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Macmillan: DOJ 'too onerous,' Amazon would regain monopoly
04/11/12, 12:40pm
Macmillan CEO John Sargent in an open letter blasted the Department of Justice for its e-book antitrust lawsuit. He insisted that his publishing company had "done no wrong" and that he, alone, had Macmillan switch to an agency model that hiked e-book prices. Revealing more than the DOJ had mentioned itself while confirming rumors, he said talks had broken down after "months" and that the DOJ's terms would allegedly let Amazon go back to the wholesale model and unfairly dominate through artificially low prices.

"The terms the DOJ demanded were too onerous," Sargent wrote. "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."

He agreed with Author's Guild president Scott Turow's view and saw the DOJ as ironically hurting the very competition it was trying to save.

The remarks still sidestepped Apple's call for "most favored nation" status, where agreeing to sell through the iBookstore prevents offering a lower price anywhere else. Revoking this while keeping the agency model would theoretically allow sales and other competitive offers while preventing Amazon from selling below cost. Three publishers are believed to have already settled and would make Macmillan's case more difficult by implying that the collusion was real.

According to the lawsuit, Macmillan executives, including Sargent, allegedly attended numerous one-on-one meetings with other publishers between 2009 and 2010, a practice that was common in between the other major publishers as well. The discussions reportedly referred to Amazon's Kindle store as "the $9.99 problem" and turned to Apple when the companies couldn't make Amazon bend on price by themselves. One publisher's e-mail from July 29, 2009 mentioned talks between publishers to "create an alternative platform" to Amazon specifically to push prices higher.

The lawsuit stops short of directly showing that Apple was aware of any collusion, although it was accused of at least orchestrating a similar effect by demanding the agency model and the best prices from every publisher. Sargent did make clear that Apple's iBookstore and the imminent iPad launch were main factors, as he only made the decision at an odd hour just five days before the iPad was unveiled.

"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," he said. "It remains the loneliest decision I have ever made, and I see no reason to go back on it now."


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