The Department Of Justice Accepts Publishers' Settlement

I just read this and I must admit I'm jumping up and down. The DOJ rejected objections its proposed settlement with HarperCollins, Hachette and Simon & Schuster. A number of authors I read regularly were singled out for mention in the ruling, among them, Joe Konrath, David Gaughran, Lee Goldberg and Laura Resnick.

This isn't an excerpt from the ruling itself, it's from The Bookseller:

Barnes & Noble's objections to the settlement had claimed it would injure booksellers. The Authors Guild had said the proposed settlement was "not in the public interest". Referring to Amazon, the US authors body had stated: "The Justice Department is sanctioning the destructive, anticompetitive campaign of a corporate giant with billions in cash and boundless ambitions."

In a response published today (23rd July), the DoJ said: "In the course of its investigation, the United States examined complaints about Amazon's alleged predatory practices and found persuasive evidence lacking . . . Even if there were evidence to substantiate claims of 'monopolization' or predatory pricing' they would not be sufficient to justify self-help in the form of collusion."

Responding to Barnes & Noble's comments, the DoJ asserted that Barnes & Noble was "worried that it will make less money after the conspiracy than it collected while the conspiracy was ongoing" and that that was not a matter for the court to consider. Many of the benefits B&N attributes to collusive pricing could be achieved in other ways, such as lowering costs, the DoJ said.

The DoJ also rejected an implication it said it drew from the Authors Guild submission, that price-fixing should be permitted in the publishing industry because of the cultural role books play in society. "An argument that a particular industry or market deserves a blanket exemption from the antitrust laws should be directed to Congress, rather than the United States or the court," the DoJ stated. It also noted that some members of the Authors Guild, including authors Joe Konrath and
David Gaughran, had written in support of the Final Settlement.

The DOJ said that after "careful consideration" of the public comments, it had concluded that the proposed final judgement was an "effective and appropriate remedy for the antitrust violations alleged in the complaint".

You can read the rest of the article here: DoJ rejects B&N/Authors Guild objections to settlement.

Here is the DoJ's entire response. I just finished reading it. It was, IMHO, very well written and what I would call a 'good read'. Joe Konrath, Lee Goldberg and Laura Resnick, amoung others, are mentioned on page 41.

It is worth noting that members of the Authors Guild also wrote in support of the
proposed Final Judgment and against the Authors Guild’s position. Joe Konrath, author of 46 books, clarifies that letter-writing campaigns by the Authors Guild and the Authors
Representatives “did not solicit the views of their members, that they in no way speak on behalf of all or even most of their members.” Konrath (ATC-0144) at 1. He observes that agency pricing has slowed global growth and hurt consumers and writers. Lee Goldberg, a published author and member of the Authors Guild writes, “I believe that it’s detrimental to authors and readers, as well as to the establishment of a free and healthy marketplace, for publishers to collude with Apple to create artificially inflated prices for ebooks.” (ATC-0553). Author Laura Resnick writes, “breaking the law is not a reasonable reaction to being faced with aggressive business competition.” (ATC-0801).

David Gaughran is also mentioned (page 42):

Many comments from self-published authors, in particular, expressed appreciation that
Amazon opened a path to publication that was immune from Publisher Defendants’ hegemony. David Gaughran, writing on behalf of 186 self-published co-signors, writes that “Amazon is creating, for the first time, real competition in publishing” by charting a “viable path” for selfpublished books. Gaughran (ATC-0125) at 1, 3. Mr. Gaughran observes that “[t]he kind of disruption caused by the Internet is often messy,” and those who “do quite well under the status quo” naturally resist change. Id. at 2. He compares publishers and literary agents to “[a]ll kinds of middlemen,” which have “gone from being indispensible to optional” with the rise of the Internet. Id. Writing in support of the proposed Final Judgment, Mr. Gaughran confirms that self-published writers, in particular, see opportunities in a market not subject to collusive pricing.

I'd encourage you all to read at least the summary at the top.

Happy reading!

Related articles:
- Joe Konrath's Letter To The Department Of Justice
- 17 More States Join The Class Action Suit Against Apple et al
- The Passive Guy writes about monopolies

Writers Sue Harlequin For Underpayment

Three writers--Barbara Keiler, Mona Gay Thomas and Linda Barrett--have filed a suit against Harlequin, the world's largest publisher of romance books. They claim that Harlequin has unfairly deprived authors of monies owed.

