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The US government is suing the merger of two major publishers to prevent a monopoly

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Writer Stephen King at a literary gala in New York in May 2018.Evan Agostini (Evan Agostini/Invision/AP)

The US government has used heavy artillery, the hammer of justice, to prevent a publishing mega-merger that would turn the book market into a virtual monopoly: the acquisition of Simon & Schuster by the giant Penguin Random House announced in November Blocked by the Department of Justice in 2020 and a year later. The trial, which began this Monday in federal court in Washington, is not only one of the Joe Biden administration’s main battles against monopolies; It’s also a deterrent to future big deals, like UnitedHealth’s $13 billion acquisition of healthcare technology company Change Healthcare. The trial against the health mega-fusion also begins this Monday in the federal capital. Both trials will take around three weeks, with a verdict expected in the coming months.

That of Penguin Random House (PRH) and Simon & Schuster is one of the most important antitrust cases in the mandate of President Joe Biden, whose administration also has its sights set on the monopolization of the market by the big tech companies. Justice argues that the merger of Penguin, the largest publisher in the world and in the United States, and Simon & Schuster, the third largest in the country, will harm free competition in the industry and reduce authors’ bargaining power, in addition to depriving them of publishing opportunities above all reduced the catalog offer for consumers. PRH countered on the eve of the hearing with a report claiming just the opposite: that buying Simon & Schuster will result in increased profits for authors and more options for consumers.

The US media invariably uses the word consumer instead of reader, but the term is not innocent: it’s about a huge slice of the pie in the lucrative entertainment sector. The U.S. regulator (Federal Trade Commission, FTC), headed by Lina Khan, known for her anti-monopoly belligerence, last November halted the nearly $2,180 million operation that allegedly merges two of the five large companies in the American publishing industry, the so-called Big Five, would consolidate the oligopoly. In mid-July, PRH sold 22% of printed books in the US and Simon & Schuster 9%. The first, with more than 90 stamps, publishes about 2,000 titles a year; the second half.

Many authors have spoken about it, most notably the bestselling Stephen King, a veteran writer on the Simon & Schuster payroll who has not hesitated to side with the government. The master of the horror genre will speak out for the administration this Tuesday. Journalist Bob Woodward, one of the authors of the best seller on the Watergate scandal and the gavel of former President Donald Trump, is also part of the Simon & Schuster team.

The court hearing the case will be headed by a judge appointed by President Biden. But beyond the offensive against White House monopolies, the matter raises other implications: the consolidation or decantation of the publishing industry with the wind against it, amid the reformulation of the entertainment sector. PRH, which itself emerged from a merger in 2013, has bestselling authors such as John Grisham and Margaret Atwood in addition to the Obama couple. The former First Lady will publish her next book in November.

Feedback between different sectors of the big entertainment industry is multi-directional. Hollywood thrives on best-selling stories and turns them into box office hits, and hot-shot celebrities, from actresses to screenwriters, fill the publishers’ catalogue. Like Hollywood, the book industry is increasingly relying on blockbusters to generate secure profits.

PRH, owned by the German group Bertelsmann, agreed in November 2020 to buy Simon & Schuster from ViacomCBS, renamed Paramount Global, to shed ballast to bet on the highly competitive business of stream. PRH wasn’t the only bidder, tycoon Rupert Murdoch, the controversial owner of populist media conglomerate News Corporation and owner of HarperCollins Publishers, PRH’s biggest rival, also bid to acquire the publishing house, which has a 10% market share in the US

PRH’s arguments are based on the fact that the industry is strong and smaller or independent publishers collectively outperform one or more of the Big Five in title purchases each year. PRH also claims that authors and consumers would benefit from the merger as it would combine Simon & Schuster’s popular list of titles with PRH’s “leading distribution structure and management systems”.

In its litigation, the Justice Department has focused on the market for authors whose books are contracted for editorial advances of at least $250,000, a segment that has more than $1 billion in 2020 between the big names and the major bets added to the season. PRH and Simon & Schuster refute the Justice number, arguing that the $250,000 figure is arbitrary and relates only to about 1,200 books per year, about “2% of all books published by commercial publishers.”

Source elpais.com

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