litigation III 

Section, 450 Fifth Street NW., Suite 4000, 

Washington, DC 20530. Telephone: (202) 

307–0520, Facsimile: (202) 514–7308. 

daniel.mccuaig@usdoj.gov. 

nathan.sutton@usdoj.gov. 

mary.beth.mcgee@usdoj.gov. 

owen.kendler@usdoj.gov. 

bill.jones2@usdoj.gov. 

stephen.fairchild@usdoj.gov. 

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24528 Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 

2The case against the remaining Defendants will 

continue. Those Defendants are Apple, 

Verlagsgruppe Georg von Holtzbrinck GmbH and 

Holtzbrinck Publishers, LLC d/b/a Macmillan 

(collectively, ‘‘Macmillan’’), and The Penguin 

Group, a division of Pearson plc and Penguin Group 

(USA), Inc. (collectively, ‘‘Penguin’’). 

3Prior to the formation of and throughout 

Publisher Defendants’ agreement, their CEOs and 

other high-level executives frequently 

communicated with each other in both formal and 

informal settings. From these communications 

emerged a pattern of Publisher Defendants 

improperly exchanging confidential, competitively 

sensitive information. 

United States District Court for the 

Southern District of New York 

United States of America, Plaintiff, v. Apple, 

Inc., Hachette Book Group, Inc., 

Harpercollins Publishers L.L.C., 

Verlagsgruppe Georg Von Holtzbrinck 

GMBH, Holtzbrinck Publishers, LLC, d/b/a 

Macmillan, The Penguin Group, A Division 

of Pearson PLC, Penguin Group (USA), 

Inc., and Simon & Schuster, Inc., 

Defendants. 

Civil Action No. 1:12-cv-02826 

Judge: Cote, Denise 

Date Filed: 04/11/2012 

Description: Antitrust 

Competitive Impact Statement 

Pursuant to Section 2(b) of the 

Antitrust Procedures and Penalties Act 

(‘‘APPA’’ or ‘‘Tunney Act’’), 15 U.S.C. 

16(b)–(h), Plaintiff United States of 

America (‘‘United States’’) files this 

Competitive Impact Statement relating 

to the proposed Final Judgment against 

Defendants Hachette Book Group, Inc. 

(‘‘Hachette’’), HarperCollins Publishers 

L.L.C. (‘‘HarperCollins’’), and Simon & 

Schuster, Inc. (‘‘Simon & Schuster’’; 

collectively with Hachette and 

HarperCollins, ‘‘Settling Defendants’’), 

submitted on April 11, 2012, for entry 

in this antitrust proceeding. 

I. Nature and Purpose of the Proceeding 

On April 11, 2012, the United States 

filed a civil antitrust Complaint alleging 

that Apple, Inc. (‘‘Apple’’) and five of 

the six largest publishers in the United 

States (‘‘Publisher Defendants’’) 

restrained competition in the sale of 

electronic books (‘‘e-books’’), in 

violation of Section 1 of the Sherman 

Act, 15 U.S.C. 1. 

Shortly after filing the Complaint, the 

United States filed a proposed Final 

Judgment with respect to Settling 

Defendants. The proposed Final 

Judgment is described in more detail in 

Section III below. The United States and 

Settling Defendants have stipulated that 

the proposed Final Judgment may be 

entered after compliance with the 

APPA, unless the United States 

withdraws its consent. Entry of the 

proposed Final Judgment would 

terminate this action as to Settling 

Defendants, except that this Court 

would retain jurisdiction to construe, 

modify, and enforce the proposed Final 

Judgment and to punish violations 

thereof.2

The Complaint alleges that Publisher 

Defendants, concerned by Amazon.com, 

Inc. (‘‘Amazon’’)’s pricing of newly 

released and bestselling e-books at $9.99 

or less, agreed among themselves and 

with Apple to raise the retail prices of 

e-books by taking control of e-book 

pricing from retailers. The effect of 

Defendants’ agreement has been to 

increase the price consumers pay for ebooks, end price competition among ebook retailers, constrain innovation 

among e-book retailers, and entrench 

incumbent publishers’ favorable 

position in the sale and distribution of 

print books by slowing the migration 

from print books to e-books. The 

Complaint seeks injunctive relief to 

enjoin continuance and prevent 

recurrence of the violation. 

II. Description of the Events Giving Rise 

to the Alleged Violation of the Antitrust 

Laws 

A. The E-Books Market 

Technological advances have enabled 

the production, storage, distribution, 

and consumption of books in electronic 

format, lowering significantly the 

marginal costs to publishers of offering 

books for sale. E-books can be read on 

a variety of electronic devices, including 

dedicated devices (‘‘e-readers’’) such as 

Amazon’s Kindle or Barnes & Noble, 

Inc.’s Nook, tablet computers such as 

Apple’s iPad, desktop or laptop 

computers, and smartphones. E-book 

sales are growing, and e-books are 

increasingly popular with American 

consumers. E-books conservatively now 

constitute ten percent of general interest 

fiction and non-fiction books 

(commonly known as ‘‘trade’’ books) 

sold in the United States and are widely 

predicted to reach at least 25 percent of 

U.S. trade books sales within two to 

three years. 

Until Defendants’ agreement took 

effect, publishers sold e-books under a 

wholesale model that had prevailed for 

decades in the sale of print books. 

Under this wholesale model, publishers 

typically sold copies of each title to 

retailers for a discount (usually around 

50%) off the price printed on the 

physical edition of the book (the ‘‘list 

price’’). Retailers, as owners of the 

books, were then free to determine the 

prices at which the books would be sold 

to consumers. Thus, while publishers 

might recommend prices, retailers could 

and frequently did compete for sales at 

prices significantly below list prices, to 

the benefit of consumers. 

In 2007, Amazon became the first 

company to offer a significant selection 

of e-books to consumers when it 

launched its Kindle e-reader device. 

From the time of its Kindle launch, 

Amazon offered a portion of its e-books 

catalogue, primarily its newly released 

and New York Times-bestselling ebooks, to consumers for $9.99. To 

compete with Amazon, other e-book 

retailers often matched or at least 

approached Amazon’s $9.99-or-less 

prices for e-book versions of many new 

releases and New York Times 

bestsellers. As a result of that 

competition, consumers benefited from 

Amazon’s $9.99-or-less e-book prices 

even when they purchased e-books from 

competing e-book retailers. 

B. Illegal Agreement To Raise E-Book 

Prices 

Publisher Defendants, however, 

feared that the Amazon-led $9.99 price 

for e-books would significantly threaten 

their long-term profits. Publisher 

Defendants feared $9.99 e-book prices 

would lead to the erosion over time of 

hardcover book prices and an 

accompanying decline in revenue. They 

also worried that if $9.99 solidified as 

consumers’ expected retail price for ebooks, Amazon and other retailers 

would demand that publishers lower 

their wholesale prices, again 

compressing their profit margins. 

Publisher Defendants also feared that 

the $9.99 price would drive e-book 

popularity to such a degree that digital 

publishers could achieve sufficient scale 

to challenge the Publisher Defendants’ 

basic business model. 

In private meetings among their 

executives, Publisher Defendants 

complained about the ‘‘$9.99 problem’’ 

and the threat they perceived it posed 

to the publishing industry.3 Through 

these communications, each Publisher 

Defendant gained assurance that its 

competitors shared concern about 

Amazon’s $9.99 e-book pricing policy. 

At the same time, each Publisher 

Defendant feared that if it attempted 

unilaterally to impose measures that 

would force Amazon to raise retail ebook prices, Amazon would resist. And 

each Publisher Defendant recognized 

that, even if it succeeded in raising 

retail prices for its e-books, if its 

competitor publishers’ e-books 

remained at the lower, competitive 

level, it would lose sales to other 

Publisher Defendants. Accordingly, 

Publisher Defendants agreed to act 

collectively to raise retail e-book prices. 

To effectuate their agreement, 

Publisher Defendants considered a 

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4Otherwise, the retail price MFN would cause 

Apple’s iBookstore prices to drop to match the best 

available retail price of each e-book, reducing the 

revenues to each Publisher Defendant and, indeed, 

defeating the very purpose of agreeing to the agency 

model: raising retail prices across all e-book 

retailers. 

number of coordinated methods to force 

Amazon to raise e-book retail prices. For 

example, they explored creating 

purported joint ventures, with exclusive 

access to certain e-book titles. These 

joint ventures were intended not to 

compete with Amazon, but to convince 

it to raise its price above $9.99. 

Publisher Defendants intended these 

strategies to cause Amazon to capitulate 

on its $9.99 pricing practice. None of 

these strategies, though, ultimately 

proved successful in raising retail ebook prices. 

