The Biden administration believes that even the 1 percent deserves antitrust laws protection. Under way in a federal courthouse in Washington is a highly anticipated trial in which the US Department of Justice is seeking to block the tie-up of two prestigious book publishers, Bertelsmann’s Penguin Random House and Simon & Schuster.
Simon’s owner, the former ViacomCBS now known as Paramount, announced the $2bn sale to PRH in late 2020. If the deal is completed, it would reduce the so-called Big Five US publishing houses to just four.
The DoJ’s theory of market harm is intriguing. It does not say that book prices are going to rise. Prospective authors who are selling manuscript ideas will have a harder time getting the best book advance if there isn’t one buyer.
What is more, the DoJ universe of victims is extremely constrained: it says those very rarefied authors who command more than $250k in book advances — celebrities and prizewinning authors — will end up getting perhaps a few hundred thousand dollars less than they would have should the Big Five remain in tact.
Simon and PRH refute this view. In their court filings and in trial they say the DoJ’s definition of a market is contrived and bears no resemblance to the practical market for authors. They claim the deal will be a benefit to the literary ecosystem and a player with the resources to challenge Amazon and pay greater advances to authors.
Antitrust enforcement has always been focused on the idea that consumers should not be forced to pay higher prices by concentrated sellers. However, US policymakers are becoming more concerned about labour market distortions and the resulting increase in income inequality.
As such, so-called “monopsony” scenarios where purchasers, in this case of labour, consolidate and allegedly increase their power to push down wages are being forced to defend such arrangements even when the alleged victims are already privileged.
Surprisingly, the DoJ has found some compelling evidence against the deal. In early 2020 during the Trump administration, a top executive at Simon wrote to an author just after the sale process had been announced, saying, “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”.
The DoJ also cites several instances where PRH and Simon engaged in direct bidding warfare over A-list authors. In one instance, an advance reached $775k. This is $300k more than where the back-and forth began. PRH and Simon believe that $1bn annually in advances in this market could shrink by $30mn.
“We’re not dealing with bushels of wheat,” said Daniel Petrocelli, an attorney for the publishers in his opening statement last week. “Every book is a new product that has never existed before, and the competition to win that book is zealous, because if you don’t win that book, you have nothing to sell.”
The US government’s first witness was Stephen King, the horror author, testifying that he believed the merger would be bad for writers such as him. Both sides have economists who will debate the details of the book market and how to get there. The witness list is so full of literary agents and publishing executives that the trial could be held in Brooklyn.
While the publisher dispute was about to get under way, another elite group was claiming they were being denied their right to make a fortune by a dominant employer. After being dropped from the elite circuit earlier this season to make way for the LIV Golf Series, several golfers sued PGA Tour.
The PGA Tour suspended players who quit because they couldn’t participate in both leagues simultaneously. The players wrote in their lawsuit that such an exclusionary standard maintained the “PGA Tour’s monopsony power over the purchase of services from professional golfers to participate in elite golf events”.
It might prove difficult to determine the extent of the alleged harm suffered by the golfers, given that LIV golf, which is backed by Saudi Arabia, had spent hundreds of millions of dollars on tournament purses and signing bonus payments. Still, even as politicians have worried about factory workers and fast-food employees, “antitrust laws still apply to workers who make a lot of money”, said James Fishkin, a partner at law firm, Dechert.
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