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Settlement approved in e-book pricing case

Sept. 6, 2012 at 5:19 PM

NEW YORK, Sept. 6 (UPI) -- A U.S. judge has approved a settlement with three major publishers over collusion in e-book pricing, setting the stage for a digital book price war.

District Court Judge Denise L. Cote, the federal judge in Manhattan overseeing the case, rejected arguments against the settlement in a civil antitrust case brought by the U.S. Department of Justice, The New York Times reported.

The government filed a lawsuit against five publishers and Apple, accusing them of engaging in price-fixing of e-books.

Three of the publishers, Hachette Book Group, Simon & Schuster and HarperCollins, had agreed to settle while Penguin Group USA, Macmillan and Apple declined and face a trial.

As part of the settlement the three publishers must terminate contracts with e-book retailers that constrain the retailer's ability to set their price of an e-book or contain any so-called "most favored nation" clause, which states no other retailer is allowed to sell e-books for a lower price.

The contract restrictions will remain in effect for two years for the e-book pricing and five years for the most favored nation clause, the Times said.

"The government reasonably describes these time-limited provisions as providing a 'cooling- off period' for the e-books industry that will allow it to return to a competitive state free from the impact of defendants' collusive behavior," the court said in a filing on Thursday.

"The time limits on these provisions suggest that they will not unduly dictate the ultimate contours of competition within the e-books industry as it develops over time."

The three publishers have also agreed to pay more than $69 million in fines.

E-book retailer Amazon, reacting to the settlement, said it will drop prices on its e-books, probably to the $9.99 point for most bestsellers and newly released e-books, which will likely put pressure on other retailer to respond in kind, the Times said.

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