[Federal Register Volume 77, Number 79 (Tuesday, April 24, 2012)]
[Notices]
[Pages 24518-24537]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-9831]


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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 e-
books, 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 ``e-books''--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

[[Page 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 e-book 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 e-book 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 e-book 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 e-books 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.

[[Page 24520]]

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 G[auml]nsheidestra[szlig]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 e-books represent a 
substantial amount of interstate commerce. In 2010, United States 
consumers paid more than $300 million for the Publisher Defendants' e-
books, 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.
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    \1\ Non-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.
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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

[[Page 24521]]

has been consistently profitable, even when substantially discounting 
some newly released and bestselling titles.
    31. To compete with Amazon, other e-book 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 
Amazon-led $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 e-book 
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 e-books. 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 e-books 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:
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.''
    <bullet> 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 low-price retail 
strategy.
    <bullet> 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 e-books 
on a model inconsistent with the way it sells the vast bulk of the 
digital

[[Page 24522]]

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 e-books 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 e-books 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.

[[Page 24523]]

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 e-book 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 e-
books--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

[[Page 24524]]

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 e-book 
prices they sought: ``Throw in with Apple and see if we can all make a 
go of this to create a real mainstream e-books 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:
    <bullet> 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.''
    <bullet> 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.
    <bullet> On January 21, 2010, the CEO of one Publisher Defendant's 
parent company instructed his U.S.

[[Page 24525]]

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.
    <bullet> 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.
    <bullet> 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 non-Apple 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 non-Apple 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

[[Page 24526]]

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 pro-competitive 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 e-books on the wholesale model. Mr. Shanks tried to 
justify the actions of the conspiracy as an effort to save brick-and-
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 e-book 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 e-book prices by collectively adopting the agency model and 
Apple price tiers for their newly released and bestselling e-books also 
led to an increase in average retail prices of the balance of Publisher 
Defendants' e-book catalogs, their so-called ``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;

[[Page 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 e-books market by depriving consumers of the benefits of 
competition among e-book 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 e-books 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 
non-fiction 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 e-book retailers;
    f. Entrenching incumbent publishers' favorable position in the sale 
and distribution of print books by slowing the migration from print 
books to e-books;
    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:

--/s/Sharis A. Pozen------
Sharis A. Pozen,
Acting Assistant Attorney General for Antitrust.

--/s/Joseph F. Wayland------
Joseph F. Wayland,
Deputy Assistant Attorney General.

--/s/Gene Kimmelman------
Gene Kimmelman,
Chief Counsel for Competition Policy and Intergovernmental 
Relations.

--/s/Patricia A. Brink------
Patricia A. Brink,
Director of Civil Enforcement.

Mark W. Ryan,
Director of Litigation, <a href="/cdn-cgi/l/email-protection#523f3320397c257c202b333c122721363d387c353d24"><span class="__cf_email__" data-cfemail="7f121e0d145108510d061e113f0a0c1b101551181009">[email protected]</span></a>.

--/s/John R. Read------
John R. Read,
Chief.

David C. Kully,
Assistant Chief, Litigation III Section, <a href="/cdn-cgi/l/email-protection#91f5f0e7f8f5bffae4fdfde8d1e4e2f5fefbbff6fee7"><span class="__cf_email__" data-cfemail="fd999c8b9499d39688919184bd888e999297d39a928b">[email protected]</span></a>.