The complaint is fairly involved and has to do with alleged legal trickery on Harlequin's part. I'll let Joe Konrath explain it:

Now I'm not a lawyer, but I'm pretty sure ... Harlequin contracts state they'll pay authors 50% for foreign and ebook royalties. This 50% is based on the amount they receive. But then they took those rights and sub-licensed them to another company for 6%, which means the author got 3% of the wholesale price, not 50%.

Confused? Here's an example.

Harlequin has an ebook it lists for $3.99. It sells that to Amazon at a wholesale price of $2.00. The author should make $1.00 for each $3.99 ebook that Amazon sells.

But instead of selling direct to Amazon, Harlequin sells the ebook to Company X for 12 cents. So the author only gets 6 cents. Company X than sells the same ebook to Amazon for $2.00, but because they are a sub-licensing company, they don't have to pay the author anything.

Sub-licensing is common. My publisher, Headline in the UK, sold book club rights to my novel AFRAID. The book club paid Headline a flat fee, and HEADLINE gave me 50% of that fee, according to my contract. The book club wasn't required to pay me royalties on each book club edition is sold. Just like Company X isn't required to pay authors anything.

This is all fine and legal. So why are authors suing Harlequin?

Because Harlequin and Company X are the same company.

In other words, it is sub-licensing the rights it holds to itself. Then it only has to pay the author 3% instead of 50%.

That's seems pretty shitty. It also doesn't seem like something a judge or jury will casually dismiss, even if Harlequin made sure it kept the two companies separate through an umbrella company.

No publishing company would ever sub-license rights for a paltry 6%, unless it was selling the rights to itself. Does Harlequin really expect a judge to believe that it sells a $3.99 ebook and only makes 6 cents? And according to the complaint, the 6% was not equivalent to the amount reasonably obtainable from an unrelated party, as required by the publishing agreements.

Ya think?

I love Joe's explanation, lots of flare but with a smidgeon of restraint. I'd encourage you to read Joe's entire post here: Harlequin Fail Part 2

Here is Harlequin's response to the lawsuit:

Harlequin announced today that they have been made aware of a class action lawsuit brought against them by three former authors.

The publisher wishes to make clear that this is the first it has heard of the proceedings and that a complaint has not yet been served.

“Our authors have been recompensed fairly and properly for their work, and we will be defending ourselves vigorously,” said Donna Hayes, Publisher and Chief Executive Officer of Harlequin. (Harlequin Blog)

Passive Guy, a practicing IP attorney, dissects Harlequin's responce:

Let’s see, this lawsuit has been in the works for months and generally discussed among romance writers during that time. PG has no inside information, but it’s not unusual for settlement discussions to precede the filing of a suit. HQ looks either clueless or dishonest when it claims to be surprised.

As far as the core issue of using one HQ company to license publishing rights to another HQ company in order to substantially reduce royalties paid to authors, PG figured that out the first time he reviewed an HQ publishing contract and authors have been complaining about it for years.

HQ’s statement that the complaint has not been served on it will draw a giant “duh” from any lawyer familiar with litigation. You file the complaint, then serve the defendant. Yet another clueless statement.

Since PG is always a helpful guy, he’ll provide Harlequin with a copy of the complaint below so they can read it. [PG put a copy of the author's complaint up on his blog, you can read it here.]

On a more serious note, most companies that are defendants in a major class-action suit incorporate a sophisticated public communications program to show themselves in the best possible light and minimize damage to their reputation.

Evidently, HQ doesn’t plan to do that.

You can read PG's entire article here: Harlequin Responds to Lawsuit by Authors Seeking Royalties.

That's all the information I have at the moment. I use to be involved with the Romance Writers Of America and many, if not most, of the published writers in that group either published through Harlequin, had at one time published through them or were actively submitting work there. I can't imagine this lawsuit will bolster the RWA's shrinking numbers.

If true, Harlequin's underhanded dealings not only hurt authors but they hurt readers as well. Of course I would be surprised if Harlequin was the only publishing company doing something like this. I hope this suit sets a president that encourages all publishers to deal fairly and honestly with their authors.

