WASHINGTON (AP) — In a time of mega-mergers and lucrative high-tech corporate hookups, plans to buy the fourth-largest US book publisher for $2.2 billion may sound somewhat bizarre. But the deal represents such an important test for the Biden administration’s antitrust policy that the Justice Department is calling an extraordinary witness to the stand: writer extraordinaire Stephen King.
In a proposed takeover of Penguin Random House’s rival Simon & Schuster, which would reduce the “Big Five” US publishers to four, the administration is burning its fight against antitrust and corporate concentration.
The Justice Department has filed a lawsuit to block the merger. The trial opens Monday in federal court in Washington.
The government argues that the merger would hurt writers, and ultimately readers, if German media titan Bertelsmann is allowed to buy Simon & Schuster from American media and entertainment company Paramount Global. It says the deal would thwart competition and give Penguin Random House a huge influence over the books it publishes in the US, possibly due to how much authors are paid and consumers getting fewer books to choose from.
An appearance at some point by King, whose work has been published by Simon & Schuster, would be highly unusual for an antitrust trial and would attract widespread attention.
Publishers are fighting the lawsuit. They contend that the merger would strengthen competition among publishers to find and sell the most popular books. He says this will benefit readers, booksellers and writers.
Take a look at the matter:
The two New York-based publishers each have impressive stables of blockbuster authors, who have sold several million copies and scored multimillion-dollar deals. The constellation of Penguin Random House stars Barack and Michelle Obama, whose package deals for their memoirs cost an estimated $65 million, Bill Clinton (he received $15 million for his memoir), Toni Morrison, John Grisham, and Dan Brown.
Simon & Schuster counts Hillary Clinton (they got $8 million for them), Bob Woodward and Walter Isaacson.
and the king. His post-apocalyptic novel “The Stand”, published in 1978, revolved around a deadly pandemic of weaponized influenza.
Bruce Springsteen splits the difference: his “Renegades: Born in the USA”, with Barack Obama, was published by Penguin Random House; His Memoirs by Simon & Schuster.
throwing books at them
As the Justice Department argued in its lawsuit, as things stand now, No. 1 Penguin Random House and No. 4 Simon & Schuster (by total sales) compete fiercely to acquire the rights to publish anticipated best-selling books. If they are allowed to merge, the combined company would control about 50% of the market for those books, it says, harming competition by reducing advances paid to authors and reducing production, creativity and diversity. is delivering.
The Big Five – the other three being Hatchet, HarperCollins and Macmillan – dominate American publishing. The government’s court filing states that they make up 90% of the market for anticipated top-selling books. “The proposed merger will further enhance consolidation in this focused industry, make the largest player even bigger, and have the potential to increase coordination in an industry with a history of coordination among major publishers,” it says.
The Justice Department’s case goes beyond the traditional antitrust concern of increasing concentration for consumers, pointing to the impact on consumer choice and viewing authors as workers as well as sellers of products in a global marketplace of ideas. The assumption is that fewer buyers (publishers) competing on the same talent pool reduce the bargaining power of sellers (writers).
The case “potentially sets a precedent that could be used in the labor sector,” says Rebecca Allensworth, an antitrust expert who is a professor of law at Vanderbilt University.
Biden’s Competition Crusade
The Biden administration is laying new ground on business concentration and competition, and the government’s case against the publishers’ merger could be seen as a significant step forward.
President Joe Biden has made competition a pillar of his economic policy, which he calls the external market force of an array of industries, and stresses the importance of strong competition for the economy, workers, consumers and small businesses. He has called on federal regulators, particularly the Justice Department and the Federal Trade Commission, to do more investigation into large business combinations.
Biden issued an executive order a year ago in which he set out 72 actions and recommendations for federal agencies targeting anti-competitive practices in tech, health care, agriculture and many other parts of the economy. Targets range from hearing aid prices to airline baggage fees.
Another test on the competition starting Monday in federal court: The Justice Department is suing to block UnitedHealth Group, which runs the largest US health insurer, from acquiring health-tech company Change Healthcare. The government argues that the $13 billion deal would hurt competition and put too much health care claim information in the hands of one company.
Publishers make their case
Wait, Penguin Random House and Simon & Schuster say they’re ready to enter the test: The merger will actually strengthen competition among publishers to find and sell the hottest books, leaving the combined company with more compensation for authors. will be able to offer.
Publishers say this will benefit readers, booksellers and authors by creating a more efficient company that will bring lower prices for books. The government has failed to show the loss to consumers as readers as the merger will not raise prices, the companies argue.
“The US publishing industry is strong and highly competitive,” he says in his filing. “There are more readers reading books than ever before, and that number continues to grow every year. Publishers compete fiercely to reach those readers, and the only way they can compete effectively is to find, acquire, and publish the books that readers most want to read. … in this case the merger would lead to even greater competition and growth in the US publishing industry.”
Companies reject the government’s central focus on the market for anticipated best-selling books—defined as those acquired to advance authors of at least $250,000. According to the companies’ filings, they represent only a small sliver of all books published by commercial companies, about 2%.
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