Amber Miller – On October 31, 2022, the United States District Court for the District of Columbia blocked publishing giant, Penguin Random House (“Penguin”), from its proposed $2.2 billion acquisition of equally ubiquitous publisher, Simon & Schuster. The district court sided with the Department of Justice (“DOJ”), which challenged the acquisition on the basis that it would harm authors, and more importantly, those that have published best sellers. This decision not only represents a strong commitment to the Biden administration’s broad focus on antitrust regulation, but also a marked departure from the goal of most antitrust decisions: protecting consumers.
Most antitrust decisions aim to protect consumers from monopolies, whereby one seller dominates the market with no limit on how much it can charge for a given product or service. However, the district court’s decision operates under a theory of monopsony, sometimes referred to as a buyer’s monopoly. In effect, a monopsony allows a single buyer to set its desired purchase price as low as it would like. Where the monopoly’s evil lies in the lack of a price ceiling, the monopsony’s lies in the lack of a price floor. If the proposed merger had been approved, Penguin would own 49% of the publishing market for anticipated best-selling books. The next largest publisher, HarperCollins, would own less than half that amount.
The court’s decision was made in an extremely narrow context, focusing on authors whose work earns advances $250,000 or more. The DOJ argued that the proposed merger would inhibit competition for publishing rights, limiting authors’ access to publishers for their work. More specifically, best-selling authors would have less competition for blockbuster books and lower advances. Acclaimed author, Stephen King, testified that “consolidation is bad for competition,” emphasizing that barring authors from publisher-shopping makes it “tougher for writers to find money to live on.”
The district court’s decision to block the merger signals a departure from protecting the average consumer while maintaining standards of quality products at fair prices. The ruling disproportionately favored a very specific subset of authors at the expense of both avid readers and lesser known independent authors. The price publishers pay for book advances varies and can be virtually any amount. However, authors who earn advances of at least $250,000 represent a very small group, as publishers are willing to pay higher advances to those authors whose work they predict will drive revenue.
It is rare for antitrust cases to be decided under a monopsony analysis, but its continuity seems likely. Preventing monopsony could have larger implications for industries that operate similarly to publishing such as the tech and entertainment industries. These industries are built on the labor of independent contractors who currently do not have the bargaining power that monopsony prevention would afford them.
Many of the large publishing houses of today have grown so large because of strategic mergers which have allowed them to publish a wide variety of content at affordable price points to the benefit of the average consumer. Likewise, authors of all levels of readership have benefitted from being marketed and represented by large, reputable publishers aflush with resources to support their careers, and pay the high advances many best-selling authors bother merit and have become accustomed to.
In general, the goal of antitrust laws is “to protect the process of competition for the benefit of consumers, making sure there are strong incentives for business to operate efficiently, keep prices down, and keep quality up.” The court’s decision to block the Penguin merger seems to run afoul of these supposed objectives.
Note: This article was originally submitted for posting in November 2022.
