INTERPRETATION: Application to block the merger of books sets competition struggle | Business news

WASHINGTON (AP) — In an age of mega-mergers and flashy high-tech corporate tie-ups, the plan by the largest U.S. book publisher to buy the fourth-largest publishing house for just $2.2 billion may seem a bit outlandish. But the deal represents such a key test for the Biden administration’s antitrust policies that the Justice Department is calling an unusual witness for The Stand: unusual author Stephen King.

In Penguin Random House’s proposed acquisition of rival Simon & Schuster, which would reduce the “big five” of US publishers to four, the administration is toning its antitrust bravado and fighting corporate concentration.

The Justice Department sued to block the merger. The trial will begin Monday in federal court in Washington.

The government says the merger will hurt authors and ultimately readers if German media titan Bertelsmann is allowed to buy Simon & Schuster from US media company Paramount Global. It said the deal would stifle competition and give Penguin Random House giant influence over what books are published in the U.S., which would likely drive down what authors pay and give consumers fewer books to choose from.

An appearance at some point by King, whose work is published by Simon & Schuster, would be highly unusual for an antitrust proceeding and would attract widespread attention.

The publishers are fighting the court. They will counter that the merger will increase competition among publishers to find and sell the most popular books. This will benefit readers, booksellers and authors, they say.

Case view:

PUBLICATION OF VYAZHKAVAGOVIK:

The two New York publishers have an impressive stable of blockbuster authors who have sold several million copies and secured multimillion-dollar deals. The constellation of Penguin Random House includes Barack and Michelle Obama, whose package of memoirs was approximately $65 million, Bill Clinton (he received $15 million for his memoirs), Toni Morrison, John Grisham and Dan Brown.

Simon & Schuster includes Hillary Clinton (she got her $8 million), Bob Woodward and Walter Isaacson.

And the king. His post-apocalyptic novel The Stand, published in 1978, covered a deadly pandemic of gunshot influenza.

Bruce Springsteen split the difference: his Renegades: Born in the USA with Barack Obama was published by Penguin Random House; his memoirs are published by Simon & Schuster.

THEY THROWN BOOKS AT THEM

As it stands, No. 1 Penguin Random House and No. 4 Simon & Schuster (by total sales) are competing fiercely to acquire the rights to publish the most popular books expected, the Justice Department says in its lawsuit. If allowed to merge, the combined company would control nearly 50% of the market for those books, it said, harming competition by reducing advances paid to authors and reducing production, creativity and diversity.

The Big Five—the other three—Hachette, HarperCollins, and Macmillan—dominate US publishing. They make up 90% of the market for expected best-selling books, the government said in a court filing. “The proposed merger will further consolidate this concentrated industry, make the largest player even larger and likely increase coordination in an industry with a history of coordination among large publishers,” it said.

The Justice Department’s case goes beyond traditional antitrust concerns about concentration that raises prices for consumers by pointing to the effect on consumer choice and treating authors as workers as well as sellers of products in the global marketplace of ideas. The idea is that fewer buyers (publishers) competing for the same talent pool reduces the trade of sellers (authors).

The case “potentially sets a precedent that can be used in the labor field,” says Rebecca Allensworth, an antitrust expert and professor of law at Vanderbilt University.

BIDEN’S COMPETITIVE CRUSADE

The Biden administration is looking for new ground for business concentration and competition, and the government’s lawsuit against the publisher merger could be seen as an important step.

President Joe Biden has made competition a pillar of his economic policy, denouncing what he calls the excessive market power of a number of industries and stressing the importance of strong competition for the economy, workers, consumers and small businesses. He called on federal regulators, particularly the Department of Justice and the Federal Trade Commission, to monitor mergers more closely.

A year ago, Biden issued an executive order targeting what he called anti-competitive practices in technology, health care, agriculture and many other areas of the economy, laying out 72 actions and recommendations for federal agencies. Targets range from hearing aid prices to airline baggage fees.

Another antitrust trial begins 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 says the $13 billion deal would harm competition and put too much information about health care claims in the hands of one company.

PUBLISHERS DO THEIR THING

Wait, Penguin Random House and Simon & Schuster say as they prepare to launch a trial: The merger will actually increase competition among publishers to find and sell the most popular books, allowing the combined company to offer authors more compensation.

This will benefit readers, booksellers and authors, the publishers say, by creating a more efficient campaign that will bring lower book prices. The government failed to show harm to consumers as readers because the merger would not push up prices, the companies argued.

“The US publishing industry is robust and highly competitive,” they said in a statement. “More readers are reading books than ever before, and the number is growing every year. Publishers are fighting intensely to reach these readers, and the only way they can compete effectively is to find, acquire, and publish the books that readers most want to read. … The merger at issue in this case will promote even greater competition and growth in the US publishing industry.”

The companies are rejecting the government’s central focus on the anticipated best-seller market, defined as books purchased with author advances of at least $250,000. They make up only a tiny fraction, about 2%, of all books published by commercial companies, according to company filings.

Follow Marcy Gordon at https://www.twitter.com/mgordonap