It was Apple’s entry into the e-book 

business, however, that provided a 

perfect opportunity collectively to raise 

e-book prices. In December 2009, Apple 

approached each Publisher Defendant 

with news that it intended to sell ebooks through its new iBookstore in 

conjunction with its forthcoming iPad 

device. Publisher Defendants and Apple 

soon recognized that they could work 

together to counter the Amazon-led 

$9.99 price. 

In its initial discussions with 

Publisher Defendants, Apple assumed 

that it would enter as an e-book retailer 

under the wholesale model. At the 

suggestion of two Publisher Defendants, 

however, Apple began to consider 

selling e-books under the ‘‘agency 

model,’’ whereby the publishers would 

set the prices of e-books sold and Apple 

would take a 30% commission as the 

selling agent. In January 2010, Apple 

sent to each Publisher Defendant 

substantively identical term sheets that 

would form the basis of the nearly 

identical agency agreements that each 

Publisher Defendant would sign with 

Apple (‘‘Apple Agency Agreements’’). 

Apple informed the publishers that it 

had devised these term sheets after 

‘‘talking to all the publishers.’’ 

The volume of Publisher Defendants’ 

communications among themselves 

intensified during the ensuing 

negotiation of the Apple Agency 

Agreements. Through frequent inperson meetings, phone calls, and 

electronic communications, Publisher 

Defendants, facilitated by Apple, 

assured each other of their mutual 

intent to reach agreement with Apple. 

After each round of negotiations with 

Apple over the terms of their agency 

agreements, Publisher Defendants’ CEOs 

immediately contacted each other to 

discuss strategy and verify where each 

stood with Apple. They also used Apple 

to verify their position vis-a`-vis other 

Publisher Defendants. Penguin, for 

example, sought Apple’s assurance that 

it was ‘‘1 of 4 before signing’’—an 

assurance that Apple provided. Two 

days later, Penguin and two other 

Publisher Defendants signed Apple 

Agency Agreements. 

To the extent Publisher Defendants 

expressed doubts during the 

negotiations about whether to sign the 

Apple Agency Agreements, Apple 

persuaded the Publisher Defendants to 

stay with the others and sign up. For 

example, Apple CEO Steve Jobs wrote to 

an executive of one Publisher 

Defendant’s corporate parent that the 

publisher had only two choices apart 

from signing the Apple Agency 

Agreement: (i) Accept the status quo 

(‘‘Keep going with Amazon at $9.99’’); 

or (ii) continue with the losing 

windowing policy (‘‘Hold back your 

books from Amazon’’). According to 

Jobs, the Apple deal offered the 

Publisher Defendants a superior 

alternative path to the higher retail ebook prices they sought: ‘‘Throw in with 

Apple and see if we can all make a go 

of this to create a real mainstream ebooks market at $12.99 and $14.99.’’ 

The Apple Agency Agreements 

contained two primary features that 

assured Publisher Defendants of their 

ability to wrest pricing control from 

retailers and raise e-book retail prices 

above $9.99. First, Apple insisted on 

including a Most Favored Nation clause 

(‘‘MFN’’ or ‘‘Price MFN’’) that required 

each publisher to guarantee that no 

other retailer could set prices lower than 

what the Publisher Defendant set for 

Apple, even if the Publisher Defendant 

did not control that other retailer’s 

ultimate consumer price. The effect of 

this MFN was twofold: it not only 

protected Apple from having to compete 

on retail price, but also dictated that to 

protect themselves from the MFN’s 

provisions, Publisher Defendants 

needed to remove from all other e-book 

retailers the ability to control retail 

price, including the ability to fund 

discounts or promotions out of the 

retailer’s own margins.4 Thus, the 

agreement eliminated retail price 

competition across all retailers selling 

Publisher Defendants’ e-books. 

Second, the Apple Agency 

Agreements contained pricing tiers 

(ostensibly setting maximum prices) for 

e-books—virtually identical across the 

Publisher Defendants’ agreements— 

based on the list price of each e-book’s 

hardcover edition. Defendants 

understood that by using the price tiers, 

they were actually fixing the de facto 

prices for e-books. In fact, once the 

Apple Agency Agreements took effect, 

Publisher Defendants almost uniformly 

set e-book prices to maximum price 

levels allowed by each tier. Apple and 

Publisher Defendants were well aware 

that the impact of their agreement was 

to force other retailers off the wholesale 

model, eliminate retail price 

competition for e-books, allow 

publishers to raise e-book prices, and 

permanently to change the terms and 

pricing on which the e-book industry 

operated. 

The negotiations between Apple and 

Publisher Defendants culminated in all 

five Publisher Defendants signing the 

Apple Agency Agreements within a 

three-day span, with the last Publisher 

Defendant signing on January 26, 2010. 

The next day, Apple announced the 

iPad at a launch event. At that event, 

then-Apple CEO Steve Jobs, responding 

to a reporter’s question about why 

customers should pay $14.99 for an iPad 

e-book when they could purchase that ebook for $9.99 from Amazon or Barnes 

& Noble, replied that ‘‘that won’t be the 

case. * * * The prices will be the 

same.’’ Jobs later confirmed his 

understanding that the Apple Agency 

Agreements fulfilled the publishers’ 

desire to increase prices for consumers. 

He explained that, under the 

agreements, Apple would ‘‘go to [an] 

agency model, where [publishers] set 

the price, and we get our 30%, and yes, 

the customer pays a little more, but 

that’s what [publishers] want anyway.’’ 

Starting the day after the iPad launch, 

Publisher Defendants, beginning with 

Macmillan, quickly acted to complete 

their scheme by imposing agency 

agreements on all of their other retailers. 

Initially, Amazon attempted to resist 

Macmillan’s efforts to force it to accept 

either the agency model or windowing 

of its e-books by refusing to sell 

Macmillan’s titles. Other Publisher 

Defendants, continuing their practice of 

communicating with each other, offered 

Macmillan’s CEO messages of 

encouragement and assurances of 

solidarity. For example, one Settling 

Defendant’s CEO emailed Macmillan’s 

CEO to tell him, ‘‘I can ensure you that 

you are not going to find your company 

alone in the battle.’’ Quickly, Amazon 

came to realize that all Publisher 

Defendants had committed themselves 

to take away any e-book retailer’s ability 

to compete on price. Just two days after 

it stopped selling Macmillan titles, 

Amazon capitulated and publicly 

announced that it had no choice but to 

accept the agency model. 

After Amazon acquiesced to the 

agency model, all of Publisher 

Defendants’ major retailers quickly 

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24530 Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 

5Sections I–III of the proposed Final Judgment 

contain a statement acknowledging the Court’s 

jurisdiction, definitions, and a statement of the 

scope of the proposed Final Judgment’s 

applicability. 

6The proposed Final Judgment defines a ‘‘Price 

MFN’’ to include most favored nation clauses 

related to retail prices, wholesale prices, or 

commissions. 

book sales. Retail price competition on 

e-books had been eliminated and the 

retail price of e-books had increased. 

C. Effects of the Illegal Agreement 

As a result of Defendants’ illegal 

agreement, consumers have paid higher 

prices for e-books than they would have 

paid in a market free of collusion. For 

example, the average price for Publisher 

Defendants’ e-books increased by over 

ten percent between the summer of 2009 

and the summer of 2010. On many adult 

trade e-books, consumers have 

witnessed an increase in retail prices 

between 30 and 50 percent. In some 

cases, the agency model dictates that the 

price of an e-book is higher than its 

corresponding trade paperback edition, 

despite the significant savings in 

printing and distributing costs offered 

by e-books. 

Beyond this monetary harm to 

consumers, Defendants’ agreement has 

prevented e-book retailers from 

experimenting with innovative pricing 

strategies that could efficiently respond 

to consumer demand. Because retailer 

discounting is prohibited by the agency 

agreements, retailers have been 

prevented from introducing innovative 

sales models or promotions with respect 

to Publisher Defendants’ e-books, such 

as offering e-books under an ‘‘all-youcan-read’’ subscription model where 

consumers would pay a flat monthly 

fee. 

III. Explanation of the Proposed Final 

Judgment 

The relief contained in the proposed 

Final Judgment is intended to provide 

prompt, certain and effective remedies 

that will begin to restore competition to 

the marketplace. The requirements and 

prohibitions will eliminate the Settling 

Defendants’ illegal conduct, prevent 

recurrence of the same or similar 

conduct, and establish robust antitrust 

compliance programs. 

A. Required Conduct (Section IV) 5

1. Sections IV.A and IV.B 

To begin to restore competition to the 

e-books marketplace, the proposed Final 

Judgment requires the Settling 

Defendants to terminate immediately 

the Apple Agency Agreements that they 

used to collusively raise and stabilize ebook prices across the industry. Section 

IV.A of the proposed Final Judgment 

orders the Settling Defendants to 

terminate those contracts within seven 

days after this Court’s entry of the 

proposed Final Judgment. This 

requirement will permit the contractual 

relationships between Apple and the 

Settling Defendants to be reset subject to 

competitive constraints. 

