From The Wall Street Journal:
The Justice Department filed a lawsuit Tuesday that seeks to block Penguin Random House from acquiring rival Simon & Schuster for nearly $2.18 billion, the latest in a series of aggressive antitrust cases brought under the Biden administration.
The department’s complaint, filed in federal court in Washington, D.C., focused not on the prices consumers pay for books, but instead on the competition between publishers to secure rights from authors, especially bestselling ones. The industry paid authors over $1 billion in advances last year.
If the Simon & Schuster deal were permitted, Penguin Random House—already the world’s largest consumer-book publisher as measured by revenue—would hold unprecedented control and outsize influence over which books are published in the U.S. and how much authors are paid, the Justice Department alleged.
“By reducing author pay, this merger would make it harder for authors to earn a living by writing books, which would, in turn, lead to a reduction in the quantity and variety of books published,” the lawsuit alleged.
Attorney General Merrick Garland said the Justice Department’s suit aimed “to ensure fair competition in the U.S. publishing industry” and was part of a broader push to use antitrust enforcement to protect economic opportunity.
Bertelsmann SE, the parent of Penguin Random House, agreed to buy Simon & Schuster from ViacomCBS Inc. last November, a deal that sought to create a publishing behemoth in an industry that has been dominated by five major players, including Simon & Schuster.
The publishers vowed to fight the Justice Department in court and said their deal would improve their efficiency and make titles more widely available for consumers and retailers.
“The publishing industry is, and following this transaction will remain, a vibrant and highly competitive environment,” the publishers said in a joint statement. They said they compete “with many other publishers including large trade publishers, newer entrants like Amazon, and a range of midsize and smaller publishers all capable of competing for future titles from established and emerging authors.”
The deal has faced criticism from writers’ groups, and the lawsuit was quickly welcomed by some authors, including Stephen King, a longtime Simon & Schuster author, who said via email that he was “delighted” by the Justice Department’s merger challenge.
Link to the rest at The Wall Street Journal (Should be a free link, but, if not, PG apologizes for the paywall, but hasn’t figured out a way around it.)
Two relatively high-level comments, sneering all the while at the WSJ‘s ignorance:
(1) This suit demonstrates that there is no publishing industry. There are thirteen distinct publishing industries… and those with the greatest potential anticompetitive effects from consolidating conglomerate publishers are those not open to indies. To name one that should be excrutiatingly obvious (in the “<headsmack> I could have had a V8” mode), just consider the effect of this proposed merger on primary-and-secondary textbooks — roughly comparable to trade fiction.
The difficulty here is a combination of antitrust law and philosophy (the “market definition” problem) that went off in its own direction about a century ago, notwithstanding either actual evidence or developments in economic theory. It’s what antitrust litigators are stuck with, though, so it’s rather inevitible that it’ll seem bizarre.
(2) Almost nobody is noting that this lawsuit was filed in DC, not NYC. That makes a yuuuuuuuuge difference — different judges, different nuances in the law. Sometimes, the DoJ actually learns from the contrasting processes and results in US v. IBM (Southern District of New York) and US v. Microsoft (DC). Hint: In an “objective” sense, the evidence for antitrust liability and remedy was stronger in the IBM case… although fully sufficient in the Microsoft case.
The real key is that there’s some really bad rhetoric in Second Circuit opinions from the 1970s and 1980s on “middle entity” mergers (those with both monopolistic and monopsonistic aspects, because the resulting entity is in a position to restrict competition in both output and input), that binds the US District Courts in Manhattan, that will make things much harder for the government/plaintiff than in DC. This is what happens when the Rule of
IrrationalityReason is the decisional baseline: Everybody goes judge-shopping because that’s by far the most “reasonable” course of action.This is like the Amazon monopoly/antitrust argument. How big is too big? Who gets to define that? How do they know they’ll commit unfair trade practices. I hope the justice department didn’t type the lawsuit on the Microsoft monopoly Word software and used Wordperfect.
“[T]his merger would make it harder for authors to earn a living by writing books, which would, in turn, lead to a reduction in the quantity and variety of books published.”
My god they’re haughty.
As the Powers hurl boulders and rave at each other, we indie publishers shuffle past, hands in our pockets and wondering what the fuss is all about.
I laughed at the posturing at the WSJ and ABC.
By both sides.
Both are equally clueless.
When in 2012 (under Obama, BTW) the DOJ rubberstamped the penguin merger with RH tbey correctly pointed out there was so much more to publishing that tbe combined operation would not have any significant market power. Ditto in Europe.
Yes, tradpub is consolidating into less and less NYC glass tower publishers. So what?
The combined share of the BPHs isn’t growing and tbeir market power is actually declining.
Since the merger the market share of the randy Penguin has become lower than the two separate entities pre-merger. Standard outome for consolidation mergers.
The whole of tradpub trade books is a stagnant business while publishing grows in other areas.
The suit is fighting over an irrelevance, particuarly because today’s S&S isn’t particularly profitable if at all.
One is tempted to ascribe a nativist kneejerk rdaction or the thought that if S&S is bought out by the germans they’ll shut down (for lack of profits) the influence peddling political book division.
The biggest loser here won’t be the randy Penguin but ViacomCBS who successfully drew HC and the penguin into a bidding war and got double what $&S is worth. Even if the Penguin prevails in court it will be by badmouthing their own business and likely exposing their marginal finances.
Fun for outsiders, less so for the Penguin.
The proper DOJ response should have been the same as in 2012. Shrug and move on.