Further reading:
- Harlequin author Patricia McLinn, one of those involved with the lawsuit, has written about the suit on her Facebook page.

Joe Konrath's Letter To The Department Of Justice

Joe Writes:

Dear Mr. Read,

I’m writing to you as the author of forty-six books--eight legacy published, two Amazon published (with three more on the way), and thirty-six self-published, all of which inform the views I express in this letter.

As you doubtless recognize from the mail you’re receiving, there is currently underway a letter-writing campaign coordinated by the Association of Authors’ Representatives, the Authors Guild, and other parts of the publishing establishment attempting to persuade you that the DOJ’s suit against five of the Big Six and Apple is without merit, and that the Agency model is, at best, good for everyone, at worst, harmless.

I’m writing to tell you that these organizations did not solicit the views of their members, that they in no way speak on behalf of all or even most of their members, and that (as I imagine is obvious) they are motivated not by what’s best for consumers, but by what they see as best for themselves.

I recognize that the heart of the DOJ’s suit is collusion, not high prices. But it’s clear that the legacy publishing industry’s strategy is to keep the prices of ebooks high so as not to cannibalize high-margin hardback sales. If the prices of legacy published books are kept artificially high it could be argued that my lower-priced self-published books are made more attractive by comparison, but I believe that a regime of higher-priced books is bad for the industry overall because it slows the growth of the global book market, which indeed hurts all sales. I also believe it’s obviously bad for consumers, especially lower-income consumers, who could buy more of the books they loved if those books weren’t priced so high.

When prices of media are high, they’re a barrier to entry. Many are avoiding buying an ereader because the ebooks they most want are $9.99 - $14.99. If prices came down, more Kindles (and Kobo readers and Nooks and Sony readers) would be sold. That widens the market, which leads to more ebook sales. This is good for authors, and for readers who can get more for their money.

Read the rest here: Joe's Letter to the DOJ

Go Joe!

I'd just woken up when I read Joe's post -- last night I stayed up late getting my short story A Night In The Country ready for publishing on Amazon -- but I hope I managed to write something marginally coherent in the comments.

Very well said Joe, but it was strange to see you write in a more subdued tone.

Anyway, I agree. One thing that has always irked me when folks complain about Walmart artificially lowering prices is that ... well, sometimes I think it's easy to lose sight of how cash poor some folks are, especially families. Getting something for 50 cents cheaper can make a difference.

Of course one doesn't need books in the same way one needs food, but -- and I hope this doesn't sound cliche -- books do feed the soul and, as I said, 50 cents (or less!) can make a dig difference.

Even though I think the Big-6 inflating the prices of books makes lower priced indie books more attractive, you're right. It hurts the book business and that hurts everyone. Writers, booksellers and especially readers.

In any case, wonderful letter Joe, thanks for sharing. :)

Of course now I'm looking at my comment about Walmart artificially lowering prices and thinking about all the mom and pop shops which went out of business because they couldn't compete against the big chain.

Is that what is happening with Amazon? Will the act of Amazon selling books for lower prices drive indie, or self-published, writers out of business?

No, I don't believe so. Amazon is the self-published writers' biggest business ally. That's true right now and I don't see why it would change in the foreseeable future. That said, Amazon isn't a friend to publishers who want to sell ebooks at inflated prices.

Some publishers complain that if they don't have the kind of monopoly control they need to do this, that they'll go out of business. Further, they say that if they go out of business that the world of publishing, the world of books, will be a poorer place and, ultimately, readers will suffer.

Personally, I don't buy it.

Yes, I do think that if publishers are prevented from fixing ebook prices artificially high, or if they are forced to give authors better ebook royalties (a topic for another post), that many of them will go out of business.

Let's say that's true. I believe that although some, perhaps many, publishers will fold that there will be many publishers who will survive and thrive. These publishers will be the new Big-X.

Publishing won't be dead, it'll just be different.

Further Reading:
17 More States Join The Class Action Suit Against Apple et al
The Fungibility of Books

"Joe Konrath's Letter To The Department Of Justice," copyright© 2012 by Karen Woodward.