The Apple Agency Agreements 

included MFN clauses that ensured 

Publisher Defendants would take away 

retail pricing control from all other ebook retailers. Accordingly, Section 

IV.B requires the termination of those 

contracts between a Settling Defendant 

and an e-book retailer that contain 

either (a) a restriction on an e-book 

retailer’s ability to set the retail price of 

any e-book, or (b) a Price MFN. Under 

the proposed Final Judgment, 

termination will occur as soon as each 

contract permits, starting 30 days after 

the Court enters the proposed Final 

Judgment.6 All of Settling Defendants’ 

contracts with major e-book retailers 

contain one of these provisions and 

would be terminated. Section IV.B also 

allows any retailer with such a contract 

the option to terminate its contract with 

the Settling Defendant on just 30 days 

notice. These provisions will ensure 

that most of Settling Defendants’ 

contracts that restrict the retailer from 

competing on price will be terminated 

within a short period. 

E-book retailers, including Apple, will 

be able to negotiate new contracts with 

any Settling Defendant. But, as set forth 

in provisions described below, the 

proposed Final Judgment will ensure 

that the new contracts will not be set 

under the collusive conditions that 

produced the Apple Agency 

Agreements. Sections V.A–B of the 

proposed Final Judgment prohibit 

Settling Defendants, for at least two 

years, from including prohibitions on 

retailer discounting in new agreements 

with retailers. Additionally, a retailer 

can stagger the termination dates of its 

contracts to ensure that it is negotiating 

with only one Settling Defendant at a 

time to avoid joint conduct that could 

lead to a return to the collusively 

established previous outcome. 

2. Section IV.C 

As part of their conspiracy to raise 

and stabilize e-book prices, the 

Publisher Defendants discussed forming 

joint ventures, the purpose of which 

was, as Publisher Defendants’ 

executives described it, ‘‘less to compete 

with Amazon as to force it to accept a 

price level higher than 9.99,’’ and to 

‘‘defend against further price erosion.’’ 

To reduce the risk that future joint 

ventures involving Settling Defendants 

could eliminate competition among 

them, Section IV.C of the proposed 

Final Judgment requires a Settling 

Defendant to notify the Department of 

Justice before forming or modifying a 

joint venture between it and another 

publisher related to e-books. That 

provision sets forth a procedure for the 

Department of Justice to evaluate the 

potential anticompetitive effects of joint 

activity among Publisher Defendants at 

a sufficiently early stage to prevent 

harm to competition. 

3. Section IV.D 

To ensure Settling Defendants’ 

compliance with the proposed Final 

Judgment, Section IV.D requires Settling 

Defendants to provide to the United 

States each e-book agreement entered 

into with any e-book retailer on or after 

January 1, 2012, and to continue to 

provide those agreements to the United 

States on a quarterly basis. 

B. Prohibited Conduct (Section V) 

1. Sections V.A, V.B, and V.C 

Sections V.A and V.B ensure that ebook retailers can compete on the price 

of e-books sold to consumers. 

Specifically, the proposed Final 

Judgment prohibits Settling Defendants 

from enforcing existing agreements with 

or entering new agreements containing 

two components of the Apple Agency 

Agreements that served as linchpins to 

their conspiracy—the ban on retailer 

discounting (eliminating all price 

competition among retailers) and the 

retail price-matching MFNs that ensured 

agency terms were exported to all ebook retailers. 

Sections V.A and V.B of the proposed 

Final Judgment prohibit Settling 

Defendants, for two years after the filing 

of the Complaint, from entering new 

agreements with e-book retailers that 

restrict the retailers’ discretion over ebook pricing, including offering 

discounts, promotions, or other price 

reductions. These provisions do not 

dictate a particular business model, 

such as agency or wholesale, but 

prohibit Settling Defendants from 

forbidding a retailer from competing on 

price and using some of its commission 

to offer consumers a better value, either 

through a promotion or a discount. 

Under Section V.A, a Settling Defendant 

also must grant each e-book retailer with 

which it currently has an agreement the 

freedom to offer discounts or other ebook promotions for two years. With 

these provisions, most retailers will 

soon be able to discount e-books in 

order to compete for market share. 

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Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 24531 

These measures prohibit Settling 

Defendants, for a two-year period, from 

completely removing e-book retailers’ 

discretion over retail prices. In light of 

current industry dynamics, including 

rapid innovation, a two-year period, in 

which Settling Defendants must provide 

pricing discretion to retailers, is 

sufficient to allow competition to return 

to the market. 

Section V.C prohibits Settling 

Defendants, for five years, from entering 

into an agreement with an e-book 

retailer that contains a Price MFN. 

Defendants knew that the inclusion of 

the Price MFN in the Apple Agency 

Agreements would lead to the adoption 

of the agency model by all of Publisher 

Defendants’ e-book retailers. The 

proposed Final Judgment therefore 

broadly defines banned ‘‘Price MFNs’’ 

to include not only MFNs requiring 

publishers to match retail e-book prices 

across e-book retailers (the MFNs in the 

Apple Agency Agreements), but also 

MFNs requiring publishers to match the 

wholesale prices at which e-books are 

sold to e-book retailers, and MFNs 

requiring publishers to match the 

revenue share or commission given to 

other e-book retailers. Prohibiting these 

particular Price MFNs serves an 

important function to prevent Settling 

Defendants from using MFNs to achieve 

substantially the same result they 

effected here through their collusive 

agreements. 

2. Section V.D 

Section V.D prohibits Settling 

Defendants from retaliating against an ebook retailer based on the retailer’s ebook prices. Specifically, this Section 

prohibits a Settling Defendant from 

punishing an e-book retailer because the 

Settling Defendant disapproves of the 

retailer discounting or promoting ebooks. This Section also prohibits a 

Settling Defendant from urging any 

other e-book publisher or e-book retailer 

to retaliate against an e-book retailer, as 

Penguin did. However, Section V.D 

expressly recognizes that, after the 

expiration of the two-year period 

described in Sections V.A and V.B, the 

anti-retaliation provision does not 

prohibit Settling Defendants from 

unilaterally entering into and enforcing 

agency agreements with e-book retailers 

that restrict a retailer’s ability to set or 

reduce e-book prices or offer 

promotions. 

3. Sections V.E and V.F 

Section V.E of the proposed Final 

Judgment broadly prohibits Settling 

Defendants from agreeing with each 

other or another e-book publisher to 

raise or set e-book retail prices or 

coordinate terms relating to the 

licensing, distribution, or sale of ebooks. This Section bans the kind of 

agreements among Publisher Defendants 

that led to the anticompetitive increase 

in e-book prices. 

Section V.F likewise prohibits 

Settling Defendants from directly or 

indirectly conveying confidential or 

competitively sensitive information to 

any other e-book publisher. Such 

information includes, but is not limited 

to, business plans and strategies, pricing 

strategies for books, terms in retailer 

agreements, or terms in author 

agreements. Banning such 

communications is critical here, where 

communications among publishing 

competitors were condoned by and 

carried out as common practice at the 

highest levels of the companies and led 

directly to the collusive agreement 

alleged in the Complaint. Because these 

communications occurred among some 

of the parent companies of the 

Publishing Defendants, Section V.F also 

applies to those parent company officers 

who directly control Settling 

Defendants’ business decisions. Settling 

Defendants are not prohibited from 

informing the buying public of the list 

prices of their books or engaging in 

ongoing legitimate distribution 

relationships with other publishers. 

C. Permitted Conduct (Section VI) 

Section VI.A of the proposed Final 

Judgment expressly permits Settling 

Defendants to compensate e-book 

retailers for services that they provide to 

publishers or consumers and help 

promote or sell more books. Section 

VI.A, for example, allows Settling 

Defendants to support brick-and-mortar 

retailers by directly paying for 

promotion or marketing efforts in those 

retailers’ stores. 

Section VI.B permits a Settling 

Defendant to negotiate a commitment 

from an e-book retailer that a retailer’s 

aggregate expenditure on discounts and 

promotions of the Settling Defendant’s 

e-books will not exceed the retailer’s 

aggregate commission under an agency 

agreement in which the publisher sets 

the e-book price and the retailer is 

compensated through a commission. In 

particular, Section VI.B grants Settling 

Defendants the right to enter one-year 

agency agreements that also prevent ebook retailers from cumulatively selling 

that Settling Defendant’s e-books at a 

loss over the period of the contract. An 

e-book retailer that enters an agency 

agreement with a Settling Defendant 

under Section VI.B would be permitted 

to discount that Settling Defendant’s 

individual e-book titles by varying 

amounts (for example, some could be 

‘‘buy one get one free,’’ some could be 

half off, and others could have no 

discount), as long as the total dollar 

amount spent on discounts or other 

promotions did not exceed in the 

aggregate the retailer’s full commission 

from the Settling Defendant over a oneyear period. This provision, which 

works with Sections V.A and V.B 

(which enhance retailers’ ability to set ebook prices), allows a Settling 

Defendant to prevent a retailer selling 

its entire catalogue at a sustained loss. 

