In an era of mega-mergers and high-tech corporate connections, plans for America’s largest book publisher to buy the fourth for just $2.2 billion might seem a bit strange. But the deal represents such a key test for the Biden administration’s antitrust policy that the Justice Department is calling a standout witness to The Stand: author extraordinaire Stephen King.
In Penguin Random House’s proposed acquisition of rival Simon & Schuster, which would reduce the “Big Five” of U.S. publishers to four, the administration is bolstering its antitrust mettle and its fight against corporate concentration.
The Department of Justice filed a lawsuit to block the merger. The trial begins Monday in federal court in Washington.
The government argues the merger would hurt authors and ultimately readers if German media titan Bertelsmann were allowed to buy Simon & Schuster from US media and entertainment company Paramount Global. He says the deal would thwart competition and give Penguin Random House gigantic influence over books published in the United States, likely reducing authors’ salaries and giving consumers fewer books to choose from.
An appearance at some point by King, whose work is published by Simon & Schuster, will be highly unusual for an antitrust lawsuit and will attract widespread attention.
Publishers are fighting the lawsuit. They counter that the merger would increase competition between publishers to find and sell the most popular books. This would benefit readers, booksellers and authors, they say.
A look at the case:
The two New York-based publishers each have impressive stables of best-selling authors who have sold millions of copies and landed multimillion-dollar deals. Within the Penguin Random House constellation are Barack and Michelle Obama, whose memoir package totaled approximately $65 million, Bill Clinton (he received $15 million for his memoir), Toni Morrison, John Grisham and Dan Brown.
Simon & Schuster has Hillary Clinton (she received $8 million for hers), Bob Woodward and Walter Isaacson.
And King. His post-apocalyptic novel “The Stand,” published in 1978, swirled around a deadly gun flu pandemic.
Bruce Springsteen shared the difference: his “Renegades: Born in the USA,” starring Barack Obama, was published by Penguin Random House; his memoirs, by Simon & Schuster.
THROW THE BOOKS TO THEM
The Justice Department argues in its lawsuit that, as things stand, No. 1 Penguin Random House and No. 4 Simon & Schuster (in terms of total sales) are in fierce competition for the rights. publication of best-selling books. If allowed to merge, the merged company would control nearly 50% of the market for such books, according to the report, harming competition by reducing advances paid to authors and diminishing output, creativity and diversity.
The Big Five – the other three are Hachette, HarperCollins and Macmillan – dominate American publishing. They account for 90% of the market for best-selling books, according to the government’s court filing. “The proposed merger would further increase consolidation in this concentrated industry, make the biggest player even bigger, and likely increase coordination in an industry with a history of coordination among major publishers,” he says.
The Justice Department case goes beyond the traditional antitrust concern of concentration raising prices for consumers, highlighting the impact on consumer choices and viewing perpetrators as workers as well as sellers of products on the market. global marketplace of ideas. The idea is that fewer buyers (publishers) competing on the same talent pool reduces the bargaining power of sellers (authors).
The case “potentially sets a precedent that could be used in the labor field,” says Rebecca Allensworth, an antitrust expert who is a professor of law at Vanderbilt University.
BIDEN’S COMPETITION CRUSADE
The Biden administration is breaking new ground in corporate concentration and competition, and the government’s case against publisher mergers can be seen as a milestone.
President Joe Biden has made competition a mainstay of his economic policy, denouncing what he calls the excessive market power of a range of industries and stressing the importance of vigorous competition for the economy, workers, consumers and small businesses. He called on federal regulators, including the Justice Department and the Federal Trade Commission, to pay greater attention to large business consolidations.
Biden issued an executive order a year ago targeting what he called anticompetitive practices in technology, health care, agriculture and many other sectors of the economy, establishing 72 actions and recommendations for federal agencies. Targets range from hearing aid prices to airline baggage fees.
Another competition lawsuit starting Monday in federal court: The Justice Department is suing to block UnitedHealth Group, which runs the largest U.S. health insurer, from acquiring health technology company Change Healthcare. The government argues the $13 billion deal would harm competition and put too much information about health care claims in the hands of one company.
PUBLISHERS MAKE THEIR BUSINESS
Wait, Penguin Random House and Simon & Schuster say as they prepare to go to trial: The merger would actually increase competition among publishers to find and sell the most popular books, by allowing the combined company to offer higher compensation for authors.
This would benefit readers, booksellers and authors, publishers say, by creating a more efficient business that would lower book prices. The government has shown no harm to consumers as readers because the merger would not raise prices, the companies say.
“The American publishing industry is robust and highly competitive,” they state in their filing. “More readers are reading books than ever before, and the number is growing every year. Publishers compete vigorously to reach these readers, and the only way to compete effectively is to find, acquire, and publish the books readers want. most read. … The merger at issue in this case will encourage even more competition and growth in the American publishing industry.”
The companies reject the government’s focus on the market for early bestselling books – defined as those acquired for advances to authors of at least $250,000. They represent only a tiny fraction, about 2%, of all books published by commercial companies, according to the companies’ filing.
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The Independent Gt