On the Publishing Monopolization Effort

The Villainous Liberal Arts Majors are at it Again

As an avid book reader, I was heartened to discover the Department of Justice (DOJ) decided to file a lawsuit blocking the merger between Penguin Random House and Simon & Schuster, respectively the No. 1 and No. 3 publishing houses in the US. Writing and publishing is a fraught industry for workers and authors. Anything that prevents big corporations from gaining more conglomerate power is good news.

Ever since the 1970s, there has been a disturbing trend of corporate consolidation in the publishing industry. Over the years, the number of major publishing houses reduced to what is now called the “Big Five” (Penguin Random House, Hachette Book Group, Harper Collins, Simon & Schuster and Macmillan), who collectively own the overwhelming market share of the entire US book industry.

If this merger were to come to pass, it would set the stage for an even more oligopolistic control. A so-called Big Four with enough power to impose all kinds of exploitative conditions against its workers and authors, with less competition for wages as it would be easier to secure publishing rights. Not only would the economic security of workers and authors be considerably jeopardized, the merger would also diminish the diversity of ideas as authors would be forced to cater to the risk-averse and commercial tastes of major publishing houses, stifling the publication of books that don't fit into the “bestseller” mold.

Just to illustrate the amount of power the current Big Five already has, this merger could impact my reading options even though I don’t live in the US, as the largest publishing house in my home country of Brazil (Companhia das Letras) is actually owned by Penguin Random House; not to mention, a considerable amount of books populating the shelves of Brazilian bookstores are translated versions of works published by the other four major publishers.

As a reader, after having studied the DOJ’s lawsuit filed in court, it was a relief  when the government stepped in order to attempt to setup a kind of bulwark against this coming publishing oligopoly, especially considering the context that the federal government sat back during the industry’s last great merger in 2013, which created the largest book publisher in the US and the world—Penguin Random House. It was scandalous that the DOJ didn’t consider the Penguin and Random House merger to be a threat. But for whatever reason, this new merger finally forced some judgment to intervene, as the mega publisher’s greed will never be satiated, requiring their immediate action to prevent the monopolization of the market.

However, as a lawyer, when I finished reading the DOJ’s lawsuit, I was less optimistic about its success and, when I later read Penguin and Simon’s response, it reminded me of my resentment against most lawyers and economists within the antitrust establishment, here being the DOJ’s approach in challenging the merger. Rather than focusing on how the new publishing giant would harm consumers by raising prices, the DOJ’s arguments were mostly centered on how the authors would be harmed. 

According to the DOJ, the “merged firm would be able to pay less and extract more from authors…[b]y reducing pay, this merger would make it harder for authors to earn a living by writing books, which would, in turn, lead to a reduction in the quantity and variety of books published.” In other words, those directly affected by the merger are the authors who would be paid less, with the consumers being indirectly harmed with loss of quality and quantity of books.

At first glance, anybody with common sense and empathy would understand why underpaying authors solely because it has the economic power is reprehensible—if not downright unethical—and, for this reason alone, should be deemed illegal. Unfortunately, this line of thinking is not common amongst most antitrust lawyers and economists, who’ve been so brainwashed to serve the interests of corporations that, for the last few decades, distorted antitrust thinking to the point of not only corporate abuse being deemed “legal,” but “beneficial” to society.

In the next section, I will explain some technical antitrust concepts which can be rather tedious, but please bear with me as I believe it’s important to understand them in order to comprehend how the current mainstream antitrust thinking—exacerbated by mindless lawyers and economists—is completely retrograde, elitist and classist, contributing to the increasing monopolization of not only the publishing industry, but also the the entire US economy as a whole.

One of the main issues in antitrust law is determining whether a merger or conduct is anti-competitive and, consequently, illegal. Historically, antitrust enforcement was mostly focused to ensure that companies didn’t become too powerful and dominant in their respective industries, based on the belief that the power to dictate the economic lives of people should only be in the hands of a democratically elected government, not on a few companies.

However, from the late 1970s onward, this thinking shifted with the rise of a new school of thought created by certain lawyers and economists—the Chicago School—who introduced the consumer welfare standard to antitrust law. Based on this new school, the only metric that should be utilized to assess the legality of a merger is whether it harmed consumers’ welfare, with the definition of “harm” essentially being an increase of prices. Therefore, as long as the consumers didn’t face higher prices, there would not be an antitrust violation regardless of the company’s size or conduct.¹

As this standard provided a veneer of “objectivity” and “technicality” to antitrust analysis for it was supposedly grounded on economic “laws,” several lawyers and economists were seduced by this school of thought and successfully lobbied for its widespread adoption in the government and in the Judiciary, all under the naive pretense that this would benefit society.

It was based on this standard that, ever since the late 1970s, antitrust enforcement was systematically crippled and weakened, allowing a massive wave of extreme corporate consolidation across several different sectors of the US economy, creating the current oligarchy and plutocracy that underpays workers, lobbies the government for laws and regulations favorable to their interests and squeezes all of the money possible from their weaker and dependent suppliers.

In other words, it is okay to screw everybody else (employees, suppliers, vendors and local communities) as long as prices remain low; which, by the way, didn’t even come to fruition as recent studies show that big mergers didn’t decrease prices or increase efficiency.² The only “benefit” that the Chicago School and consumer welfare standard brought is more and more monopolization and inequality.