Absent the collusion here, the antitrust 

laws would normally permit a publisher 

unilaterally to negotiate for such 

protections. 

D. Antitrust Compliance (Section VII) 

As outlined in Section VII, as part of 

the compliance program, each Settling 

Defendant must designate an Antitrust 

Compliance Officer. The Antitrust 

Compliance Officer must distribute a 

copy of the proposed Final Judgment to 

the Settling Defendant’s officers, 

directors, and employees (and their 

successors) who engage in the licensing, 

distribution, or sale of e-books. The 

proposed Final Judgment further 

requires the Antitrust Compliance 

Officer to ensure that each such person 

receives training related to the proposed 

Final Judgment and the antitrust laws; 

to ensure certification by each such 

person of compliance with the terms of 

the proposed Final Judgment; to 

conduct an annual antitrust compliance 

audit; to be available to receive 

information concerning violations of the 

proposed Final Judgment and to take 

appropriate action to remedy any 

violations of the proposed Final 

Judgment; and to maintain a log of 

communications between officers and 

directors of Settling Defendants, 

involved in the development of 

strategies related to e-books, and any 

person associated with another 

Publisher Defendant, where that 

communication relates to the selling of 

books in any format in the United 

States. 

Appointment of an Antitrust 

Compliance Officer is necessary in this 

case given the extensive communication 

among competitors’ CEOs that 

facilitated Defendants’ agreement, 

among other things. The United States 

has required the submission of Settling 

Defendants’ e-book agreements to 

facilitate the monitoring of the e-book 

industry and to ensure compliance with 

the proposed Final Judgment. 

To facilitate monitoring compliance 

with the proposed Final Judgment, 

Settling Defendants must make 

available, upon written request, records 

and documents in their possession, 

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24532 Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 

7United States v. Bechtel Corp., 648 F.2d 660, 

666 (9th Cir. 1981) (‘‘The balancing of competing 

social and political interests affected by a proposed 

antitrust consent decree must be left, in the first 

instance, to the discretion of the Attorney 

General.’’). See generally Microsoft, 56 F.3d at 1461 

(discussing whether ‘‘the remedies [obtained in the 

decree are] so inconsonant with the allegations 

charged as to fall outside of the ‘reaches of the 

public interest’’’). 

8 Microsoft, 56 F.3d at 1461 (noting the need for 

courts to be ‘‘deferential to the government’s 

predictions as to the effect of the proposed 

remedies’’); United States v. Archer-DanielsMidland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) 

(noting that the court should grant due respect to 

the United States’ prediction as to the effect of 

proposed remedies, its perception of the market 

structure, and its views of the nature of the case). 

custody, or control relating to any 

matters contained in the proposed Final 

Judgment. Settling Defendants must also 

make available their personnel for 

interviews regarding such matters. In 

addition, Settling Defendants must, 

upon written request, prepare written 

reports relating to any of the matters 

contained in the proposed Final 

Judgment. 

IV. Alternatives to the Proposed Final 

Judgment 

At several points during its 

investigation, the United States received 

from some Publisher Defendants 

proposals or suggestions that would 

have provided less relief than is 

contained in the proposed Final 

Judgment. These proposals and 

suggestions were rejected. 

The United States considered, as an 

alternative to the proposed Final 

Judgment, a full trial on the merits 

against Settling Defendants. The United 

States believes that the relief contained 

in the proposed Final Judgment will 

more quickly restore retail price 

competition to consumers. 

V. Remedies Available to Private 

Litigants 

Section 4 of the Clayton Act, 15 

U.S.C. 15, provides that any person who 

has been injured as a result of conduct 

prohibited by the antitrust laws may 

bring suit in federal court to recover 

three times the damages the person has 

suffered, as well as costs and reasonable 

attorneys’ fees. Entry of the proposed 

Final Judgment will neither impair nor 

assist the bringing of any private 

antitrust damage action. Under the 

provisions of Section 5(a) of the Clayton 

Act, 15 U.S.C. 16(a), the proposed Final 

Judgment has no prima facie effect in 

any subsequent private lawsuit that may 

be brought against Publisher Defendants 

or Apple. 

VI. Procedures Available for 

Modification of the Proposed Final 

Judgment 

The United States and Settling 

Defendants have stipulated that the 

proposed Final Judgment may be 

entered by this Court after compliance 

with the provisions of the APPA, 

provided that the United States has not 

withdrawn its consent. The APPA 

conditions entry of the decree upon this 

Court’s determination that the proposed 

Final Judgment is in the public interest. 

The APPA provides a period of at 

least sixty (60) days preceding the 

effective date of the proposed Final 

Judgment within which any person may 

submit to the United States written 

comments regarding the proposed Final 

Judgment. Any person who wishes to 

comment should do so within sixty (60) 

days of publication of this Competitive 

Impact Statement in the Federal 

Register, or the last date of publication 

in a newspaper of the summary of this 

Competitive Impact Statement, 

whichever is later. 

All comments received during this 

period will be considered by the United 

States Department of Justice, which 

remains free to withdraw its consent to 

the proposed Final Judgment at any 

time prior to the Court’s entry of 

judgment. The comments and the 

responses of the United States will be 

filed with the Court and published in 

the Federal Register. 

Written comments should be 

submitted to: John Read, Chief, 

Litigation III Section, Antitrust Division, 

U.S. Department of Justice, 450 5th 

Street NW., Suite 4000, Washington, DC 

20530. 

The proposed Final Judgment 

provides that the Court retains 

jurisdiction over this action, and the 

parties may apply to the Court for any 

order necessary or appropriate for 

modification, interpretation, or 

enforcement of the Final Judgment. 

VII. Standard of Review Under the 

APPA for the Proposed Final Judgment 

The Clayton Act, as amended by the 

APPA, requires that proposed consent 

judgments in antitrust cases brought by 

the United States be subject to a sixtyday comment period, after which the 

court shall determine whether entry of 

the proposed Final Judgment ‘‘is in the 

public interest.’’ 15 U.S.C. 16(e)(1). In 

making that determination, the court is 

directed to consider: 

(A) The competitive impact of such 

judgment, including termination of alleged 

violations, provisions for enforcement and 

modification, duration of relief sought, 

anticipated effects of alternative remedies 

actually considered, whether its terms are 

ambiguous, and any other competitive 

considerations bearing upon the adequacy of 

such judgment that the court deems 

necessary to a determination of whether the 

consent judgment is in the public interest; 

and 

(B) the impact of entry of such judgment 

upon competition in the relevant market or 

markets, upon the public generally and 

individuals alleging specific injury from the 

violations set forth in the complaint 

including consideration of the public benefit, 

if any, to be derived from a determination of 

the issues at trial. 

15 U.S.C. 16(e)(1)(A) & (B); see generally 

United States v. KeySpan Corp., 763 F. 

Supp. 2d 633, 637–38 (S.D.N.Y. 2011) 

(WHP) (discussing Tunney Act 

standards); United States v. SBC 

Commc’ns, Inc., 489 F. Supp. 2d 1 

(D.D.C. 2007) (assessing standards for 

public interest determination). In 

considering these statutory factors, the 

court’s inquiry is necessarily a limited 

one as the United States is entitled to 

‘‘broad discretion to settle with the 

Defendant within the reaches of the 

public interest.’’ United States v. 

Microsoft Corp., 56 F.3d 1448, 1461 

(D.C. Cir. 1995). 

Under the APPA a court considers, 

among other things, the relationship 

between the remedy secured and the 

specific allegations set forth in the 

United States’ complaint, whether the 

decree is sufficiently clear, whether 

enforcement mechanisms are sufficient, 

and whether the decree may positively 

harm third parties. See Microsoft, 56 

F.3d at 1458–62. With respect to the 

adequacy of the relief secured by the 

decree, the court’s function is ‘‘not to 

determine whether the proposed 

[d]ecree results in the balance of rights 

and liabilities that is the one that will 

best serve society, but only to ensure 

that the resulting settlement is within 

the reaches of the public interest.’’ 

