U.S. Department of Justice remains concerned over antitrust issues raised by “Google Books” settlement

On 4 February 2010 the U.S. Department of Justice filed a statement of interest regarding the proposed amended settlement agreement in The Authors Guild Inc. et al. v. Google Inc.with the U.S. District Court for the Southern District of New York.

According to the Department, while the parties have made substantial progress on concerns raised by it (see Newsletter 5/2009 p. 2 for the Department’s first statement of interest), several antitrust and other issues remain.

As to the horizontal price competition concerns, the Department, first, remains concerned over the industry-wide revenue sharing that would be established by the settlement among publishers and authors. While the amended settlement would give Google the right to renegotiate bilaterally with rightsholders on how wholesale revenue is shared among them, this remedy is too limited because it would not apply to all works and because renegotiations would be limited to the prices of works, not their qualitative aspects such as usage restrictions or digital rights management.

Second, the Department continues to object to the agreement among publishers and authors to allow Google price their works using an algorithm. The Department is also concerned about the ability of rightsholders to block Google from agreeing on jointly funded discounting with individual rightsholders.

Third, the Department considers that the creation of “Unclaimed Works Fiduciary” (“UWF”) – while a welcome effort – is in its current form insufficient to address the concern raised by rightsholders of known works pricing the works of unknown rightsholders. The powers and independence of the UWF may be too limited for it to be able to depart from default prices set by a board that primarily consists of commercial publishers and authors.

According to the Department, the amended settlement does not address the concerns raised by the settlement conferring Google de facto exclusivity in orphan and unclaimed works, thus “producing less than optimal result from a competition standpoint.” The Department rejects as “poor policy and not something antitrust laws required a competitor to do” the suggestion that a competitor could engage in copying of books in the hope of prompting a class action suit and a subsequent settlement.

The Department also notes that the de facto exclusivity could strengthen Google’s dominance in its online search business, as being able to offer content exclusively would give Google at least some protection from competition. The Department argues that this protection is not gained by Google’s technological advances in search or the operation of normal market forces, but the use of class action settlement to gain a result Google could not achieve in the marketplace.

Despite the concerns the Department, however, continues to believe that a settlement would be beneficial and that its concerns can be addressed by further revisions. [Juha Vesala]