U.S. Probes Google’s $125 Million Book-Scanning Settlement

U.S. Probes Google’s $125 Million Book-Scanning Settlement


July 3 (Bloomberg) -- Google Inc.’s $125 million agreement to settle copyright issues with book publishers is being investigated by U.S. antitrust regulators.

The issues raised by the settlement, which compensates copyright holders and gives Google a share of online book sales and ads, “warrant further inquiry,” U.S. Deputy Assistant Attorney General William Cavanaugh said yesterday in a letter filed in U.S. District Court in New York. Google said last month that the Justice Department had requested information about the agreement.

“The U.S. has reviewed public comments expressing concern that aspects of the settlement agreement may violate the Sherman Act,” Cavanaugh said. “At this preliminary stage the U.S. has reached no conclusions as to the merit of those concerns or more broadly what impact this settlement may have on competition.”

Google, operator of 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.

Millions of Titles

The Mountain View, California-based company is creating an online 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 deal could make Google the main online source for millions of out-of print books, raising antitrust concerns because it puts the distribution of those books in the hands of one company. Before the settlement, publishers and authors fought the project on the ground it constituted massive copyright infringement.

The agreement won preliminary court approval in November.

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.

Revenue Split

The deal lets Google keep 37 percent of revenue from online book sales and from advertisements that run next to previews of book pages. The remainder will be passed on to the registry, which will keep an administrative fee.

“The Department of Justice and several state attorneys general have contacted us to learn more about the impact of the settlement, and we are happy to answer their questions,” Google said in an e-mailed statement. “It’s 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 U.S.”

The government will have discussions with the parties in the settlement and with “other interested parties, in order to assess the competitive impact of the proposed settlement,” the letter said.

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.

The case is Authors Guild v. Google Inc., 1:05-08136, U.S. District Court, Southern District of New York (Manhattan).

bloomberg