New York — The U.S. Department of Justice last week initiated an anti-trust investigation into the proposed Google Inc.’s USD 125 million deal to settle copyright issues with book publishers over the digital publishing rights to certain books, citing antitrust concerns.
The settlement, which Google reached with the Authors Guild and the Association of American Publishers for about USD 125 million in October 2008, compensates copyright holders and gives Google a share of on-line book sales and advertisements.
The agreement inked last year is subject to review by a Federal Court.
In a letter to the New York District Court, the issues raised by the settlement, “warrants further inquiry,” US Deputy Assistant Attorney General William Cavanaugh said in a letter filed to the New York District Court.
“The US has reviewed public response expressing concern that aspects of the settlement agreement may violate the Sherman [Anti-Trust] Act,” Cavanaugh said.
“At this preliminary stage, the US has reached no conclusions as to the merits of those concerns or more broadly what impact the settlement may have on competition,” he added.
Such an investigation had been previously reported, and Google confirmed that the Justice Department had made requests for information about the agreement. But Judge Denny Chin, who is overseeing issues surrounding the settlement until it is implemented in October, received formal notice of an investigation last Thursday from the DOJ and released the letter as part of the court docket concerning the case in the U.S. District Court for the Southern District of New York.
“The Antitrust Division is investigating the possibility of anticompetitive practices involving digital book intellectual property rights and distribution,” said Gina Talamona, a DOJ representative. She declined to elaborate beyond that statement and the letter sent Thursday to Judge Chin.
The Mountain View, California-based company is developing an on-line database of books by scanning millions of titles. It reached the agreement with publishers last year to settle a 2005 lawsuit filed by the Authors Guild, Pearson Plc’s Penguin unit and other publishers claiming the digitizing process infringed their copyrights.
The settlement has raised heated disapproval from those who think Google was effectively handed a monopoly over these copyright-yet-out-of-print works, since anyone else who wished to publish those books would have to individually negotiate with their authors, many of whom can not be located very easily.
Under the settlement, authors and publishers will have the final say on whether their copyrighted works may be included in the project. Google and the publishers will use $34.5 million of the settlement fund to create a registry program to compensate rights holders, and another $45 million will be used to pay authors whose works have been scanned without their permission, according to court papers.
The settlement would authorize Google the right to display and sell the books on-line while the profits would be shared between the internet major, publishers and authors.
A hearing about the fairness of the settlement is scheduled for Oct. 7 in federal court in Manhattan. U.S. District Judge Denny Chin said the government can weigh in on the matter in writing and in person.
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.
“It is important to note that this agreement is non-exclusive and if approved by the court stands to expand access to millions of books in the US.”
Jeff Bezos, chief executive of Amazon.com, has previously expressed concerns about the settlement and has said he believes “it needs to be revisited”.
The case is Authors Guild v. Google Inc., 1:05-08136, U.S. District Court, Southern District of New York (Manhattan).
Google, which runs the world’s most popular Internet search engine, is also under investigation by antitrust regulators for possible collusion with other technology companies in hiring practices and for sharing two board members with Apple Inc.
“We feel very comfortable that the decisions that we have made, including the ones that have gotten us into hot water, have been pro-consumer,” Eric Schmidt, Google’s chief executive officer, said this week in an interview on CNBC.