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A Sea Change in Antitrust & Labor | Roundup #9
Somehow, Stephen King is involved 🎈
Reminder: Election Day is tomorrow! Check out last week’s Roundup if you’re curious about the various state and local ballot initiatives affecting workers.
On to the post!
Last week, the Department of Justice (DOJ) won a pretty significant court case blocking the merger of two large publishing houses, Penguin Random House and Simon & Schuster. If the merger had gone through, the combined entity would have controlled 27% of paperback book publishing and 51% of hardcover book publishing. It would have been much larger than the 3 other large publishers — HarperCollins, Hachette, and Macmillan.
What was interesting in this court case, though, was that the DOJ didn’t focus on why the merger would result in increased prices for consumers (i.e. higher book prices), as is the strategy typically in these sorts of antitrust merger cases.Instead, it primarily argued that the merger would result in lower wages for authors. Hal Singer, Professor at Georgetown and frequent expert witness on antitrust cases, told Bloomberg Law this represents a “sea change” in the DOJ’s approach to labor.
From Josh Sisco at Politico:
After three high-profile antitrust losses, the Justice Department notched a win, convincing a judge to block the $2.2 billion merger between Penguin Random House and Simon & Schuster, the first and fourth largest U.S. book publishers…
The case was also notable for DOJ’s focus on harm to writers rather than the ultimate buyers of books. The government argued that the deal would reduce competition between publishers vying to purchase the rights to the most well-known authors. The marquee witness testifying against the deal was the famed novelist Stephen King….
[T]he DOJ’s victory in a case targeting the labor market, a theory with relatively little precedent in court, will likely give it momentum for more aggressive legal theories in future cases.
Yup, that Stephen King took the stand in this trial to speak out against the merger, which may have been more than a little awkward for Simon & Schuster, the publisher of most of King’s work. It might also have been terrifying. Given it was Stephen King. Without a livestream, we really don’t know for sure what happened in that courtroom…
The DOJ’s argument that this merger harmed workers goes like this. Authors who are trying to negotiate a better book deal can have any of the “big 5” publishing houses bid for the privilege of publishing their book. But turning the “big 5” into the “big 4” through a merger would mean there are fewer competing bids and therefore lower auction prices. With more publisher leverage, more of the value that comes from writing books goes to the publishing houses rather than authors.
Authors have been squeezed already by a plethora of factors like increasing consolidation among publishers, increasing bargaining power of distributors like Amazon, and a slow decline in American book readership. Over the last 15 years, surveyed author income has fallen below the poverty line:
Now, it is true that the proposed $2.2B acquisition price of Simon & Schuster is dwarfed by other corporate acquisitions receiving antitrust scrutiny (for instance, the still-pending Adobe-Figma deal is $20B). But even so, this trial carries a lot of weight. It is the DOJ’s first ever merger challenge based on a labor argument.That means that, unless the decision somehow gets overturned by a higher court, this case will establish judicial precedent for the validity of this argument in future antitrust suits.
What will the DOJ do now? Especially given employers have become increasingly concentrated over the last several decades, it may be even more aggressive about preventing mergers that could harm workers. Even in ongoing antitrust investigations (more focused on traditional arguments around consumer prices), the DOJ also has the option of bringing up more arguments around worker wages and bargaining power.
Many things are difficult to predict here, like how more conservative judges will react to the DOJ’s new legal arguments and what will happen now that Penguin Random House is trying to appeal the decision to a higher court. Matt Stoller has a great writeup on the some of the possibilities here.
And of course, we shouldn’t forget to mention the elephant in the room — that Amazon, which sells a majority of books and e-books in the US, still has incredible price-setting power over authors and book publishers alike. That’s a topic for another post.
Despite these concerns, this is still a landmark case. And it appears that the lines between labor and antitrust policy will continue to blur even further.
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Noteworthy Links from Last Week
Paul Krugman (NYT): A Nation of Quitters
Aaron Sojourner (Upjohn Institute): Twitter Thread on Employment Update from Bureau of Labor Statistics
Bloomberg Beta: Panel on how AI will impact the nature of work
The DOJ apparently still did argue that the merger was going to increase long-term prices on books, although it didn’t use this as its primary argument.
This isn’t the first time the DOJ has taken action on behalf of workers in an antitrust case. Since 2010, it has successfully sued companies like Google, Apple, Tyson Foods, and others for instituting no-poach and wage-fixing practices at their companies, which have resulted in hundreds of millions of dollars in settlements paid back to workers (for more on this topic, see one of my older posts on employer collusion here).