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Why the Penguin Random House Merger Is Also About Amazon


Amazon isn’t on trial in a giant books lawsuit. But its power is.

The U.S. government is suing to stop the book publisher Penguin Random House from buying a competitor, Simon & Schuster. The federal government says that the merger, which can shrink the number of enormous American publishers of mass-market books from five to 4, will hurt some authors by reducing competition for his or her books.

A trial in the federal government’s lawsuit began this week, and my colleagues wrote a helpful explanation of the legal issues and what’s at stake for the businesses involved, writers and book lovers.

This case, which is about far more than books and the earnings of big-name authors, is one other example of the talk over tips on how to handle large firms — including the largest digital powers — that shape our world.

The elephant within the room is Amazon. Book publishers need to turn into greater and stronger partly to have more leverage over Amazon, by far the most important seller of books in the US. One version of Penguin Random House’s strategy boils all the way down to this: Our book publishing monopoly is the perfect defense against Amazon’s book selling monopoly.

Because the dominant way Americans find and buy books, Amazon can, in theory, steer people to titles that generate more income for the corporate. If authors or publishers don’t want their books sold on Amazon, they might disappear into obscurity, or counterfeits may proliferate. But when the publisher is sufficiently big, the idea goes, then it has leverage over Amazon to stock books on the costs and terms the publisher prefers.

“Their argument is with a purpose to protect the market from monopolization by Amazon, we’re going to monopolize the market,” said Barry Lynn, the chief director of the Open Markets Institute, a company that wishes tougher antitrust laws and enforcement.

Penguin Random House isn’t saying that it desires to buy a rival to beat Amazon at the ability game, which isn’t legally relevant in the federal government’s lawsuit. But Lynn told me that if Amazon’s dominance is hurting book publishing firms, readers, authors or the American public — and he believes that it’s — allowing a book company to grow more muscular to bully Amazon is counterproductive. The perfect approach, he said, is to restrain Amazon with laws and regulations.

We all know that a number of technology firms — including Amazon, Google, Facebook and Apple — have enormous influence over entire industries and our lives. We’re all attempting to determine wherein ways their power is nice or bad for us, and what, if anything, government policy and law should do in regards to the downsides. This disputed merger of book publishers is one example of the reckoning over these essential issues.

It’s not unusual for firms to justify acquisitions by saying they need more power to level the playing field. When AT&T bought the media and entertainment company then called Time Warner a number of years ago, considered one of the corporate’s explanations was that it desired to turn into a substitute for digital promoting powers like Google and Facebook. Music firms have consolidated over the past 15 years partially to have more heft as digital services like Spotify transform how we take heed to music.

And a decade ago when the German conglomerate Bertelsmann bought a competitor to create Penguin Random House, that merger was one answer to Amazon’s influence over book sales.

Today, Penguin Random House says that one other acquisition would make book publishing more competitive and help authors and readers. In a twist, it cites Amazon’s fast-growing business in publishing books for example of stiff competition in its industry.

Lynn’s critique of each Penguin Random House and Amazon reflects an influential view particularly amongst left-leaning economists, public officials and lawyers that America has botched its approach to big firms, especially digital ones. The criticism is that the increasing consolidation of industries reminiscent of airlines, banking, digital promoting, news media and meatpacking hurts the patrons, staff and residents.

Some Republican politicians agree with leftists in wanting more government restraint of digital superstars. Congress has also been debating a bill that will require potentially extensive business changes to Amazon and other tech giants, even though it’s unlikely to turn into law immediately. Similar laws have passed elsewhere on the planet.

Chris Sagers, a law professor at Cleveland State University who wrote a book a couple of previous government antitrust lawsuit within the books industry, told me that the final result of this case probably won’t matter very much. In his view, the book industry already is overcharging readers and underpaying authors. He believes that each Amazon and book publishers have been permitted to grow too large and powerful.

This legal case about book publishing is a window onto deep-rooted problems within the U.S. economy that took many years to make and can take an extended time to vary.

“There is de facto substantial consolidation in markets all over,” Sagers wrote in an email. “When you let an economy get to that time, there may be just little or no that any antitrust law (or another regulatory intervention) could hope to do.”

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A classic scene from the movie “Singin’ within the Rain,” but with a velociraptor as an alternative of Gene Kelly. (Due to my colleague Jane Coaston for sharing this tweet.)

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