Sunday, September 20, 2009

DOJ Weighs in on Proposed Google Books Settlement

The Department of Justice Antitrust Division filed a statement of interest Friday, available here, opposing the Google Books settlement. DOJ's filing addresses concerns that the settlement: (1) fails to satisfy Federal Rule of Civil Procedure 23 (which governs class action lawsuits); (2) violates copyright law; and (3) violates antitrust law. DOJ's statement is a bit unusual in that it raises both antitrust and non-antitrust concerns; typically the DOJ's Antitrust Division confines public stances to antitrust issues.

DOJ states that the proposed settlement "is one of the most far-reaching class action settlements of which the United States is aware." Under Rule 23, DOJ raises concerns that the interests of one set of class members -- orphan works holders – conflicts with another set of class members – rightsholders, that the settlement resolves amorphous future claims, and that the class was not provided adequate notice of the settlement. A class member (and former colleague), Scott Gant, previously filed a lengthy and well reasoned objection to the settlement raising more detailed class action procedural concerns.

DOJ raises two main antitrust concerns. First, the proposed settlement appears to give book publishers the power to restrict price competition. Second, the settlement may "effectively preclude[]" competing distributors of digital books. Kotchen & Low recently co-authored an op-ed, along with the American Antitrust Institute, addressing the antitrust implications of the Google Books settlement, available here, raising the same concerns. The settlement provides a fixed royalty rate and creates a joint pricing mechanism. It also provides a monopoly over orphan works, which may create a substantial disadvantage for any potential competitors.

Despite these objections, DOJ recognizes that the settlement has great potential benefits, such as to "breathe life into millions of works that are now effectively off limits to the public," and to "open the door to new research opportunities."

In light of these issues, DOJ concludes that the Court should reject the proposed settlement, but should encourage the parties to continue negotiations to modify the settlement consistent with Rule 23 and the copyright and antitrust laws. Consistent with Kotchen & Low and AAI's recent op-ed, I agree, and encourage the Court to give substantial weight to DOJ's concerns.


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