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Publisher Macmillan says 'We did not collude' over e-books

April 11, 2012 |  9:36 am

Photo: A digital book is displayed on an Apple Inc. iPad. Credit: Scott Eells / Bloomberg

This post has been corrected. See note below.

Even before the Department of Justice officially announced its e-book pricing suit against Apple and five publishers, the chief executive of Macmillan, John Sargent, responded to it. "We did not collude," he writes in an open letter posted at Tor.com, one of the publisher's imprints. It begins:

Today the Department of Justice filed a lawsuit against Macmillan’s U.S. trade publishing operation, charging us with collusion in the implementation of the agency model for e-book pricing. The charge is civil, not criminal. Let me start by saying that Macmillan did not act illegally. Macmillan did not collude.

We have been in discussions with the Department of Justice for months. It is always better if possible to settle these matters before a case is brought. The costs of continuing — in time, distraction, and expense — are truly daunting.

But the terms the DOJ demanded were too onerous. After careful consideration, we came to the conclusion that the terms could have allowed Amazon to recover the monopoly position it had been building before our switch to the agency model. We also felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents.

When Macmillan changed to the agency model we did so knowing we would make less money on our e book business. We made the change to support an open and competitive market for the future, and it worked. We still believe in that future and we still believe the agency model is the only way to get there.

It is also hard to settle a lawsuit when you know you have done no wrong. The government’s charge is that Macmillan’s CEO colluded with other CEOs in changing to the agency model. I am Macmillan’s CEO and I made the decision to move Macmillan to the agency model. After days of thought and worry, I made the decision on January 22nd, 2010 a little after 4:00 AM, on an exercise bike in my basement. It remains the loneliest decision I have ever made, and I see no reason to go back on it now.

Macmillan, which is the smallest of the five publishers named in the DOJ's suit, has long been on the front lines of e-book pricing. When it was in a disagreement with Amazon, the online retailer pulled the "buy" buttons from Macmillan's books on its site. During the dispute, readers who wanted to purchase Hilary Mantel's bestselling, Booker Prize-winning novel "Wolf Hall" could see the book on Amazon's site, but not buy it, not as an e-book nor in print. The dispute was later resolved and the "buy" buttons were restored.

Interestingly, Sargent continues by saying that other publishers have chosen to settle. Have they? Bloomberg reports that Apple has refused to engage in settlement talks and that Penguin may also be poised to fight in court. Sargent's letter continues after the jump.

Sargent continues:

Other publishers have chosen to settle. That is their decision to make. We have decided to fight this in court. Because others have settled, there may well be a preponderance of references to Macmillan, and to me personally, in the Justice Department’s papers -- often without regard to context. So be it.

I hope you will agree with our stance, and with Scott Turow, the president of the Author’s Guild, who stated, “The irony of this bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition. This would be tragic for all of us who value books and the culture they support.”

Since we are now in litigation, I may not be able to comment much going forward. We remain dedicated to finding the best long-term outcome for the book business, for Macmillan and for the work you have entrusted to our care.

Thanks.

John

We'll be back with more as the story continues to unfold. And in June, I will interview Scott Turow about the changing situation around e-books at the LiveTalksLA Business Forum.

For the record, 4:24 p.m. April 11: An earlier version of this post misspelled the last name of Macmillan's chief executive. His name is John Sargent.

RELATED:

Random House will adopt agency model

Government sues Apple, publishers over e-books

Steve Jobs says publishers are "not happy" with Amazon

-- Carolyn Kellogg

Photo: A digital book is displayed on an Apple Inc. iPad. Credit: Scott Eells / Bloomberg

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