Macmillan CEO, John Sargent, Reverses Himself and Settles with DoJ (Updated)By
In December, Macmillan CEO John Sargent said he wouldn’t settle with the DoJ: “First, it is hard to settle when you have done nothing wrong. Much as the lawyers explain to me that settling is completely standard business procedure, it still seems fundamentally flawed to me somehow.” Well, I guess the lawyers finally overwhelmed him or his protestations of innocence were a bit much. According to WebProNews, in April, 2012: “He begins with the assertion that Macmillan is innocent of any wrongdoing in its adoption of the agency model: ‘Macmillan did not act illegally. Macmillan did not collude.’ In fact, he said, the decision to adopt the agency model was not made in concert with other publishing CEOs, but rather Sargent himself came to the decision ‘on January 22nd, 2010 a little after 4:00 AM, on an exercise bike in my basement.’ He also called it ‘the loneliest decision I have ever made.’”
The only party still outstanding on the list is Apple. Here’s what the DoJ says in their press release:
“As a result of today’s settlement, Macmillan has agreed to immediately allow retailers to lower the prices consumers pay for Macmillan’s e-books,” said Jamillia Ferris, Chief of Staff and Counsel at the Department of Justice’s Antitrust Division. “Just as consumers are already paying lower prices for the e-book versions of many of Hachette’s, HarperCollins’ and Simon & Schuster’s new releases and best sellers, we expect the prices of many of Macmillan’s e-books will also decline.” …
“Under the proposed settlement agreement, Macmillan will immediately lift restrictions it has imposed on discounting and other promotions by ebook retailers and will be prohibited until December 2014 from entering into new agreements with similar restrictions. The proposed settlement agreement also will impose a strong antitrust compliance program on Macmillan, including requirements that it provide advance notification to the department of any e-book ventures it plans to undertake jointly with other publishers and regularly report to the department on any communications it has with other publishers. Also for five years, Macmillan will be forbidden from agreeing to any kind of most favored nation (MFN) provision that could undermine the effectiveness of the settlement.”
This is not significantly different from the settlements signed by the other defendants in the anti-trust case. Digital textbooks are exempt from the settlement as the DoJ case only covered trade books.
Update: In a posting on the Tor website Sargent posted the following letter to his “Authors, Illustrators and Agents”
Today we agreed to settle our case with the DOJ. We settled because the potential penalties became too high to risk even the possibility of an unfavorable outcome.
There are two reasons we did not settle earlier. First, the settlement called for a level of ebook discounting we believed would be harmful to the industry. We felt that if only three of the big six publishers were required to discount and we stood firm, those problems might be avoided. But when Random House agreed to be bound by the Penguin settlement, it became clear that all five of the other big six publishers would be allowing the whole agent’s commission to be used as discount, and Macmillan’s stand-alone selling at full agency price would have no impact on the overall marketplace. And in addition, your books and our business would have a pricing disadvantage for two years.
The second reason was simpler. I had an old fashioned belief that you should not settle if you have done no wrong. As it turns out, that is indeed old fashioned.
Our company is not large enough to risk a worst case judgment. In this action the government accused five publishers and Apple of conspiring to raise prices. As each publisher settled, the remaining defendants became responsible not only for their own treble damages, but also possibly for the treble damages of the settling publishers (minus what they settled for). A few weeks ago I got an estimate of the maximum possible damage figure. I cannot share the breathtaking amount with you, but it was much more than the entire equity of our company.
I like to believe that we would win at trial. But outcomes are hard to predict with certainty, particularly in a civil case with a low burden of proof. And so we agreed to settle with no admission of guilt. As with the other settling publishers, retailers will now be able to discount Macmillan ebooks for a limited time. This change will take effect quickly.
Thank you for all the support you have shown for Macmillan, and me, over this last year. And also thanks to the many booksellers and others who voiced their opinions. I’m disappointed it ended this way. But this round will shortly be over, and it is time for us to move on to the next.