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Files Antitrust Suit to Stop Major Book Publisher Merger | December 2021

December 2021 | Volume 13, Issue 5


Read the full article from ABC News.

According to the article, the United States Justice Department is suing to block a $2.2 billion book publishing deal that would have reshaped the industry, saying consolidation would hurt authors and, ultimately, readers.

German media giant Bertelsmann's Penguin Random House, already the largest American publisher wants to buy New York-based Simon & Schuster, whose authors include Stephen King, Hillary Clinton, and John Irving, from TV and film company ViacomCBS.

The Department of Justice recently filed an antitrust suit in federal court in Washington, D.C., in the first major antitrust action by the Biden administration. The department said the deal would give Penguin Random House “outsized influence" over which books are published in the U.S. and how much authors are paid.

“If the world’s largest book publisher is permitted to acquire one of its biggest rivals, it will have unprecedented control over this important industry," Attorney General Merrick Garland said.

“American authors and consumers will pay the price of this anticompetitive merger — lower advances for authors and ultimately fewer books and less variety for consumers."

The purchase of Simon & Schuster would reduce the so-called Big Five, which dominate American publishing and include HarperCollins, Hachette Book Group, and Macmillan, to four.

Because it targets the prices paid to authors as well as those paid by consumers, the suit shows a possible new direction for the antitrust regulators under the Biden administration, suggested Daniel Crane, a law professor at the University of Michigan who focuses on antitrust.

“There’s a desire to think very comprehensively about all the interests that could be harmed,” he said. “It raises lots of interesting questions about publishing and about competition in publishing.”

The government’s case addresses a conventional market of five mammoth old-line publishing houses. Overshadowing it is Amazon, which created an empire and ecosystem of digital books starting back in 1995, controlling not only the bookstore but also the dominant devices for reading e-books and listening to audiobooks, and eventually some of the content. The e-books undercut the prices of conventional books, providing ammunition to the publishing houses in asserting that they must bulk up to survive the competition.

The deal raised concern from writers and from rival publishers. The Authors Guild has said it opposes the acquisition because there would be less competition for authors’ manuscripts.

Rupert Murdoch's News Corp, which owns HarperCollins and had reportedly also been interested in buying Simon & Schuster, also slammed the deal. Its CEO Robert Thomson said last fall that Bertelsmann was “buying market dominance as a book behemoth.”

In a statement, Penguin Random House and Simon & Simon & Schuster said they would fight the lawsuit. They say blocking the deal would harm authors.

“DOJ’s lawsuit is wrong on the facts, the law, and public policy,” said Daniel Petrocelli, Penguin Random House's lawyer. “Importantly, DOJ has not found, nor does it allege, that the combination will reduce competition in the sale of books.”

The new antitrust suit signals that the Justice Department “is willing to use its full authority to combat the wave of consolidation swallowing the American economy,” said Sarah Miller, executive director of the American Economic Liberties Project, an organization that advocates for government action against business concentration.

“This case also reflects how Amazon’s dominance looms as a predatory presence for most firms in the economy,” Miller said in a statement. “The CEOs of the number one and number three publishers openly sought to use this merger to become an ‘exceptional partner’ to Amazon.”

Discussion Questions

  1. What is antitrust law? What is a merger?

    Antitrust law seeks to prevent or control trusts or other monopolies, with the intention of promoting competition in business. A merger is, quite simply, a combination of two companies into one company.
  2. Assess the strength of the U.S. Department of Justice’s case to block the proposed merger between Penguin Random House and Simon & Schuster.

    In your author’s opinion, the U.S. Department of Justice’s case to block the proposed merger is a strong one, particularly since Penguin Random House is already the largest publisher in the United States, and Simon & Schuster is a publishing behemoth in its own right.
  3. Assess the strength of argument(s) in favor of the proposed merger.

    In your author’s opinion, the argument in favor of the proposed merger, as described in the article, is a weak one. According to Daniel Petrocelli, Penguin Random House's lawyer, “Importantly, DOJ has not found, nor does it allege, that the combination will reduce competition in the sale of books.” This argument appears disingenuous. Logically, if America’s largest publisher were to merge with another publishing giant, competition would be reduced in a market that has already substantially consolidated over the years. Additionally, implicit in the DOJ’s action is that the combination will reduce competition in the sale of books since that is the principal reason why the DOJ would seek to block the proposed merger.