The books merger that aims to level the playing field with Amazon

Amazon isn’t on trial in a big books lawsuit. But its power is.

The US government is suing to stop book publisher Penguin Random House from buying a competitor, Simon & Schuster. The government contends that the merger, which would shrink the number of large American publishers of mass-market books from five to four, would hurt some authors by reducing competition for their books.

A trial in the government’s lawsuit started this week. 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 defence against Amazon’s book selling monopoly.

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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 monopolisation by Amazon, we’re going to monopolise the market,” said Barry Lynn, executive director of the Open Markets Institute, an organisation 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 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 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 on to deep-rooted problems in the US 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.”

This article originally appeared in The New York Times.