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Penguin gives in to US Feds over ebooks

Publisher drops defiant stance, settles price-fixing case

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Penguin has caved in to the US Justice Department, agreeing to a settlement over alleged price-setting of ebooks after holding out since April.

Three of five publishers that the Justice Department accused of conspiring with Apple over ebook pricing have already settled. Penguin's capitulation leaves just one publisher, MacMillan, and tech firm Apple as the remaining two defendants. The allegations levelled at the firms have to do with the agency model, which allowed the publishers to set the price of ebooks, from which the fruity firm took a 30 per cent cut.

While Hachette, HarperCollins and Simon & Schuster settled up straight away, Apple, Penguin and MacMillan all said they would fight the allegations.

Penguin, owned by Pearson and about to merge with Bertelsmann's Random House - which is not a defendant - is still holding out in Europe, where Apple, MacMillan, HarperCollins, Hachette and Simon & Schuster have all agreed to drop "most favoured nation" clauses from contracts with Apple and allow other retailers to discount ebooks.

The most favoured nation clause meant that the price offered to Apple was the lowest and publishers couldn't offer a lower price to other shops, keeping all ebooks at the same price. The Justice Department has alleged that the publishers also agreed with each other about what price books should be.

The change to using the agency model instead of the wholesale model, where retailers buy the books at a certain price and then sell them on at whatever price they like, is believed to have been a reaction to deep-discounting Amazon. The giant etailer had been selling ebooks at cost or below to push sales of its Kindle ereader and gain brand loyalty to dominate the growing market. ®

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