Penguin’s Flippers In A Flap: CMA investigates Penguin takeover of Simon & Schuster

April 6, 2021

2 min read

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What's going on here?

The Competition and Markets Authority (CMA) has launched an investigation into the $2bn takeover of American book publishing business Simon & Schuster (S&S) by Penguin Random House (PRH). The concern is that the takeover would make PRH the world’s largest bookseller, in turn stamping out competition between UK booksellers.

What does this mean?

The proposed takeover has come under fire by the CMA for its defiance of market logic. News Corp CEO Robert Thomson described the deal as leading to a “behemoth of books” that would control a meaty two-thirds of the US bookselling market. Since PRH and S&S are part of the “big five” book publishers, the deal would reduce publishing opportunities down to the book markets “big four”.

 However, a reduced market will be favoured by PRH’s controller: German media group Bertelsmann. The deal would allow them to take a hard line on negotiating terms with booksellers on the high street.  This might lead to better prices for the consumer, but the smaller sellers would likely lose out simply because of the prospective market dominance if the deal was to be actioned.

What's the big picture effect?

The proposed deal is facing huge opposition in the US. The Authors Guild, the National Writers Union, the Open Markets Institute and four other writers’ groups wrote to the Department of Justice insisting the deal be blocked. Much of the controversy is the scale of Bertelsmann’s dominance in the book market because rival publishers will inevitably lose out on the most coveted book rights.

 One potentially strong motive for supporters of the deal is the rise of the ebook market. Unsurprisingly, tech giant Amazon has been capitalising on ebooks for years with the Kindle and its audiobooks service. However, the proposed deal proves that print books have not turned their final page. While the tech companies leveraging ebooks may have found the long term cost-cutting solution, a deal affecting publishing across two continents and competitive markets is not to be ignored. S&S publishes approximately 2,000 books a year and PRH churns out a whopping 15,000 from its 320 publishers around the world. The combined effort would result in greater efficiency and a wider array of choice for consumers in the print book market. 

 The CMA has until 19 May 2021 to decide whether or not they wish to proceed with the next stage of investigations, which will go into greater depth about the more serious competition concerns. The largest pool of concerns comes from the US, where financial analysts have already begun speculating as to whether the fallout from regulatory scrutiny will result in PRH selling off assets. Ultimately, this would lead to the deal being called off. Competitors would breathe a sigh of relief, however if this result was eventually the case, it would place an arbitrary line between those sectors that the CMA swoops on and those that frequently evade the watchful eye of the watchdog.

Report written by Evangeline Taylor

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