Reuters: Penguin’s big book deal gets a regulatory ice bath

November 2, 2021 Media

NEW YORK, Nov 3 (Reuters Breakingviews) – Consumers usually serve as the main characters in antitrust dramas; U.S. watchdogs in particular worry mergers will saddle Americans with higher prices. But the Department of Justice, in dumping ice on Penguin Random House’s acquisition of smaller rival Simon & Schuster, is focusing instead on authors. That suggests it’s setting the tone for a broader anti-merger opus.

Attorney General Merrick Garland’s agency on Tuesday sued to block read more the $2.2 billion bid by German media group Bertelsmann (BTGGg.F), which owns Penguin, to buy Simon & Schuster from broadcaster ViacomCBS. The tie-up would make the world’s largest publisher even bigger. Adding Simon & Schuster, the No. 3 in the U.S. book market, would boost its share of literary nonfiction in that country to over 70%, according to NPD Book Scan.

The problem isn’t what the enlarged Penguin sells, though, but what it buys: authors’ labor. The regulator alleges writers could get paid less because the two publishers often bid against each other for top-selling books. By eliminating a competitive bidder, the Department of Justice reckons, authors will get less, and there will be fewer of them. Dependence on advance payments as a means of paying the bills means it’s not like budding authors can just give big publishers the elbow.

It’s a change of tack, because generally watchdogs sue based on harm to the consumer’s wallet, not the quality of what’s on their bookshelf. An earlier lawsuit against Apple (AAPL.O) and publishers including Simon & Schuster and Penguin focused on e-book pricing. AT&T (T.N), the top U.S. telecom in 2011, failed to clinch its union with T-Mobile US (TMUS.O) because the regulators feared higher prices. Similar problems beset cable giant Comcast’s (CMCSA.O) bid for competitor Time Warner Cable.

Federal agencies have rarely stopped a merger based on worries that it will create something like a monopsony for labor, according to the American Economic Liberties Project. Then again, there’s a new sheriff in town. President Joe Biden thinks wages are a top priority. And in targeting powerful tech firms like Amazon.com (AMZN.O) and Meta Platforms (FB.O), watchdogs like the Federal Trade Commission seem to think they have a license to get creative. This plot will definitely thicken.