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Regulators Question Google’s Deal With Publishers — Online Book Project Raises Antitrust Concerns

By EDMONTON JOURNAL(Canada)

Thu, Apr 30, 2009 at 9:26 am

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U.S. antitrust regulators are making inquiries into Google Inc.’s settlement with publishers over its book-scanning project, two consumer groups said.

Google, which is creating an online book database by scanning millions of titles, reached a $125-million US deal with publishers last year to settle copyright concerns. Justice Department lawyers are now asking questions about the accord, Consumer Watchdog and the American Antitrust Institute said.

The settlement may raise antitrust concerns if it gives Google too much influence over the market for online books. Before the settlement, publishers and authors had fought the book-scanning project on the grounds it constituted massive copyright infringement. The agreement won preliminary court approval in November.

Consumer Watchdog, based in Santa Monica, Calif., spent about an hour on a conference call with Justice Department lawyers this month to discuss its concerns, John Simpson, a consumer advocate at the group, said in an interview.

The group says the deal might violate antitrust law. Its terms include the treatment of "orphan books" — titles without clear copyright holders — and a provision that states that if another company negotiates better terms with rights owners, Google would get the same deal, Simpson said.

"They listened with interest and asked questions and followed up on the points that we raised. It seems to me they were asking the right questions."

Bert Foer, president of the Washington-based American Antitrust Institute, said his organization also discussed the settlement with the agency. "We are not out to kill the deal," Foer said. "But it’s got to be done right, and it has got to be done with the appropriate oversight."

The agreement is structured to encourage competition, said Gabriel Stricker, a spokesman for Mountain View, Calif.-based Google. This is a non-exclusive agreement."

A federal judge ruled on the case Tuesday, giving thousands of U.S. authors until Sept. 4 to either join the settlement or object to the deal. The deadline had been May 5.

Critics argue that the settlement, which sets up a registry to distribute book copyright royalties to publishers and authors, would give Google a monopoly over the online versions of millions of out-of-print books.

It would give Google the ability to set prices "for perhaps a majority of books ever published," said James Grimmelmann, a New York Law School professor. Unless the settlement is modified, it assures that Google is "the only player in town" for out-of-print works, he said.

If approved, the settlement would end four years of wrangling between Google and publishers. The company was sued in 2005 by the Author’s Guild, Pearson Plc’s Penguin unit, McGraw- Hill Cos., John Wiley & Sons Inc. and CBS Corp.’s Simon & Schuster. They claimed the digitizing infringed their copyrights.

Google, which began scanning books in 2004, uses volumes from Harvard University, the New York Public Library and other sources. The project lets users search through books, bringing up pages or excerpts that contain sought-for terms.

Google and its former publishing adversaries will use $34.5 million of the settlement fund to create a registry program to compensate rights holders, according to court papers. Another $45 million will be used to compensate authors whose works have already been scanned without permission, the parties said.

Under the settlement, authors and publishers will have final say on whether their copyrighted works may be used by the program.

The deal lets Google keep 37 per cent of revenue from online book sales and from advertisements that run next to previews of book pages. It will pass on the remainder to the registry, which will keep an administrative fee and leave the rest for the copyright holders to collect.

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