Last fall Bertelsmann announced plans to acquire Simon & Schuster, which would reduce the number of Big Five publishers to four. In response, the Authors Guild, Open Markets Institute, Horror Writers Association, National Writers Union, Novelists Inc., Romance Writers Association, Sisters in Crime, and Western Writers of America have written to Richard Power, Acting Attorney General of the Antitrust Division at the Department of Justice, urging the DOJ not to approve the proposed acquisition.
The groups say the merger between Bertelsmann’s Penguin Random House (PRH) and Simon & Schuster would create an unbalanced industry with one grossly outsized company, which, among other things, will inevitably lead to less competition for authors’ manuscripts. The takeover would, for instance, result in Bertelsmann controlling a 70% market share in the literary and general fiction market in the United States. Bertelsmann would also control 70% of the action and adventure, horror, political, legal, medical, erotica, and coming-of-age submarkets and 60% of biography.
The complete letter is available here [PDF file].
The letter notes that Bertelsmann’s case for taking over Simon & Schuster is the various threats to its business posed by Amazon’s monopoly over book sales, and Amazon’s increasing power over book publishing, printing, warehousing and many other activities. However, while the writers groups agree that Amazon’s monopoly poses a variety of threats, they contend that the strategy of attempting to address dangerous monopolies by building countervailing monopolies has already been tried and failed.
The Department [of Justice] adopted precisely such an approach in 2013 when it approved Bertelsmann’s takeover of Penguin – even though that deal reduced the ranks of top-tier trade publishers from six to five. The fact that Bertelsmann is now proposing another giant deal clearly proves that the previous concentration of power was not sufficient to counterbalance Amazon’s monopoly and create a more level playing field.
What a Bertelsmann acquisition of Simon & Schuster would do, however, is increase the already huge pressures on the remaining larger publishers to compete with the outsized company on manuscripts, distribution, printing, and procurement. Many predict that the remaining three of the current “Big 5” will be forced to merge with each other to stay in the game, leaving the United States – a powerful and diverse nation of 330 million people – with two dominant publishers.
As was true last year when the Department blocked Quad/Graphics takeover of LSC, Bertelsmann’s acquisition of Simon & Schuster is a threat to democracy and must be stopped.
But the time has also come to recognize that simply blocking takeovers is no longer sufficient. The Department of Justice must begin today to proactively restructure the entire U.S. market for books in ways that also deal with the danger posed by Amazon. In this way alone will the Department fulfill its mission of protecting the interest of the public as a whole, and of every reader and author in the United States, from dangerous concentrations of power and control over America’s authors, editors, booksellers, and readers, and over public debate itself.
According to Publishers Weekly, “PRH execs argue that, once ViacomCBS put S&S up for sale in the spring, the odds were good that the trade publishing industry was in for another round of consolidation, and that PRH is the best positioned to implement a smooth transition.”
If regulators approve, the deal is expected to be completed this year.