Department of Justice files statement of interest regarding the proposed Google settlement

On 18 September 2009 the U.S. Department of Justice filed a statement of interest with the U.S. District Court of S.D.N.Y. regarding the proposed class action settlement in The Authors Guild Inc. et al. v. Google Inc. The Department raised concerns about the settlement, including that it may violate antitrust law, but emphasized the significant societal benefits offered by it.

The antitrust issues identified in the proposed settlement by the Department include, first, the risk that book publishers and authors could jointly restrict price competition and, second, the risk that the settlement could foreclose distributors of digital library products other than Google.

As to concerns regarding reduced price competition among publishers and authors, the Department considered that the settlement could restrict price competition among authors and publishers

1)    by establishing an industry wide revenue sharing formula at the wholesale level;

2)    by setting default prices for books and, effectively, precluding discounting in retail sales by Google; and

3)    by allowing the publishers and authors of known books to control the prices of orphan books that may compete with their books.

According to the Department, the collectively agreed pricing terms resemble quintessential per se antitrust violations, despite arguments of the parties that their conduct is unilateral or should be regarded as a joint venture escaping a per se condemnation. In this respect the proposed settlement would thus risk being considered to violate antitrust laws.

As to the foreclosure concerns, the Department considered that the settlement would grant Google a de facto exclusive right for the digital distribution of, in particular, orphan works. The joint agreement by competing authors and publishers to deny Google’s competitors access to such works has according to the Department significant anticompetitive potential. As only Google would have the ability to market a comprehensive digital book library, including the orphan works, competing sellers of libraries lacking the orphan works would not be able to compete effectively with Google. The Department noted that giving Google’s competitors comparable access to orphan works would substantially lessen the foreclosure concerns. [Juha Vesala]

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