KeySpan, 763 F. Supp. 2d at 637 

(quoting United States v. Alex Brown & 

Sons, Inc., 963 F. Supp. 235, 238 

(S.D.N.Y. 1997)) (internal quotations 

omitted). In making this determination, 

‘‘[t]he [c]ourt is not permitted to reject 

the proposed remedies merely because 

the court believes other remedies are 

preferable. [Rather], the relevant inquiry 

is whether there is a factual foundation 

for the government’s decision such that 

its conclusions regarding the proposed 

settlement are reasonable.’’ Id. at 637–38 

(quoting United States v. Abitibi– 

Consolidated Inc., 584 F. Supp. 2d 162, 

165 (D.D.C. 2008).7 The government’s 

predictions about the efficacy of its 

remedies are entitled to deference.8

Courts have greater flexibility in 

approving proposed consent decrees 

than in crafting their own decrees 

following a finding of liability in a 

litigated matter. ‘‘[A] proposed decree 

must be approved even if it falls short 

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9See United States v. Enova Corp., 107 F. Supp. 

2d 10, 17 (D.D.C. 2000) (noting that the ‘‘Tunney 

Act expressly allows the court to make its public 

interest determination on the basis of the 

competitive impact statement and response to 

comments alone’’). 

of the remedy the court would impose 

on its own, as long as it falls within the 

range of acceptability or is ‘within the 

reaches of public interest.’ ’’ United 

States v. Am. Tel. & Tel. Co., 552 F. 

Supp. 131, 151 (D.D.C. 1982) (citations 

omitted) (quoting United States v. 

Gillette Co., 406 F. Supp. 713, 716 (D. 

Mass. 1975)), aff’d sub nom. Maryland 

v. United States, 460 U.S. 1001 (1983); 

see also United States v. Alcan 

Aluminum Ltd., 605 F. Supp. 619, 622 

(W.D. Ky. 1985) (approving the consent 

decree even though the court would 

have imposed a greater remedy). To 

meet this standard, the United States 

‘‘need only provide a factual basis for 

concluding that the settlements are 

reasonably adequate remedies for the 

alleged harms.’’ SBC Commc’ns, 489 F. 

Supp. 2d at 17. 

Moreover, the court’s role under the 

APPA is limited to reviewing the 

remedy in relationship to the violations 

that the United States has alleged in its 

Complaint, and does not authorize the 

court to ‘‘construct [its] own 

hypothetical case and then evaluate the 

decree against that case.’’ Microsoft, 56 

F.3d at 1459; KeySpan, 763 F. Supp. 2d 

at 638 (‘‘A court must limit its review 

to the issues in the complaint * * *.’’). 

Because the ‘‘court’s authority to review 

the decree depends entirely on the 

government’s exercising its 

prosecutorial discretion by bringing a 

case in the first place,’’ it follows that 

‘‘the court is only authorized to review 

the decree itself,’’ and not to ‘‘effectively 

redraft the complaint’’ to inquire into 

other matters that the United States did 

not pursue. Microsoft, 56 F.3d at 1459– 

60. 

In its 2004 amendments, Congress 

made clear its intent to preserve the 

practical benefits of utilizing consent 

decrees in antitrust enforcement, adding 

the unambiguous instruction that 

‘‘[n]othing in this section shall be 

construed to require the court to 

conduct an evidentiary hearing or to 

require the court to permit anyone to 

intervene.’’ 15 U.S.C. 16(e)(2). This 

language effectuates what Congress 

intended when it enacted the Tunney 

Act in 1974, as Senator Tunney 

explained: ‘‘[t]he court is nowhere 

compelled to go to trial or to engage in 

extended proceedings which might have 

the effect of vitiating the benefits of 

prompt and less costly settlement 

through the consent decree process.’’ 

119 Cong. Rec. 24,598 (1973) (statement 

of Senator Tunney). Rather, the 

procedure for the public interest 

determination is left to the discretion of 

the court, with the recognition that the 

court’s ‘‘scope of review remains 

sharply proscribed by precedent and the 

nature of Tunney Act proceedings.’’ 

SBC Commc’ns, 489 F. Supp. 2d at 11.9

VIII. Determinative Documents 

There are no determinative materials 

or documents within the meaning of the 

APPA that were considered by the 

United States in formulating the 

proposed Final Judgment. 

Dated: April 11, 2012 

Respectfully submitted, 

For Plaintiff 

The United States of America 

l/s/Daniel McCuaiglll 

Daniel McCuaig, 

Nathan P. Sutton, 

Mary Beth McGee, 

Owen M. Kendler, 

William H. Jones, 

Stephen T. Fairchild, 

Attorneys for the United States, United States 

Department of Justice Antitrust Division 

Litigation III, 450 Fifth Street, NW., Suite 

4000, Washington, DC 20530. 

United States District Court for the 

Southern District of New York 

United States of America, Plaintiff, v. Apple, 

Inc., Hachette Book Group, Inc., 

Harpercollins Publishers L.L.C., 

Verlagsgruppe Georg Von Holtzbrinck 

GMBH, Holtzbrinck Publishers, LLC d/b/a 

Macmillan, The Penguin Group, A Division 

of Pearson PLC, Penguin Group (USA), 

Inc., and Simon & Schuster, Inc., 

Defendants. 

Civil Action No. 1:12–cv–02826 

Judge: Cote, Denise 

Date Filed: 04/11/2012 

Description: Antitrust. 

[Proposed] Final Judgment as to 

Defendants 

Hachette, Harpercollins, and Simon & 

Schuster 

Whereas, Plaintiff, the United States 

of America filed its Complaint on April 

11, 2012, alleging that Defendants 

conspired to raise retail prices of Ebooks in violation of Section 1 of the 

Sherman Act, as amended, 15 U.S.C. 1, 

and Plaintiff and Settling Defendants, by 

their respective attorneys, have 

consented to the entry of this Final 

Judgment without trial or adjudication 

of any issue of fact or law; 

And whereas, this Final Judgment 

does not constitute any admission by 

Settling Defendants that the law has 

been violated or of any issue of fact or 

law, other than that the jurisdictional 

facts as alleged in the Complaint are 

true; 

And whereas, Settling Defendants 

agree to be bound by the provisions of 

this Final Judgment pending its 

approval by the Court; 

And whereas, Plaintiff requires 

Settling Defendants to agree to 

undertake certain actions and refrain 

from certain conduct for the purpose of 

remedying the loss of competition 

alleged in the Complaint; 

And whereas, Settling Defendants 

have represented to the United States 

that the actions and conduct restrictions 

can and will be undertaken and that 

they will later raise no claim of 

hardship or difficulty as grounds for 

asking the Court to modify any of the 

provisions contained below; 

Now therefore, before any testimony 

is taken, without trial or adjudication of 

any issue of fact or law, and upon 

consent of Settling Defendants, it is 

ordered, adjudged, and decreed: 

I. Jurisdiction 

This Court has jurisdiction over the 

subject matter of this action and over 

the Settling Defendants. The Complaint 

states a claim upon which relief may be 

granted against Settling Defendants 

under Section 1 of the Sherman Act, as 

amended, 15 U.S.C. 1. 

II. Definitions 

As used in this Final Judgment: 

A. ‘‘Agency Agreement’’ means an 

agreement between an E-book Publisher 

and an E-book Retailer under which the 

E-book Publisher Sells E-books to 

consumers through the E-book Retailer, 

which under the agreement acts as an 

agent of the E-book Publisher and is 

paid a commission in connection with 

the Sale of one or more of the E-book 

Publisher’s E-books. 

B. ‘‘Apple’’ means Apple, Inc., a 

California corporation with its principal 

place of business in Cupertino, 

California, its successors and assigns, 

and its parents, subsidiaries, divisions, 

groups, affiliates, partnerships, and joint 

ventures, and their directors, officers, 

managers, agents, and employees. 

C. ‘‘Department of Justice’’ means the 

Antitrust Division of the United States 

Department of Justice. 

D. ‘‘E-book’’ means an electronically 

formatted book designed to be read on 

a computer, a handheld device, or other 

electronic devices capable of visually 

displaying E-books. For purposes of this 

Final Judgment, the term E-book does 

not include (1) an audio book, even if 

delivered and stored digitally; (2) a 

standalone specialized software 

application or ‘‘app’’ sold through an 

‘‘app store’’ rather than through an ebook store (e.g., through Apple’s ‘‘App 

Store’’ rather than through its 

‘‘iBookstore’’ or ‘‘iTunes’’) and not 

designed to be executed or read by or 

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through a dedicated E-book reading 

device; or (3) a media file containing an 

electronically formatted book for which 

most of the value to consumers is 

derived from audio or video content 

contained in the file that is not included 

in the print version of the book. 

E. ‘‘E-book Publisher’’ means any 

Person that, by virtue of a contract or 

other relationship with an E-book’s 

author or other rights holder, owns or 

controls the necessary copyright or 

other authority (or asserts such 

ownership or control) over any E-book 

sufficient to distribute the E-book 

within the United States to E-book 

Retailers and to permit such E-book 

Retailers to Sell the E-book to 

consumers in the United States. 

Publisher Defendants are E-book 

Publishers. For purposes of this Final 

Judgment, E-book Retailers are not Ebook Publishers. 

