Google Books and Antitrust Problems

The Antitrust Division of the DOJ has weighed in on the Google Books settlement, and rejection of the settlement is urged.  (See news articles on it here.)  According to the DOJ press release, “the Department proposed that the parties consider a number of changes to the agreement that may help address the United States’ concerns, including imposing limitations on the most open-ended provisions for future licensing, eliminating potential conflicts among class members, providing additional protections for unknown rights holders, addressing the concerns of foreign authors and publishers, eliminating the joint-pricing mechanisms among publishers and authors, and, whatever the settlement’s ultimate scope, providing some mechanism by which Google’s competitors can gain comparable access.”  (Source.)

But what’s actually in the Statement of Interest, which can be found here?  First, it assumes that the parties have been acting in good faith, that is “it should not be a surprise that the parties did not anticipate all of the difficult legal issues such an ambitious undertaking might raise.”  Authors Guild v. Google, No. 05-Civ-8136 (S.D.N.Y. 2009), Statement of Interest of the United States of America Regarding Proposed Class Settlement at 1.  Furthermore, it says that the basic idea is good: it would “breathe new life” into out-of-print books, which benefits the public.  Id.

Nonetheless, “the breadth of the Proposed Settlement – especially the forward-looking business arrangements it seeks to create – raises significant legal concerns. As a threshold matter,the central difficulty that the Proposed Settlement seeks to overcome – the inaccessibility of many works due to the lack of clarity about copyright ownership and copyright status – is a matter of public, not merely private, concern. A global disposition of the rights to millions of copyrighted works is typically the kind of policy change implemented through legislation, not through a private judicial settlement.” Id. at 2.  It also states that its antitrust investigation is ongoing, and as such the Statement is a “preliminary explanation.”  Id. at 3.

The first part of the Statement is an analysis of Federal Rule of Civil Procedure 23, which I mentioned here.  It (the Statement) argues that there are three defects with Rule 23 compliance: the forward-looking components of the Settlement (such as the Registry) require modification; the parties have not demonstrated that the class representatives adequately represent absent class members; and scope of the Settlement requires “robust” notice, which might not be adequately developed by the record.  Id. at 6-13.

The antitrust implications are a little more interesting to me, even though it is technically the requirements of Rule 23 that ultimately control the Court’s decision.  Nonetheless, the antitrust concerns are incredibly important, and while, as noted, the investigation isn’t complete, the DOJ’s “views on certain core issues are sufficiently well developed that articulating them now may be beneficial to the Court in its consideration of the Proposed Settlement and to the parties in their continuing negotiations….”  Id. at 16.

Two serious issues, then, are raised:  the Settlement appears to give publishers the power to restrict price competition, and second, other digital distributors may be effectively precluded from competing with Google in the sale of digital library products and other derivative products.  Id.

As to the first issue, the DOJ states, two “features of the Proposed Settlement bear an uncomfortably close resemblance to the kinds of horizontal agreements found to be quintessential per se violations of the Sherman Act.”  Id. at 17.  “Absent modification by the parties, there is a significant possibility that the Department will conclude that those terms violate the federal antitrust laws.”  Id. at 19.

And as to the second, the DOJ argues that “[t]he risk of market foreclosure would be substantially ameliorated if the Proposed Settlement could be amended to provide some mechanism by which Google’s competitors’ [sic] could gain comparable access to orphan works (whatever such access turns out to be assuming the parties negotiate modifications to the settlement).”  Id. at 25.

Interestingly, the privacy concerns are not mentioned (at least, I don’t believe they are; page 26 had an error which prevented me from viewing it) and I don’t know if that means they aren’t a concern anymore, or if it means that they are part of the ongoing investigation.

In any event, rejection is urged.

(As a side note, I’ve long felt that in many ways Google is being rewarded for its willful infringement of copyright, and there’s a interesting passage in the Statement of Interest:  “Nor is it reasonable to think that a competitor could enter the market by copying books en masse without permission in the hope of prompting a class action suit that could then be settled on terms comparable to the Proposed Settlement.  Even if there were reason to think history could repeat itself in this unlikely fashion, it would scarcely be sound policy to encourage deliberate copyright violations and additional litigation as a means of obtaining approval for licensing provisions that could not otherwise be negotiated lawfully.”  Id. at 23-24.)