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Simon & Schuster settles e-book antitrust suit with state AGs

Simon & Schuster is the third of the five publishers accused of illegally fixing e-book prices with Apple's help to settle an antitrust suit brought by 29 states.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
3 min read
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Simon & Schuster, one of the five major book publishers accused in multiple lawsuits of conspiring with Apple to fix e-book prices, has settled the complaint filed by numerous states' attorney generals, CNET has learned.

Denise Cote, the federal judge overseeing the three different antitrust complaints pending against Apple and the defendant publishers, granted a motion Tuesday to dismiss Simon & Schuster (owned by CNET's parent company, CBS) from the complaint. This suit was originally filed by the attorney generals from Texas as well as 15 other state AGs. More states have joined that suit as plaintiffs; 29 are now involved.

The terms of the settlement weren't provided in court documents. A Simon & Schuster spokesman declined to comment. Spokespeople for Apple and the Texas AGs office did not immediately respond to a request for comment but we will update as soon as we hear back.

Last month, Simon & Schuster also settled a complaint by the U.S. Department of Justice (DOJ) as did Lagardere SCA's Hachette Book Group and News Corp.'s HarperCollins. The defendants that refused to settle and deny wrongdoing are Apple and Macmillan Publishers (owned by Germany's Verlagsgruppe Georg von Holtzbrinck holding company), and Pearson PLC's Penguin Group.

The move by Simon & Schuster follows similar settlement deals the AGs reached with HarperCollins and Hachette.

In addition to the complaints filed by the many states' attorney generals and DOJ, a group of consumers is seeking to bring a class-action suit.

The plaintiffs in each of the three complaints allege that Apple and the five publishing houses worked together to wrongfully manipulate prices of e-books while limiting Amazon's control over the e-book market. Amazon possessed an estimated 90 percent share of the e-book market prior to 2010; that's since fallen to 60 percent. The plaintiffs allege the defendant publishers all moved in lockstep to jack up retail prices.

In the past, publishers sold books to merchants, such as Barnes & Noble, at a wholesale price; the retailers then got to set the price consumers paid. But after numerous talks with Apple and each other, the defendant publishers all agreed to move to an agency model, the government claims. This strategy calls for a retailer to act as an agent of the publishers, who then becomes the one who sets retail prices.

The states and DOJ say that Apple helped convince the publisher defendants to work together to move to an agency model in time for the launch of the iPad on January 27, 2010. From that day on, the publishers all began pressuring Amazon and other retailers to adopt the agency model, the plaintiffs say.

Soon after, books that once went for $9.99 were listed between $12.99 and $14.99.

Apple and the publishers tried to get the complaint filed by the consumer group tossed out on Tuesday, but Cote denied the request.

In her written ruling, Cote said: "It is presumed that the conduct by all parties would be unlawful under the rule of reason."

Correction 2:42 p.m. PT: This story incorrectly reported that Simon and Schuster was the first to settle with the group of state's attorney generals. Hatchette and Harper Collins settled previously.