Returning to the merger between Penguin Random House and Simon & Schuster, it is exactly this issue which will hinder the DOJ’s case in court. A considerable amount of their arguments is based on how the authors will be harmed, not on the ways in which consumers will pay higher prices.

Due to lack of consumer price arguments, which I suspect weren’t raised due to the lack of data, the DOJ will have a long fight ahead of them in order to convince the judge that this merger will be harmful. In fact, this weakness was precisely brought up by the publishers themselves in their defense filing, “Notably, the Department of Justice (“DOJ”) does not allege that the merger will reduce competition in the market for book sales or raise prices for consumers.”

It is unfortunate that the current thinking of antitrust laws is in such a deplorable state, if prosecution cannot prove consumer prices will increase, anything is fair game, even if it means underpaying authors, laying off workers, and suppressing the diversity of opinions.

This is not to say that Penguin Random House and Simon & Schuster didn’t also argue that the merger will benefit authors, such as through the provision of better back office, editorial and sales services, but anybody who actually follows the industry understands that this is what we call in legal parlance bullshit.

After the consolidation of the publishing houses, the major publishers have increasingly stopped publishing new and diversified titles, mostly relying on bestsellers and back-list titles. It is the smaller publishing house who takes risks in finding new authors and, after their books reach moderate success, the Big Five Vultures will snatch the authors through sheer financial might. This tactic, by the way, was only made possible precisely because past antitrust enforcement—shaped by the consumer welfare standard—allowed the major publishing houses to become the “Big Five” in the first place, attaining its size and vast financial resources through mergers and labor exploitation rather than through legitimate means such as providing better content. 

This merger is a grave threat to the publishing industry, workers, authors, and consumers, reducing the diversity of ideas that is essential to society and democracy. Sadly, none of these harms are given its due attention by the current elitist antitrust thinking, prioritizing corporate profits and “consumer welfare” over any and all other values.

The worst part of it all, however, is that this change in antitrust, contributing to the monopolization of the publishing industry and the US economy as a whole, came about through the actions of an extremely small and select group of antitrust lawyers and economists who ignorantly assume their judgment is the one most beneficial to society.

Whether the country’s economy should be structured to serve the interests of big corporations or of the people is an extremely important matter for its citizens to decide, not a handful of lawyers and economists. Because of this elitist and patronizing class of people,  the economic lives of millions of Americans and other international peoples are now under the mercy of large corporations.

Though I am bitter that Penguin Random House and Simon & Schuster want to further monopolize the publishing industry, it is still a pittance compared to my resentment against the sycophantic lawyers/economists that paved the road for them.

Hopefully the DOJ will be successful in this case, but if the publishing industry and the entire economy will have any chance in preventing future monopolization attempts, it is about time the lawyers and economists who shape antitrust public policy and law are held accountable for their pernicious influence in the economy and culture at large. 

- MC

Where is value placed? In art itself? Is it what readers take from the experience: a challenge, a new idea? Or the profits made? The words within the book should mean more than the cost of the paper it's printed on. We can agree on this. Corporations don’t, obviously. Independent publishers are strained as is. There’s only so much 12/24-books-per-year publishers can do for “literature.” If major publishers are not willing to take hits on riskier and complex fiction then we all lose. The stagnation of literature is already visible; in the last few years there’s been incessant clamoring from publishers for auto-fictional, under-masticated novels—barely distinguishable from the milquetoast memoir craze of the late aughts.  

This is where the law should intervene. Money already is no object for the likes of Penguin and Simon & Schuster. A merger, beyond being ludicrous and monopolistic, is rank greed. More and more we will see the slow, steady disintegration of quality control in editing; an altogether lack of effort will reign supreme without the challenge of cutting edge large presses. 

The product, if one must use the word, will be worse. Strangeness is essential to a healthy artistic ecosystem, as is diversity, without which it’s best to just give up and let AI write the books, might as well. Human feeling will be unnecessary if all books are the same as publishers have manufactured enough consent to make consumers feel what is currently being published is literary excellence of the highest order. A cursory look at the last two decades of Pulitzer Prize winners is enough for the dread to set in. 

For the sake of interest, of my sanity; if art has any value then please let writers make odd, barely publishable books. Publishers have long lost the plot; profit is now the only thing to take pride over for the Penguins and Schusters of the world. A merger of this sort is antithetical to artistic development and liberty. It will further alienate readers, will make books written by minorities harder to publish, and will mobilize cash flows towards the most uninspired areas of publishing trends. 

Profit is the death of art. The death of art means the death of culture. The death of culture means the death of society. Perhaps we are already there. 

- CM

1. This is an oversimplification of what the consumer welfare standard actually means as technically it also takes into account other metrics such as quality and innovation. However, as quantitatively measuring changes in quality and innovation across different industries is extremely hard (and also for several different reasons that would take too long to explain), prices became the dominant metric which the consumer welfare standard utilizes.

2.  Kwoka, John, et al. Mergers, Merger Control, and Remedies: A Retrospective Analysis of U.S. Policy. The MIT Press, 2015; Blonigen, Bruce A., and Justin R. Pierce (2016). “Evidence for the Effects of Mergers on Market Power and Efficiency,” Finance and Economics Discussion Series 2016-082. Washington: Board of Governors of the Federal Reserve System