AMENDED GOOGLE BOOKS SETTLEMENT IS A “PALTRY PROPOSAL” THAT DEFIES ANTITRUST LAWS

The Open Book Alliance today formally filed Amicus Curiae in opposition to the proposed settlement between the Authors Guild, Inc., Association of American Publishers, Inc. and Google, Inc.

The OBA filing states,  “The torrent of criticism to the settlement may have produced amendments to the class definition, but it has not affected Google’s conduct one iota…..All in all, little has been accomplished, save from Google’s perspective as it continues to build its lead over competitors.  …The Court’s procedures are ill-suited for resolution of what is now at stake in this matter – rewriting the copyright law, restructuring the publishing industry, and maintaining a competitive search market.”

The proposed Google book settlement is not a philanthropic effort to bring literature into the 21^st century and bridge a literary divide.  In reality, Google is focused on becoming the sole owner of an immense digital library that will improve the company’s advertising-based search business.  This de facto exclusive license will provide Google with an enormous advantage over its search competitors.

The brief explores the market importance of so-called “tail queries” – rare or obscure search requests that are hard to fulfill accurately.  The brief explains how “[d]igital rights to virtually all out-of-print books provide Google with a decisive advantage in responding to tail queries.”  The brief continues, “[i]f Google can deny its search rivals the ability to integrate the same corpus of books, Google’s lead in search will become insurmountable.”

The brief also uncovers “carefully crafted exceptions” inside the settlement regarding the Google Partner Program.  Google has signed “Partner” agreements with thousands of publishers.  Doubtless, many – if not all – of the named publishers in the settlement have their own agreements with Google that will govern the payments they receive from Google, in lieu of the provisions that were negotiated in the settlement for other class members.  The brief states, “…[this] permits the parties to negotiate secret side deals to govern the economic terms of books licensed to Google under the Settlement at any time, even after a court review of the Amended Agreement, effectively evading judicial and public scrutiny…”.

The OBA believes that the proposed settlement threatens to bottleneck the access to and distribution and pricing of the largest, private digital database of books in the world. It would do so by using the class action mechanism to not only redress past harm, but to prospectively shape the future of digital book distribution, display and search.

In the Amicus, the OBA highlights five key reasons why the amended settlement is a “paltry proposal”:

• “Control of the Search Market is Google’s True Goal.” Google Books Director Daniel Clancy has stated that Google did not undertake the book-scanning project in order to make money through digital book sales or library subscriptions.  The court should prevent Google from using the judicial system to bolster its search monopoly.
• “Secret Side Deals Among the Parties Actually Control The Settlement Terms.” Google has signed “Partner” agreements with thousands of publishers.  Doubtless, many – if not all – of the named publishers in the settlement have their own agreements with Google that will govern the payments they receive from Google, in lieu of the provisions that were negotiated in the settlement for other class members.   The terms of partner agreements remain secret.  In addition, publishers can withdraw display rights of books they register.  As a result, notwithstanding the millions and millions of books Google claims it has digitized, the Registry’s corpus may well end up with only a few million volumes.
• “Google’s Anticompetitive Bundling Undermines Competition in Digital Book Distribution.” Google has already undermined competition by giving preference to brands such as Google Maps over competitors like MapQuest.  Concerns abound about the consequences to competition in digital book distribution by augmenting Google’s market power through a judicial grant of access to books that no other competitor can secure.
• “The Amendments Fail to Resolve Antitrust Objections.” The settlement bestows upon Google a de facto exclusive license to millions of books and continues to set a price floor for out-of-print books.  The big publishers continue to look to the settlement to dampen price competition and stabilize prices.
• “The Settlement Fails Even a Rule of Reason Evaluation.” The per se rule, rather than the rule of reason, governs horizontal price fixing schemes embedded into joint ventures. A rule of reason evaluation does not turn solely on increasing output; if it did, every joint venture for the creation of product would pass antitrust scrutiny.