F. ‘‘E-book Retailer’’ means any 

Person that lawfully Sells (or seeks to 

lawfully Sell) E-books to consumers in 

the United States, or through which a 

Publisher Defendant, under an Agency 

Agreement, Sells E-books to consumers. 

For purposes of this Final Judgment, 

Publisher Defendants and all other 

Persons whose primary business is book 

publishing are not E-book Retailers. 

G. ‘‘Hachette’’ means Hachette Book 

Group, Inc., a Delaware corporation 

with its principal place of business in 

New York, New York, its successors and 

assigns, and its subsidiaries, divisions, 

groups, and partnerships, and their 

directors, officers, managers, agents, and 

employees. 

H. ‘‘HarperCollins’’ means 

HarperCollins Publishers L.L.C., a 

Delaware limited liability company with 

its principal place of business in New 

York, New York, its successors and 

assigns, and its subsidiaries, divisions, 

groups, and partnerships, and their 

directors, officers, managers, agents, and 

employees. 

I. ‘‘Including’’ means including, but 

not limited to. 

J. ‘‘Macmillan’’ means (1) Holtzbrinck 

Publishers, LLC d/b/a Macmillan, a New 

York limited liability company with its 

principal place of business in New 

York, New York; and (2) Verlagsgruppe 

Georg von Holtzbrinck GmbH, a German 

corporation with its principal place of 

business in Stuttgart, Germany, their 

successors and assigns, and their 

parents, subsidiaries, divisions, groups, 

affiliates, and partnerships, and their 

directors, officers, managers, agents, and 

employees. 

K. ‘‘Penguin’’ means (1) Penguin 

Group (USA), Inc., a Delaware 

corporation with its principal place of 

business in New York, New York, and 

(2) The Penguin Group, a division of 

U.K. corporation Pearson PLC with its 

principal place of business in London, 

England, their successors and assigns, 

and their parents, subsidiaries, 

divisions, groups, affiliates, and 

partnerships, and their directors, 

officers, managers, agents, and 

employees. 

L. ‘‘Person’’ means any natural 

person, corporation, company, 

partnership, joint venture, firm, 

association, proprietorship, agency, 

board, authority, commission, office, or 

other business or legal entity, whether 

private or governmental. 

M. ‘‘Price MFN’’ means a term in an 

agreement between an E-book Publisher 

and an E-book Retailer under which 

1. The Retail Price at which an E-book 

Retailer or, under an Agency 

Agreement, an E-book Publisher Sells 

one or more E-books to consumers 

depends in any way on the Retail Price, 

or discounts from the Retail Price, at 

which any other E-book Retailer or the 

E-book Publisher, under an Agency 

Agreement, through any other E-book 

Retailer Sells the same E-book(s) to 

consumers. 

2. The Wholesale Price at which the 

E-book Publisher Sells one or more Ebooks to that E-book Retailer for Sale to 

consumers depends in any way on the 

Wholesale Price at which the E-book 

Publisher Sells the same E-book(s) to 

any other E-book Retailer for Sale to 

consumers; or 

3. The revenue share or commission 

that E-book Retailer receives from the Ebook Publisher in connection with the 

Sale of one or more E-books to 

consumers depends in any way on the 

revenue share or commission that (a) 

any other E-book Retailer receives from 

the E-book Publisher in connection with 

the Sale of the same E-book(s) to 

consumers, or (b) that E-book Retailer 

receives from any other E-book 

Publisher in connection with the Sale of 

one or more of the other E-book 

Publisher’s E-books. 

For purposes of this Final Judgment, 

it will not constitute a Price MFN under 

subsection 3 of this definition if a 

Settling Defendant agrees, at the request 

of an E-book Retailer, to meet more 

favorable pricing, discounts, or 

allowances offered to the E-book 

Retailer by another E-book Publisher for 

the period during which the other Ebook Publisher provides that additional 

compensation, so long as that agreement 

is not or does not result from a preexisting agreement that requires the 

Settling Defendant to meet all requests 

by the E-book Retailer for more 

favorable pricing within the terms of the 

agreement. 

N. ‘‘Publisher Defendants’’ means 

Hachette, HarperCollins, Macmillan, 

Penguin, and Simon & Schuster. Where 

this Final Judgment imposes an 

obligation on Publisher Defendants to 

engage in or refrain from engaging in 

certain conduct, that obligation shall 

apply to each Publisher Defendant 

individually and to any joint venture or 

other business arrangement established 

by any two or more Publisher 

Defendants. 

O. ‘‘Purchase’’ means a consumer’s 

acquisition of one or more E-books as a 

result of a Sale. 

P. ‘‘Retail Price’’ means the price at 

which an E-book Retailer or, under an 

Agency Agreement, an E-book Publisher 

Sells an E-book to a consumer. 

Q. ‘‘Sale’’ means delivery of access to 

a consumer to read one or more E-books 

(purchased alone, or in combination 

with other goods or services) in 

exchange for payment; ‘‘Sell’’ or ‘‘Sold’’ 

means to make or to have made a Sale 

of an E-book to a consumer. 

R. ‘‘Settling Defendants’’ means 

Hachette, HarperCollins, and Simon & 

Schuster. Where the Final Judgment 

imposes an obligation on Settling 

Defendants to engage in or refrain from 

engaging in certain conduct, that 

obligation shall apply to each Settling 

Defendant individually and to any joint 

venture other business arrangement 

established by a Settling Defendant and 

one or more Publisher Defendants. 

S. ‘‘Simon & Schuster’’ means Simon 

& Schuster, Inc., a New York 

corporation with its principal place of 

business in New York, New York, its 

successors and assigns, and its 

subsidiaries, divisions, groups, and 

partnerships, and their directors, 

officers, managers, agents, and 

employees. 

T. ‘‘Wholesale Price’’ means (1) the 

net amount, after any discounts or other 

adjustments (not including promotional 

allowances subject to Section 2(d) of the 

Robinson-Patman Act, 15 U.S.C. 13(d)), 

that an E-book Retailer pays to an Ebook Publisher for an E-book that the Ebook Retailer Sells to consumers; or (2) 

the Retail Price at which an E-book 

Publisher, under an Agency Agreement, 

Sells an E-book to consumers through 

an E-book Retailer minus the 

commission or other payment that Ebook Publisher pays to the E-book 

Retailer in connection with or that is 

reasonably allocated to that Sale. 

III. Applicability 

This Final Judgment applies to 

Settling Defendants and all other 

Persons in active concert or 

participation with any of them who 

receive actual notice of this Final 

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Judgment by personal service or 

otherwise. 

IV. Required Conduct 

A. Within seven days after entry of 

this Final Judgment, each Settling 

Defendant shall terminate any 

agreement with Apple relating to the 

Sale of E-books that was executed prior 

to the filing of the Complaint. 

B. For each agreement between a 

Settling Defendant and an E-book 

Retailer other than Apple that (1) 

restricts, limits, or impedes the E-book 

Retailer’s ability to set, alter, or reduce 

the Retail Price of any E-book or to offer 

price discounts or any other form of 

promotions to encourage consumers to 

Purchase one or more E-books; or (2) 

contains a Price MFN, the Settling 

Defendant shall notify the E-book 

Retailer, within ten days of the filing of 

the Complaint, that the E-book Retailer 

may terminate the agreement with 

thirty-days notice and shall, thirty days 

after the E-book Retailer provides such 

notice, release the E-book Retailer from 

the agreement. For each such agreement 

that the E-book Retailer has not 

terminated within thirty days after entry 

of this Final Judgment, each Settling 

Defendant shall, as soon as permitted 

under the agreement, take each step 

required under the agreement to cause 

the agreement to be terminated and not 

renewed or extended. 

C. Settling Defendants shall notify the 

Department of Justice in writing at least 

sixty days in advance of the formation 

or material modification of any joint 

venture or other business arrangement 

relating to the Sale, development, or 

promotion of E-books in the United 

States in which a Settling Defendant 

and at least one other E-book Publisher 

(including another Publisher Defendant) 

are participants or partial or complete 

owners. Such notice shall describe the 

joint venture or other business 

arrangement, identify all E-book 

Publishers that are parties to it, and 

attach the most recent version or draft 

of the agreement, contract, or other 

document(s) formalizing the joint 

venture or other business arrangement. 

Within thirty days after a Settling 

Defendant provides notification of the 

joint venture or business arrangement, 

the Department of Justice may make a 

written request for additional 

information. If the Department of Justice 

makes such a request, the Settling 

Defendant shall not proceed with the 

planned formation or material 

modification of the joint venture or 

business arrangement until thirty days 

after substantially complying with such 

additional request(s) for information. 

