Why the Penguin Random House Merger Is Also About Amazon

Amazon isn’t on trial in a big 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 government says that the merger, which will shrink the number of large American publishers of mass-market books from five to four, will hurt some authors by reducing competition for their books.

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

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

The elephant in the room is Amazon. Book publishers want to become bigger and stronger partly to have more leverage over Amazon, by far the largest seller of books 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 Americans find and buy books, Amazon can, in theory, steer people to titles that generate more income for the company. If authors or publishers don’t want their books sold on Amazon, they may disappear into obscurity, or counterfeits may proliferate. But if the publisher is big enough, the theory goes, then it has leverage over Amazon to stock books on the prices and terms the publisher prefers.

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

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

We know that a few technology companies — including Amazon, Google, Facebook and Apple — have enormous influence over entire industries and our lives. We’re all trying to figure out in which 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 one example of the reckoning over 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 then called Time Warner a few years ago, one of the company’s explanations was that it wanted to become an alternative to digital advertising powers like Google and Facebook. Music companies have consolidated over the past 15 years in part to have more heft as digital services like Spotify transform how we listen 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 another 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 as an example of stiff competition in its industry.

Lynn’s critique of both Penguin Random House and Amazon reflects an influential view particularly among left-leaning economists, public officials and lawyers that America has botched its approach to big companies, especially digital ones. The criticism is that the increasing consolidation of industries such as airlines, banking, digital advertising, news media and meatpacking hurts the shoppers, workers and citizens.

Some Republican politicians agree with leftists in wanting more government restraint of digital superstars. Congress has also been debating a bill that would require potentially extensive business changes to Amazon and other tech giants, although it’s unlikely to become law right away. Similar laws have 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 books industry, told me that the outcome 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 both 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 in the U.S. economy that took decades to make and will take a long time to change.

“There is really substantial consolidation in markets all over the place,” Sagers wrote in an email. “Once you let an economy get to that point, there is just very little that any antitrust law (or any other regulatory intervention) could hope to do.”

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

  • Failures in organ transplant technology: The system that coordinates organ transplants in the U.S. relies on outdated tech that crashes for hours at a time and threatens patient care, The Washington Post reported. A draft of a White House review concluded that the government should mandate a complete overhaul of the nonprofit agency that solely operates the transplant system. (A subscription may be required.)

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

    Related: There is a Twitter account that posts people’s real cats 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.)

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