--/s/Daniel McCuaig------
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.
<a href="/cdn-cgi/l/email-protection#99fdf8f7f0fcf5b7f4fafaecf8f0fed9eceafdf6f3b7fef6ef"><span class="__cf_email__" data-cfemail="a6c2c7c8cfc3ca88cbc5c5d3c7cfc1e6d3d5c2c9cc88c1c9d0">[email protected]</span></a>.
<a href="/cdn-cgi/l/email-protection#543a35203c353a7a272120203b3a142127303b3e7a333b22"><span class="__cf_email__" data-cfemail="85ebe4f1ede4ebabf6f0f1f1eaebc5f0f6e1eaefabe2eaf3">[email protected]</span></a>.
<a href="/cdn-cgi/l/email-protection#472a26353e692522332f692a2420222207323423282d69202831"><span class="__cf_email__" data-cfemail="aac7cbd8d384c8cfdec284c7c9cdcfcfeadfd9cec5c084cdc5dc">[email protected]</span></a>.
<a href="/cdn-cgi/l/email-protection#94fbe3f1fabafff1faf0f8f1e6d4e1e7f0fbfebaf3fbe2"><span class="__cf_email__" data-cfemail="eb849c8e85c5808e858f878e99ab9e988f8481c58c849d">[email protected]</span></a>.
<a href="/cdn-cgi/l/email-protection#aeccc7c2c280c4c1c0cbdd9ceedbddcac1c480c9c1d8"><span class="__cf_email__" data-cfemail="05676c69692b6f6a6b607637457076616a6f2b626a73">[email protected]</span></a>.
<a href="/cdn-cgi/l/email-protection#02717667726a676c2c64636b70616a6b6e66427771666d682c656d74"><span class="__cf_email__" data-cfemail="a6d5d2c3d6cec3c888c0c7cfd4c5cecfcac2e6d3d5c2c9cc88c1c9d0">[email protected]</span></a>.

[[Page 24528]]

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\
---------------------------------------------------------------------------

    \2\ The 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'').
---------------------------------------------------------------------------

    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 e-books, end price competition 
among e-book 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 e-books, 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 e-books, 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.
---------------------------------------------------------------------------

    \3\ Prior 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.
---------------------------------------------------------------------------

    At the same time, each Publisher Defendant feared that if it 
attempted unilaterally to impose measures that would force Amazon to 
raise retail e-book 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

[[Page 24529]]

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 e-book 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 e-books 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 in-person 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-[agrave]-
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 e-book prices they 
sought: ``Throw in with Apple and see if we can all make a go of this 
to create a real mainstream e-books 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.
---------------------------------------------------------------------------

    \4\ Otherwise, 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.
---------------------------------------------------------------------------

    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 e-book 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 transitioned to the agency model 
for e-

[[Page 24530]]

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-you-can-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\
---------------------------------------------------------------------------

    \5\ Sections 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.
---------------------------------------------------------------------------

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 e-book 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 e-book 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.
---------------------------------------------------------------------------

    \6\ The proposed Final Judgment defines a ``Price MFN'' to 
include most favored nation clauses related to retail prices, 
wholesale prices, or commissions.
---------------------------------------------------------------------------

    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 e-book 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 e-book 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 e-book 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 e-book promotions for two years. With these provisions, most 
retailers will soon be able to discount e-books in order to compete for 
market share.

[[Page 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 e-book retailer based on the retailer's e-book 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 e-books. 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 e-books. 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 e-book 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 one-
year period. This provision, which works with Sections V.A and V.B 
(which enhance retailers' ability to set e-book 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,

[[Page 24532]]

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 sixty-day 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\
---------------------------------------------------------------------------

    \7\ United 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-Daniels-Midland 
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).
---------------------------------------------------------------------------

    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

[[Page 24533]]

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\
---------------------------------------------------------------------------

    \9\ See 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'').
---------------------------------------------------------------------------

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
    --/s/Daniel McCuaig------
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 E-books 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 e-book 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

[[Page 24534]]

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 E-book 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 E-books 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 E-book 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 E-book 
Publisher provides that additional compensation, so long as that 
agreement is not or does not result from a pre-existing 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 E-book Publisher for an E-book that 
the E-book 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 E-book 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

[[Page 24535]]

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 co-publishing 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 E-book titles or a particular 
author's E-books; (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 E-books, 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 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, 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 E-books.
    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 E-book 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 E-books.
    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 E-book 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 E-book 
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 E-book or fix, set, or coordinate any 
term

[[Page 24536]]

or condition relating to the Sale of E-books.
    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 E-
book Publisher of specifically identified E-book titles or a particular 
author's E-books, or from participating in output-enhancing 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 E-book Retailer with the intent 
that the E-book 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 E-book 
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 E-books) 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 E-
book 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 E-book 
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 
E-books; 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

[[Page 24537]]

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:------------------------------------------------------------------
Court approval subject to procedures set forth in the Antitrust 
Procedures and Penalties Act, 15 U.S.C. 16
--------------------

United States District Judge

[FR Doc. 2012-9831 Filed 4-23-12; 8:45 am]
BILLING CODE P


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