Why the Penguin Random House merger is also about Amazon

Amazon is not being tried in a ledger lawsuit. But its power is.

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

A lawsuit in the government’s lawsuit began this week, and my colleagues have written a helpful explanation of the legal issues and stakes for the companies involved, writers, and book lovers.

This case, which is about much more than books and big-name authors’ earnings, is another example of the debate over how to handle the big corporations — including the biggest digital powerhouses — that shape our world.

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

As the dominant way for Americans to find and buy books, Amazon can, in theory, direct people to titles that generate more revenue for the company. If authors or publishers don’t want their books sold on Amazon, they may fade into obscurity, or counterfeits may proliferate. But if the publisher is big enough, the theory goes, then they have leverage on Amazon to stock books at prices and terms the publisher prefers.

“Their argument is that to protect the market from being monopolized by Amazon, we’re going to monopolize the market,” said Barry Lynn, executive director of the Open Markets Institute, an organization that wants tougher antitrust laws and enforcement.

Penguin Random House is not saying it wants to buy a rival to beat Amazon at the power game, which is not legally relevant in the government’s lawsuit. But Lynn told me that if Amazon’s dominance hurts book publishing companies, readers, authors, or the American public — and he thinks it does — allowing a book company to become more muscle to intimidate Amazon is counterproductive. The best approach, he said, is to restrict Amazon with laws and regulations.

We know that a few tech companies – including Amazon, Google, Facebook and Apple – have enormous influence over entire industries and our lives. We are all trying to figure out in what ways their power is good or bad for us, and what, if anything, government policy and law should do about the downsides. This disputed merger of book publishers is an example of awareness of these essential issues.

It’s not uncommon for companies to justify acquisitions by saying they need more power to level the playing field. When AT&T bought the media and entertainment company that was called so Time Warner, one of the company’s explanations was that it wanted to become an alternative to digital advertising powerhouses like Google and Facebook. Music companies have consolidated over the past 15 years in part to have more clout as digital services like Spotify transform the way we listen to music.

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

Today, Penguin Random House says another acquisition would make book publishing more competitive and help authors and readers. In a twist, he cites Amazon’s fast-growing book publishing business as an example of fierce competition in its industry.

Lynn’s criticism of both Penguin Random House and Amazon reflects an influential view, particularly among leftist economists, civil servants and lawyers, that America has botched its approach to big business, especially those digital. The criticism is that the growing consolidation of industries such as airlines, banks, digital advertising, news media and meatpacking is hurting shoppers, workers and citizens.

Some Republican politicians agree with leftists in wanting more government restraint on digital superstars. Congress has also been debating a bill that would require potentially big business changes for Amazon and other tech giants, though it’s unlikely to become law immediately. Similar laws have been passed elsewhere in the world.

Chris Sagers, a law professor at Cleveland State University who wrote a book about a previous government antitrust lawsuit in the book industry, told me the outcome of that case probably won’t have much impact. ‘importance. According to him, the book industry already overcharges readers and underpays authors. He thinks Amazon and book publishers have been allowed to get too big and too powerful.

This book publishing court case is a window into deep-rooted problems in the American economy that have taken decades to develop and will take a long time to change.

“There is really substantial consolidation in markets everywhere,” Sagers wrote in an email. “Once you’ve let an economy get to this point, there’s very little that antitrust law (or any other regulatory intervention) can hope to do.”

If you do not already receive this newsletter in your inbox, please register here.


  • Crypto is sad now, but they don’t mind. My colleague David Yaffe-Bellany has written about people who have sounded the alarm about fraud in the cryptocurrency market, but also insisted that Bitcoin will transform the financial system. David explained that these believers wanted to take crypto away from an unsustainable mania and return to some of its original ideals.

  • Failures of organ transplant technology: The system that coordinates organ transplants in the United States relies on outdated technology that breaks down for hours and threatens patient care, The Washington Post reported. A draft White House review has concluded that the government should mandate a complete overhaul of the nonprofit agency that solely runs the transplant system. (Subscription may be required.)

  • Imagine you are a cat. That’s it. That’s the game. Jay Caspian Kang, writer for New York Times Opinion, wrote about his love for the video game “Stray”. The game, in which you play as an orange cat doing cat things like jumping into boxes, is part of the debate over whether we want games to be realistic or emotional, he wrote.

    Related: There is a Twitter account that posts the real chats of people reacting to the game.

A classic scene from the movie “Singin’ in the Rain”, but with a velociraptor instead of Gene Kelly. (Thanks to my colleague Jane Coaston for sharing this tweet.)


We want to hear from you. Let us know what you think of this newsletter and what else you would like us to explore. You can reach us at [email protected]

If you do not already receive this newsletter in your inbox, please register here. You can also read old On Tech columns.

Comments are closed.