Inside Google

The U.S. Justice Department said it is investigating a settlement between Google Inc. and authors and publishers, saying that antitrust issues raised by the deal warrant scrutiny by the agency.

Deputy Assistant Attorney General William Cavanaugh disclosed the
investigation in a letter to U.S. District Court Judge Denny Chin, who
is scheduled to review the settlement. Mr. Cavanaugh wrote that the
Justice Department hasn’t yet reached any conclusions on "what impact
this settlement may have on competition."

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Google said it remains confident in its settlement with authors and publishers.

Judge
Chin said the court will maintain an October hearing date and invited
regulators to present views in writing by Sept. 18 or to appear in
person during the hearing.

Google spokesman Gabriel Stricker on Thursday reiterated the
company’s previous statement that it had been contacted by the DOJ and
several state attorneys general about the settlement and said it
remains confident in the settlement.

"It’s important to note that this agreement is nonexclusive and if
approved by the court stands to expand access to millions of books in
the U.S."

Samuel Miller, an antitrust lawyer at Sidley Austin LLP who isn’t
involved in the case, said the Justice Department’s move "makes it
public and clear to the court that there may be some competitive issues
with this settlement." He added that the move is likely to "make the
judge take a harder look at the settlement."

The agreement, which was struck to resolve a copyright lawsuit
between Google, authors and publishers, gives Google copyright licenses
over millions of digital books it has scanned since 2004 to include in
its book search service and to sell in digital form to consumers and
libraries. In exchange, it has agreed to share revenue earned by
selling access to digital copies and advertising against books with
rights holders.

Since it was announced last October, however, the court has received
letters raising concerns about the settlement, including worries that
the settlement would prevent other companies from entering the digital
book market. In particular, academics and competitors have written that
the settlement could give Google de facto exclusivity over online
access to works whose rights holders are unknown.

Some large libraries have raised concerns about how Google will
price a subscription digital books services it plans to offer if the
settlement passes.

Amazon.com Inc. chief executive Jeff Bezos
said at a conference in New York in June that the company had "strong
opinions" about the settlement and believed it "needs to be revisited."

Some lawyers Thursday said the Justice Department’s move was simply
procedural. "This is a nonevent," said David Balto, a senior fellow at
the Center for American Progress and the former policy director of the
Federal Trade Commission. "They simply want to inform the court."

It is possible that there will be some adjustments to the
settlement, said Allan Adler, vice president for legal and government
affairs for the Association of American Publishers, one member of the
team of lawyers and publisher representatives involved in the talks.
But Mr. Adler said that he is confident the settlement will survive.

"This letter is a status report to the court," he said. "They
haven’t reached any conclusions, but they aren’t finished with their
inquiry. But it will survive. There is tremendous public benefit
involved, both for consumers and for institutions such as universities
and libraries."

Paul Aiken, executive director of the Authors Guild, also predicted
the settlement would "pass muster" because it opens up new markets. But
those concerned about the settlement said they were pleased with the
Justice Department’s letter. "This is now a clear step that they are
taking the matter seriously." said John M. Simpson, an advocate for
Consumer Watchdog, a non-profit consumer group.