Pearson may face a lawsuit

The unauthorised discounting scandal which last month engulfed Pearson, the publishing to television conglomerate, deepened yesterday after a report that the US arm of its Penguin publishing subsidiary could face legal action from independent booksellers.

Penguin USA has already announced a $163m (pounds 100m) charge in the wake of the discovery that Christina Galatro, a former credit manager in its New Jersey office, had been hiding unsanctioned discounts to retailers in the company's accounts. But a report in the US yesterday said that Penguin USA was now being accused by independent booksellers of not extending to them discounts available to large retailers.

The American Booksellers Association (ABA) was reported as saying it was considering mounting a lawsuit against the company on allegations of offering unfair discounts. A spokesman said the board had discussed this and other possible courses of action, which he did not detail, at a meeting yesterday morning. The association hoped to make a further announcement in the next few days, he added.

A lawyer for the association said the discounts could violate a consent decree the New York-based Penguin signed in 1995. According to Jerald Jacobs, a lawyer with Jenner and Block, the Washington firm that represents the ABA: "We believe Penguin was giving large amounts of credit to only the very largest booksellers. If the practice occurred after the consent decree was signed, Penguin may be in violation of a court order."

The company was one of several large US publishers which signed consent orders promising not to favour big chains with discounts. Michael Lynton, Penguin's chief executive since last year, said he didn't know yet which retailers were offered discounts.

Pearson is expected to give details of its investigation into the affair when it announces its annual results in two weeks.

Market report, page 23

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