The failure of the Department of Justice 

to request additional information or to 

bring an action under the antitrust laws 

to challenge the formation or material 

modification of the joint venture shall 

neither give rise to any inference of 

lawfulness nor limit in any way the 

right of the United States to investigate 

the formation, material modification, or 

any other aspects or activities of the 

joint venture or business arrangement 

and to bring actions to prevent or 

restrain violations of the antitrust laws. 

The notification requirements of this 

Section IV.C shall not apply to ordinary 

course business arrangements between a 

Publisher Defendant and another E-book 

Publisher (not a Publisher Defendant) 

that do not relate to the Sale of E-books 

to consumers, or to business 

arrangements the primary or 

predominant purpose or focus of which 

involves: (i) E-book Publishers copublishing one or more specifically 

identified E-book titles or a particular 

author’s E-books; (ii) a Settling 

Defendant licensing to or from another 

E-book Publisher the publishing rights 

to one or more specifically identified Ebook titles or a particular author’s Ebooks; (iii) a Settling Defendant 

providing technology services to or 

receiving technology services from 

another E-book Publisher (not a 

Publisher Defendant) or licensing rights 

in technology to or from another E-book 

Publisher; or (iv) a Settling Defendant 

distributing E-books published by 

another E-book Publisher (not a 

Publisher Defendant). 

D. Each Settling Defendant shall 

furnish to the Department of Justice (1) 

within seven days after entry of this 

Final Judgment, one complete copy of 

each agreement, executed, renewed, or 

extended on or after January 1, 2012, 

between the Settling Defendant and any 

E-book Retailer relating to the Sale of Ebooks, and, (2) thereafter, on a quarterly 

basis, each such agreement executed, 

renewed, or extended since the Settling 

Defendant’s previous submission of 

agreements to the Department of Justice. 

V. Prohibited Conduct 

A. For two years, Settling Defendants 

shall not restrict, limit, or impede an Ebook Retailer’s ability to set, alter, or 

reduce the Retail Price of any E-book or 

to offer price discounts or any other 

form of promotions to encourage 

consumers to Purchase one or more Ebooks, such two-year period to run 

separately for each E-book Retailer, at 

the option of the Settling Defendant, 

from either: 

1. The termination of an agreement 

between the Settling Defendant and the 

E-book Retailer that restricts, limits, or 

impedes the E-book Retailer’s ability to 

set, alter, or reduce the Retail Price of 

any E-book or to offer price discounts or 

any other form of promotions to 

encourage consumers to Purchase one or 

more E-books; or 

2. The date on which the Settling 

Defendant notifies the E-book Retailer in 

writing that the Settling Defendant will 

not enforce any term(s) in its agreement 

with the E-book Retailer that restrict, 

limit, or impede the E-book Retailer 

from setting, altering, or reducing the 

Retail Price of one or more E-books, or 

from offering price discounts or any 

other form of promotions to encourage 

consumers to Purchase one or more Ebooks. 

Each Settling Defendant shall notify 

the Department of Justice of the option 

it selects for each E-book Retailer within 

seven days of making its selection. 

B. For two years after the filing of the 

Complaint, Settling Defendants shall not 

enter into any agreement with any Ebook Retailer that restricts, limits, or 

impedes the E-book Retailer from 

setting, altering, or reducing the Retail 

Price of one or more E-books, or from 

offering price discounts or any other 

form of promotions to encourage 

consumers to Purchase one or more Ebooks. 

C. Settling Defendants shall not enter 

into any agreement with an E-book 

Retailer relating to the Sale of E-books 

that contains a Price MFN. 

D. Settling Defendants shall not 

retaliate against, or urge any other Ebook Publisher or E-book Retailer to 

retaliate against, an E-book Retailer for 

engaging in any activity that the Settling 

Defendants are prohibited by Sections 

V.A, V.B, and VI.B.2 of this Final 

Judgment from restricting, limiting, or 

impeding in any agreement with an Ebook Retailer. After the expiration of 

prohibitions in Sections V.A and V.B of 

this Final Judgment, this Section V.D 

shall not prohibit any Settling 

Defendant from unilaterally entering 

into or enforcing any agreement with an 

E-book Retailer that restricts, limits, or 

impedes the E-book Retailer from 

setting, altering, or reducing the Retail 

Price of any of the Settling Defendant’s 

E-books or from offering price discounts 

or any other form of promotions to 

encourage consumers to Purchase any of 

the Settling Defendant’s E-books. 

E. Settling Defendants shall not enter 

into or enforce any agreement, 

arrangement, understanding, plan, 

program, combination, or conspiracy 

with any E-book Publisher (including 

another Publisher Defendant) to raise, 

stabilize, fix, set, or coordinate the 

Retail Price or Wholesale Price of any Ebook or fix, set, or coordinate any term 

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or condition relating to the Sale of Ebooks. 

This Section V.E shall not prohibit a 

Settling Defendant from entering into 

and enforcing agreements relating to the 

distribution of another E-book 

Publisher’s E-books (not including the 

E-books of another Publisher Defendant) 

or to the co-publication with another Ebook Publisher of specifically identified 

E-book titles or a particular author’s Ebooks, or from participating in outputenhancing industry standard-setting 

activities relating to E-book security or 

technology. 

F. A Settling Defendant (including 

each officer of each parent of the 

Settling Defendant who exercises direct 

control over the Settling Defendant’s 

business decisions or strategies) shall 

not convey or otherwise communicate, 

directly or indirectly (including by 

communicating indirectly through an Ebook Retailer with the intent that the Ebook Retailer convey information from 

the communication to another E-book 

Publisher or knowledge that it is likely 

to do so), to any other E-book Publisher 

(including to an officer of a parent of a 

Publisher Defendant) any competitively 

sensitive information, including: 

1. Its business plans or strategies; 

2. Its past, present, or future 

wholesale or retail prices or pricing 

strategies for books sold in any format 

(e.g., print books, E-books, or audio 

books); 

3. Any terms in its agreement(s) with 

any retailer of books Sold in any format; 

or 

4. Any terms in its agreement(s) with 

any author. 

This Section V.F shall not prohibit a 

Settling Defendant from communicating 

(a) in a manner and through media 

consistent with common and reasonable 

industry practice, the cover prices or 

wholesale or retail prices of books sold 

in any format to potential purchasers of 

those books; or (b) information the 

Settling Defendant needs to 

communicate in connection with (i) its 

enforcement or assignment of its 

intellectual property or contract rights, 

(ii) a contemplated merger, acquisition, 

or purchase or sale of assets, (iii) its 

distribution of another E-book 

Publisher’s E-books, or (iv) a business 

arrangement under which E-book 

Publishers agree to co-publish, or an Ebook Publisher agrees to license to 

another E-book Publisher the publishing 

rights to, one or more specifically 

identified E-book titles or a particular 

author’s E-books. 

VI. Permitted Conduct 

A. Nothing in this Final Judgment 

shall prohibit a Settling Defendant 

unilaterally from compensating a 

retailer, including an E-book Retailer, 

for valuable marketing or other 

promotional services rendered. 

B. Notwithstanding Sections V.A and 

V.B of this Final Judgment, a Settling 

Defendant may enter into Agency 

Agreements with E-book Retailers under 

which the aggregate dollar value of the 

price discounts or any other form of 

promotions to encourage consumers to 

Purchase one or more of the Settling 

Defendant’s E-books (as opposed to 

advertising or promotions engaged in by 

the E-book Retailer not specifically tied 

or directed to the Settling Defendant’s Ebooks) is restricted; provided that (1) 

such agreed restriction shall not 

interfere with the E-book Retailer’s 

ability to reduce the final price paid by 

consumers to purchase the Settling 

Defendant’s E-books by an aggregate 

amount equal to the total commissions 

the Settling Defendant pays to the Ebook Retailer, over a period of at least 

one year, in connection with the Sale of 

the Settling Defendant’s E-books to 

consumers; (2) the Settling Defendant 

shall not restrict, limit, or impede the Ebook Retailer’s use of the agreed funds 

to offer price discounts or any other 

form of promotions to encourage 

consumers to Purchase one or more Ebooks; and (3) the method of accounting 

for the E-book Retailer’s promotional 

activity does not restrict, limit, or 

impede the E-book Retailer from 

engaging in any form of retail activity or 

promotion. 

VII. Antitrust Compliance 

Within thirty days after entry of this 

Final Judgment, each Settling Defendant 

shall designate its general counsel or 

chief legal officer, or an employee 

reporting directly to its general counsel 

or chief legal officer, as Antitrust 

Compliance Officer with responsibility 

for ensuring the Settling Defendant’s 

compliance with this Final Judgment. 

