The merger of books that concerns Amazon

Amazon is not being tried in a ledger lawsuit. But its power is. The US government is suing to prevent book publisher Penguin Random H...


Amazon is not being tried in a ledger lawsuit. But its power is.

The US government is suing to prevent book publisher Penguin Random House from buying competitor Simon & Schuster. The government says the merger, which will reduce the number of major US consumer book publishers from five to four, will hurt some authors by reducing competition for their books.

A trial within the trial of the government started this week, and my colleagues wrote a useful explanation of the legal issues and issues for the companies involved, writers and book lovers.

This case, which concerns much more than books and the income of great authorsis another example of the debate over how to manage big business – including the biggest digital powerhouses – that shape our world.

The elephant in the room is Amazon. Book publishers want to get bigger and stronger, in part to get more traction on Amazon, by far the biggest book seller in the United States. One version of Penguin Random House’s strategy boils down to this: our book publishing monopoly is the best defense against Amazon’s book selling monopoly.

As the dominant way for Americans to find and buy books, Amazon can, in theory, direct people to titles that generate more revenue for the company. If authors or publishers don’t want their books sold on Amazon, they can fade into obscurity, or counterfeits can proliferate. But if the publisher is big enough, the theory goes, then they have leverage on Amazon to stock books at prices and terms the publisher prefers.

“Their argument is that to protect the market from being monopolized by Amazon, we’re going to monopolize the market,” said Barry Lynn, executive director of the Open Markets Institute, an organization that wants tougher antitrust laws and enforcement.

Penguin Random House is not saying it wants to buy a rival to beat Amazon at the power game, which is not legally relevant in the government’s lawsuit. But Lynn told me that if Amazon’s dominance hurts book publishing companies, readers, authors, or the American public — and he thinks it does — allowing a book company to become more muscle to intimidate Amazon is counterproductive. The best approach, he said, is to restrict Amazon with laws and regulations.

We know that a few tech companies – including Amazon, Google, Facebook and Apple – have enormous influence over entire industries and our lives. We are all trying to figure out in what ways their power is good or bad for us, and what, if anything, government policy and law should do about the downsides. This disputed merger of book publishers is an example of awareness of these essential issues.

It’s not uncommon for companies to justify acquisitions by saying they need more power to level the playing field. When AT&T bought the media and entertainment company that was called then Time Warner, one of the explanations of the company was that it wanted to become a alternative to the powers of digital advertising like Google and Facebook. Music companies have consolidated over the past 15 years, in part to have more clout as digital services like Spotify transform the way we listen to music.

And ten years ago, when German conglomerate Bertelsmann bought a competitor to create Penguin Random House, that merger was a response to the influence of Amazon on book sales.

Today, Penguin Random House says another acquisition would make book publishing more competitive and help authors and readers. In a twist, he quotes Amazon strong growth in book publishing as an example of fierce competition in its industry.

Lynn’s criticism of both Penguin Random House and Amazon reflects an influential view, particularly among leftist economists, civil servants and lawyers, that America has botched its approach to big business, especially those digital. The critical is it the growing consolidation from industries such as airlines, banking, digital advertising, media and meat packing hurts buyers, workers and citizens.

Some Republican politicians I agree with leftists in want to more government detention digital superstars. Congress also debated a bill that would require potentially significant business changes to Amazon and other tech giants, though it’s unlikely to become law anytime soon. Similar laws have been passed somewhere else in the world.

Chris Sagers, a law professor at Cleveland State University, who has written a book on a previous government book industry antitrust lawsuit, told me that the outcome of this case probably won’t matter much. According to him, the book industry already overcharges readers and underpays authors. He thinks Amazon and book publishers have been allowed to get too big and too powerful.

This book publishing court case is a window into deep-rooted problems in the American economy that have taken decades to develop and will take a long time to change.

“There is really substantial consolidation in markets everywhere,” Sagers wrote in an email. “Once you’ve let an economy get to this point, there’s very little that antitrust law (or any other regulatory intervention) can hope to do.”

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A classic scene from the movie “Singin’ in the Rain”, but with a velociraptor instead of Gene Kelly. (Thanks to my colleague Jane Coaston for sharing this tweet.)


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