Merger of books about Amazon

Amazon is not on trial over the large books lawsuit. But his power is there.

The US government is suing to prevent book publisher Penguin Random House from buying competitor Simon & Schuster. The government says the merger, which will cut the number of major US mass-market book publishers from five to four, will hurt some authors by reducing competition for their books.

Government lawsuit began this week and my colleagues wrote a useful explanation of the legal issues and what is at stake for the companies, writers and book lovers involved.

This is a matter that concerns much more than books and salaries of famous authorsis yet another example of the debate over how to treat big companies, including the biggest digital powers that shape our world.

The elephant in the room is the Amazon. Book publishers want to get bigger and stronger, in part to have more leverage over Amazon, by far the largest bookseller in the United States. One version of the Penguin Random House strategy boils down to this: our monopoly on book publishing is the best defense against Amazon’s monopoly on book sales.

As the primary way Americans find and buy books, Amazon could theoretically nudge people towards books that generate more revenue for the company. If authors or publishers do not want their books to be sold on Amazon, they may disappear into obscurity or counterfeits may appear. But if the publisher is large enough, the theory is that they have leverage over Amazon to sell books at the prices and terms the publisher prefers.

“Their argument is to protect the market from Amazon’s monopolization, we’re going to monopolize the market,” said Barry Lynn, executive director of the Open Market Institute, an organization that wants to tighten antitrust and enforcement laws.

Penguin Random House doesn’t say it wants to buy a competitor to beat Amazon in a game of power, which is legally irrelevant in the government’s lawsuit. But Lynn told me that if Amazon’s dominance hurts publishers, readers, authors, or the American public—as he believes it does—allowing the book company to become more muscular to intimidate Amazon is counterproductive. The best approach, he says, is to restrict Amazon with laws and regulations.

We know that several technology companies, including Amazon, Google, Facebook and Apple, have a huge impact on entire industries and our lives. We’re all trying to figure out what their strengths are good or bad for us, and what, if anything, public policy and law should do about weaknesses. This controversial book publisher merger is one example of addressing these important issues.

Companies often 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, one of the company’s explanations was that it wanted to be alternative to digital advertising like Google and Facebook. Music companies have consolidated over the past 15 years in part to carry more weight as digital services like Spotify change the way we listen to music.

And ten years ago, when the German conglomerate Bertelsmann bought a competitor to create Penguin Random House, this merger was one response to Amazon influence about selling books.

Today, Penguin Random House says the acquisition will make book publishing more competitive and help authors and readers alike. In a punchline, he quotes Amazon fast growing book publishing business as an example of fierce competition in their industry.

Lynn’s criticism of both Penguin Random House and Amazon reflects influential sentiment, especially among left-wing economists, government officials and lawyers, that America has messed up its approach to big companies, especially digital ones. criticism what’s this increased consolidation or industries such as airlines, banking, digital advertising, mass media as well as meat packaging harms customers, workers and citizens.

Some Republican politicians agree with the left in want more government restraint or digital superstars. Congress is also debating a bill that would require potentially large-scale business changes Amazon and other tech giants, although this is unlikely to become law immediately. Similar laws have been passed in the other place in the world.

Chris Sagers, professor of law at Cleveland State University, who wrote a book about previous government antitrust lawsuit in the book industry, told me that the outcome of this case probably wouldn’t matter much. In his view, the book industry is already overcharging readers and underpaying authors. He believes both Amazon and book publishers have been allowed to become too big and powerful.

This book publishing lawsuit is a window into deeply rooted problems in the US economy that have taken decades to resolve and will take a long time to change.

“There is indeed substantial consolidation across the markets,” Sagers wrote in an email. “Once you let the economy get to this point, there’s not much that antitrust law (or any other regulatory intervention) can do.”

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A classic scene from Singing in the Rain, but with Velociraptor instead of Gene Kelly. (thanks colleague Jane Coston for sharing this tweet.)

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