The Antitrust Compliance Officer shall 

be responsible for the following: 

A. Furnishing a copy of this Final 

Judgment, within thirty days of its 

entry, to each of the Settling Defendant’s 

officers and directors, and to each of the 

Settling Defendant’s employees 

engaged, in whole or in part, in the 

distribution or Sale of E-books; 

B. Furnishing a copy of this Final 

Judgment in a timely manner to each 

officer, director, or employee who 

succeeds to any position identified in 

Section VII.A of this Final Judgment; 

C. Ensuring that each person 

identified in Sections VII.A and VII.B of 

this Final Judgment receives at least 

four hours of training annually on the 

meaning and requirements of this Final 

Judgment and the antitrust laws, such 

training to be delivered by an attorney 

with relevant experience in the field of 

antitrust law; 

D. Obtaining, within sixty days after 

entry of this Final Judgment and on 

each anniversary of the entry of this 

Final Judgment, from each person 

identified in Sections VII.A and VII.B of 

this Final Judgment, and thereafter 

maintaining, a certification that each 

such person (a) has read, understands, 

and agrees to abide by the terms of this 

Final Judgment; and (b) is not aware of 

any violation of this Final Judgment or 

the antitrust laws or has reported any 

potential violation to the Antitrust 

Compliance Officer; 

E. Conducting an annual antitrust 

compliance audit covering each person 

identified in Sections VII.A and VII.B of 

this Final Judgment, and maintaining all 

records pertaining to such audits; 

F. Communicating annually to the 

Settling Defendant’s employees that 

they may disclose to the Antitrust 

Compliance Officer, without reprisal, 

information concerning any potential 

violation of this Final Judgment or the 

antitrust laws; 

G. Taking appropriate action, within 

three business days of discovering or 

receiving credible information 

concerning an actual or potential 

violation of this Final Judgment, to 

terminate or modify the Settling 

Defendant’s conduct to assure 

compliance with this Final Judgment; 

and, within seven days of taking such 

corrective actions, providing to the 

Department of Justice a description of 

the actual or potential violation of this 

Final Judgment and the corrective 

actions taken; 

H. Furnishing to the Department of 

Justice on a quarterly basis electronic 

copies of any non-privileged 

communications with any Person 

containing allegations of Settling 

Defendants’ noncompliance with any 

provisions of this Final Judgment; 

I. Maintaining, and furnishing to the 

Department of Justice on a quarterly 

basis, a log of all oral and written 

communications, excluding privileged 

or public communications, between or 

among (1) any of the Settling 

Defendant’s officers, directors, or 

employees involved in the development 

of the Settling Defendant’s plans or 

strategies relating to E-books, and (2) 

any person employed by or associated 

with another Publisher Defendant, 

relating, in whole or in part, to the 

distribution or sale in the United States 

of books sold in any format, including 

an identification (by name, employer, 

and job title) of the author and 

recipients of and all participants in the 

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communication, the date, time, and 

duration of the communication, the 

medium of the communication, and a 

description of the subject matter of the 

communication (for a collection of 

communications solely concerning a 

single business arrangement that is 

specifically exempted from the 

reporting requirements of Section IV.C 

of this Final Judgment, the Settling 

Defendant may provide a summary of 

the communications rather than logging 

each communication individually); and 

J. Providing to the Department of 

Justice annually, on or before the 

anniversary of the entry of this Final 

Judgment, a written statement as to the 

fact and manner of the Settling 

Defendant’s compliance with Sections 

IV, V, and VII of this Final Judgment. 

VIII. Compliance Inspection 

A. For purposes of determining or 

securing compliance with this Final 

Judgment, or of determining whether 

the Final Judgment should be modified 

or vacated, and subject to any legally 

recognized privilege, from time to time 

duly authorized representatives of the 

Department of Justice, including 

consultants and other persons retained 

by the Department of Justice, shall, 

upon written request of an authorized 

representative of the Assistant Attorney 

General in charge of the Antitrust 

Division, and on reasonable notice to 

Settling Defendants, be permitted: 

1. Access during the Settling 

Defendants’ office hours to inspect and 

copy, or at the option of the United 

States, to require Settling Defendants to 

provide to the United States hard copy 

or electronic copies of all books, ledgers, 

accounts, records, data, and documents 

in the possession, custody, or control of 

Settling Defendants, relating to any 

matters contained in this Final 

Judgment; and 

2. To interview, either informally or 

on the record, the Settling Defendants’ 

officers, employees, or agents, who may 

have their individual counsel present, 

regarding such matters. The interviews 

shall be subject to the reasonable 

convenience of the interviewee and 

without restraint or interference by 

Settling Defendants. 

B. Upon the written request of an 

authorized representative of the 

Assistant Attorney General in charge of 

the Antitrust Division, Settling 

Defendants shall submit written reports 

or respond to written interrogatories, 

under oath if requested, relating to any 

of the matters contained in this Final 

Judgment as may be requested. Written 

reports authorized under this paragraph 

may, in the sole discretion of the United 

States, require Settling Defendants to 

conduct, at their cost, an independent 

audit or analysis relating to any of the 

matters contained in this Final 

Judgment. 

C. No information or documents 

obtained by the means provided in this 

Section shall be divulged by the United 

States to any person other than an 

authorized representative of the 

executive branch of the United States, 

except in the course of legal proceedings 

to which the United States is a party 

(including grand jury proceedings), or 

for the purpose of securing compliance 

with this Final Judgment, or as 

otherwise required by law. 

D. If at the time information or 

documents are furnished by a Settling 

Defendant to the United States, the 

Settling Defendant represents and 

identifies in writing the material in any 

such information or documents to 

which a claim of protection may be 

asserted under Rule 26(c)(1)(G) of the 

Federal Rules of Civil Procedure, and 

the Settling Defendant marks each 

pertinent page of such material, 

‘‘Subject to claim of protection under 

Rule 26(c)(1)(G) of the Federal Rules of 

Civil Procedure,’’ then the United States 

shall give the Settling Defendant ten 

calendar days notice prior to divulging 

such material in any civil or 

administrative proceeding. 

IX. Retention of Jurisdiction 

This Court retains jurisdiction to 

enable any party to apply to this Court 

at any time for further orders and 

directions as may be necessary or 

appropriate to carry out or construe this 

Final Judgment, to modify any of its 

provisions, to enforce compliance, and 

to punish violations of its provisions. 

X. No Limitation on Government Rights 

Nothing in this Final Judgment shall 

limit the right of the United States to 

investigate and bring actions to prevent 

or restrain violations of the antitrust 

laws concerning any past, present, or 

future conduct, policy, or practice of the 

Settling Defendants. 

XI. Expiration of Final Judgment 

Unless this Court grants an extension, 

this Final Judgment shall expire five 

years from the date of its entry. 

XII. Public Interest Determination 

Entry of this Final Judgment is in the 

public interest. The parties have 

complied with the requirements of the 

Antitrust Procedures and Penalties Act, 

15 U.S.C. 16, including making copies 

available to the public of this Final 

Judgment, the Competitive Impact 

Statement, and any comments thereon 

and the United States’ responses to 

comments. Based upon the record 

before the Court, which includes the 

Competitive Impact Statement and any 

comments and response to comments 

filed with the Court, entry of this Final 

Judgment is in the public interest. 

Date: llllllllllllllll

Court approval subject to procedures set 

forth in the Antitrust Procedures and 

Penalties Act, 15 U.S.C. 16 

llllllllll 

United States District Judge 

[FR Doc. 2012–9831 Filed 4–23–12; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF JUSTICE 

Office of Justice Programs 

[OJP (NIJ) Docket No. 1589] 

Draft Standards and Best Practices for 

Interaction Between Medical Examiner/ 

Coroner and Organ and Tissue 

Procurement Organizations 

AGENCY: National Institute of Justice, 

DOJ. 

ACTION: Notice and request for 

comments. 

SUMMARY: In an effort to obtain 

comments from interested parties, the 

U.S. Department of Justice, Office of 

Justice Programs, National Institute of 

Justice, Scientific Working Group for 

Medicolegal Death Investigation will 

make available to the general public a 

document entitled, ‘‘Organ and Tissue 

Procurement Committee Standards and 

Best Practices for Interaction Between 

Medical Examiner/Coroner Offices and 

Organ Tissue Procurement 

Organizations’’. The opportunity to 

provide comments on this document is 

open to coroner/medical examiner office 

representatives, law enforcement 

agencies, organizations, and all other 

stakeholders and interested parties. 

Those individuals wishing to obtain and 

provide comments on the draft 

document under consideration are 

directed to the following Web site: 

http://www.swgmdi.org. 

DATES: Comments must be received on 

or before May 12, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Patricia Kashtan, by telephone at 202– 

353–1856 [Note: this is not a toll-free 

telephone number], or by email at 

Patricia.Kashtan@usdoj.gov. 

John H. Laub, 

Director, National Institute of Justice. 

[FR Doc. 2012–9842 Filed 4–23–12; 8:45 am] 

BILLING CODE 4410–18–P 

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