“The bigger, the better.”
It’s a common saying, and the opposite of something like, “Good things come in small packages.” Neither are necessarily wrong, especially in the world of business. For instance, a local independent shop may offer better customer service, but a large retailer can offer more variety.
But every big business started off as a small one, and one of the ideals of America is the land of opportunity — the possibility that anyone can make it. In order to make sure that can happen, the US government has laws against monopolies. Otherwise, the large businesses could instantly crush or absorb any competition and dominate the market. Which would mean consumers would have no choice but to pay whatever the company demands and leaves the business little incentive to improve their business.
This is all information you’ve likely learned already, if only in a game of Monopoly. But what do you know about a monopsony?
United States v. Bertelsmann SE & Co KGaA
In December 2020, I talked about ViacomCBS selling its Simon & Schuster publishing division to Penguin Random House, which is owned by German conglomerate Bertelsmann. Penguin Random House is already the largest publishing firm by far, and adding Simon & Schuster would just increase their dominance even more. This led to some opposition among industry insiders and trade groups, but others (including the two firms) argued fears of lesser author pay were overblown. In fact, they said the merger would actually be beneficial, like to better pressure Amazon’s pricing methods.
Post-merger, which was expected to close sometime this year, most manga would be distributed by Penguin Random House. Out of the biggest manga names, only Yen Press would not be under their umbrella along with smaller companies like DENPA.
Anyway, from the start were musings about whether the US government would challenge the deal. Well, they have.
Attorney General Merrick Garland explained the rationale for the lawsuit:
“If the world’s largest book publisher is permitted to acquire one of its biggest rivals, it will have unprecedented control over this important industry. American authors and consumers will pay the price of this anticompetitive merger — lower advances for authors and ultimately fewer books and less variety for consumers.”
Penguin Random House and Simon & Schuster have stated they will still operate independently after the sale, including bidding against each other for titles and the deal is a “pro-consumer, pro-author, and pro-book seller transaction”.
However, groups like the Authors Guild are applauding the US government for stepping in.
The two publishers will be going to court, hiring the same lawyer who prevented the previous administration from blocking the AT&T-Time Warner deal.
Although, to be fair, it’s not like President Biden has a known personal grief with ViacomCBS, Bertelsmann, or any other of the companies involved here, so I imagine this case will be at least a bit more difficult. Especially when, according to the government’s complaint:
“Although Defendants have publicly suggested that the merger is necessary to create a stronger counterweight to Amazon, Penguin Random House’s Global CEO privately admitted that he ‘never, never bought into that argument’ and that one ‘[g]oal’ after the merger is to become an ‘[e]xceptional partner’ to Amazon.”
In addition, there’s also a quote from Simon & Schuster’s CEO who wrote to a top author, “I’m pretty sure that the Department of Justice wouldn’t allow Penguin Random House to buy us, but that’s assuming we still have a Department of Justice.” He now says this was a joke.
So, yeah, when you have records of two executives from these publishers saying this deal isn’t likely unless the US just gave up on law and countering one of their biggest public arguments, the lawsuit to prevent the deal has a high chance of being successful.
Of course, the government could always settle with the publishers. Like, perhaps Penguin Random House has to sell some of its divisions or be transparent about any bidding between its division and Simon & Schuster. Or they could lose completely, with the judge finding the deal okay since the Penguin and Random House merger was fine and that new publishers are still popping up. The judge hearing the case was nominated by President Biden in March and confirmed in September.
Monopsony
The government’s main argument is rather unusual, at least for modern times: the suit is focusing on the monetary changes for authors (advance payments) rather than book buyers.
So this isn’t an anti-monopoly case, it’s an anti-monopsony case. According to Investopedia, a monopsony is “is a market condition in which there is only one buyer, the monopsonist”.
The gist is that readers will still have plenty of options to buy books from, but authors will have fewer options to sell their books to (i.e. “get hired” with advance payments). Consumers will be hurt, but only because lower author salary means less people can make a living writing — and fewer books.
This, according to some analysts, may be the stronger argument, and it’s why the Authors Guild and big names like Stephen King support blocking the sale. In an interview with Bloomberg Law, a former principal deputy assistant attorney general in the Antitrust Division at the Department Justice also pointed out that if Penguin Random House and Simon & Schuster are still going to be bidding for rights as they claim, then there seems to be little point in them merging.
If the Department of Justice successfully prevents Penguin Random House from buying Simon & Schuster, the latter would still get some money from the deal. ViacomCBS will likely put the company back up for auction, although a new sale price will likely be closer to the original high-end estimates of around $1.7 billion versus the almost $2.18 billion Penguin Random House agreed to.
Penguin Random House’s Future
But what will happen is probably a long way off. The AT&T-TimeWarner case took over two years before the government gave up appealing again, so it’s easy to see this lawsuit taking just as long. And this is a different sort of case, so it could go either way.
Even though Penguin Random House is already so large and books are more popular than ever, it’s hard to see a lot of benefits to this deal. Just think in terms of manga alone — almost every publisher’s titles handled by one company.
Since my original article on this subject, Penguin Random House has managed to sign distribution agreements with IDW Comics and Marvel, which, along with DC Comics in 2020, ended Diamond Comics’ almost exclusive hold on the direct market (aka comic book shops).
Penguin Random House isn’t afraid to go after the competition and increase its publishing and distribution businesses. So there are legitimate monopsony concerns the company could really put pressure for any new publisher or author (manga or otherwise) who wants to work with them since the competition is so much smaller.
But if this deal goes through, who’s to say Penguin Random House won’t try to nab another publisher and reduce the competition even further — maybe even so that the largest of the non-Bertelsmann-affiliated manga publishers, Yen Press, ends up under their umbrella?
Or, as one Twitter user put it: