One of the most important legal cases in recent years began in the United States on Monday. The parties involved: the Biden administration and two of America’s top five publishers, Penguin Random House and Simon & Schuster. The subject of the lawsuit: Penguin Random House’s takeover of Simon & Schuster, a $2.18 billion operation that, as Alexandra Alter, Elizabeth A. Harris, and David McCabe write about New York Timeswould radically change the American literary market.
According to the government, for the worse. The Biden administration’s argument is the argument of all governments pursuing important antitrust policies. If Penguin Random House were indeed to acquire Simon & Schuster, a monopsony would result: a seller able to exercise excessive power over its suppliers (a monopoly, on the other hand, is the seller able to exercise the same excessive power over consumers). In the publishing market, the suppliers are the authors, and in this part of the publishing market, those who are defined as top sellers: authors who sell a lot of copies, who make a lot of money, and therefore deserve advances of over $250,000. John Grisham, EL James, Margaret Atwood, Nora Roberts, Barack and Michelle Obama, to understand. If the publishers who are able to invest these sums – the so-called Big Five: Penguin Random House, Simon & Schuster, Hachette, Macmillan and HarperCollins – fall from five to four, there will consequently be less competition around the books on the publishing market by the top sellers and this will lead to a decrease in the amounts paid to secure the same books. “There will be fewer writers who will make a living from writing,” reads the summary from the US Department of Justice in an initial hearing. In support of its thesis, the Biden administration can bring some numbers that leave little room for interpretation. Penguin Random House is the largest American publisher, publishing about two thousand books each year. By acquiring Simon & Schuster, it would add another thousand titles to its catalog. If the agreement signed between the two companies in 2020 were to be judged regular, a publishing giant would be born that alone produces 49 percent of the hundred best-selling books in America (currently Penguin Random House produces 38 percent, Simon & Schuster on the 11th). Without taking into account that Penguin Random House, which already owns the most important printing, transport and distribution network in the market, would also acquire the former competitor’s facilities and infrastructure.
The counterargument from Bertelsmann, the company that owns Penguin Random House, is that none of the government’s concerns are realistic. Allowing the birth of a bigger and stronger seller will not have any negative consequences either for consumers or, above all, for suppliers. A growing business actually means a more competitive market, which means higher advances for authors and lower prices for readers. The government, Bertelsmann argues, does not know the publishing market, overestimates the importance of the Big Five “auctions” to obtain manuscripts from top sellers, and exaggerates the frequency with which the two publishers in question, Penguin Random House and Simon & Schuster, are in direct competition for a book. Then there is a part of Bertelsmann’s counterargument that is not directly relevant to the purposes of this process, but is very relevant in the debate about the future of American (and not just American) publishing. The modern publishing market, argue the lawyers and executives of Penguin Random House and Simon & Schuster, consists not only of the Big Five, but also dozens of smaller publishers and hundreds of independents. The publishing market today consists mainly of Big Tech giants: Apple, Disney, to name just two, and of course Amazon.
In his newsletter At Techthe journalist by New York Times Shira Ovide explained why Amazon is the “elephant in the room” in this process. Basically, Bertelsmann is trying to portray himself as the future champion of American publishing, the adversary finally strong enough to put “bully” Amazon in his place after years of abuse and oppression. To do that, Bertelsmann argues, however, the purchase of Simon & Schuster must go through: only then will the company actually have the broad and deep enough arsenal to declare war on the world’s richest. Indeed, for Bertelsmann, a nail hits a nail: the excessive power of Amazon – it is on Amazon that most American readers discover and buy books, it is on Amazon that all American authors must sell their books, facts that allow the company to Bezos affects the market almost like a monopoly – it can only be limited and reduced by a correspondingly excessive power. The excesses of capitalism are fought with even more capitalism. To answer this strange thesis, Ovide interviewed Barry Lynn, executive director of the Open Markets Institute, an organization that promotes stricter and better enforced antitrust laws. For Lynn, the only way to limit the overwhelming power of companies like Amazon is through state laws. Additionally, Lynn adds, Bertelsmann’s argument is outdated and the facts have often disproved it. When AT&T decided to buy what was then Time Warner, it said it had to do so to compete with Google and Facebook. In recent years, there have been a ton of acquisitions and mergers in the music industry, all motivated by the need to compete with Spotify. In 2012, Bertelsmann, then owner of the Random House publisher, bought Penguin: the explanation was that the deal was necessary to withstand Amazon’s competition. Even today, Google, Facebook, Spotify and Amazon remain the monopolies used to justify the creation of other monopolies.
Judge Florence Pan of the United States District Court for the District of Columbia will decide whether the agreement between Penguin Random House and Simon & Schuster is legal. Should Pan decide that the acquisition violates US antitrust rules, Bertelsmann will have to pay $200 million in fines to Paramount Group, the company that owns Simon & Schuster. For the latter, the future would therefore be uncertain: the Paramount Group has already announced that in any case it no longer intends to invest in the publisher, which at that time could be sold to a third party, with consequences – especially on workers – currently impossible to predict. Just started, the trial has already had one memorable moment: Stephen King’s testimony, called by the Department of Justice. King said he was concerned about the consequences the birth of this publishing giant could have on smaller publishers, the ones where “young writers make their bones.” At one point in his testimony, he was told Penguin Random House’s argument that the latter and Simon & Schuster will continue to compete in the publishing market as if they were two separate entities, even though they belonged to the same multinational culture. possible to avoid all the unfortunate consequences he imagined. “I think it’s a rather ridiculous thesis – replied the writer – it’s like saying that husband and wife are competing to buy a house”.