November 4, 2021

The Rise of Hipster Antitrust: DOJ Brings Monopsony Case

Earlier this week, the DOJ announced that it had filed a lawsuit to block Penguin Random House’s pending $2.175 billion acquisition of Simon & Schuster. Why? Here’s what the DOJ’s press release has to say about that:

While smaller publishers occasionally win the publishing rights to anticipated top-selling books, they lack the financial resources to regularly pay the high advances required and absorb the financial losses if a book does not meet sales expectations. Today, Penguin Random House, the world’s largest publisher, and Simon & Schuster, the fourth largest in the United States, compete head-to-head to acquire manuscripts by offering higher advances, better services and more favorable contract terms to authors. However, as the complaint alleges, the proposed merger would eliminate this important competition, resulting in lower advances for authors and ultimately fewer books and less variety for consumers.

The complaint alleges that the acquisition of Simon & Schuster for $2.175 billion would put Penguin Random House in control of close to half the market for acquiring publishing rights to anticipated top-selling books, leaving hundreds of individual authors with fewer options and less leverage. According to its own documents as described in the complaint, Penguin Random House views the U.S. publishing market as an “oligopoly” and its acquisition of Simon & Schuster is intended to “cement” its position as the dominant publisher in the United States.

Courts have long recognized that the antitrust laws are designed to protect both buyers and sellers of products and services, including, as relevant here, authors who rely on competition between the major publishers to ensure they are fairly compensated for their work. As the complaint makes clear, this merger will cause harm to American workers, in this case authors, through consolidation among buyers – a fact pattern referred to as “monopsony.”

This was all pretty standard fare until the last paragraph – because as this Axios article notes, monopsony is a pretty unusual claim in an antitrust enforcement proceeding, and one with some significant potential implications. Here’s an excerpt:

The main harm being alleged in the complaint is a harm to workers — authors who could end up receiving less money when there are fewer bidders for their work. “This is the DOJ saying they are prepared to bring at least some labor side monopsony cases,” says Rebecca Haw Allensworth of Vanderbilt Law School. “Even though the statutes and the case law would support the idea, it is a departure from how things have been going in the past 40 years.”

This focus on monopsony as an area of concern for the antitrust laws has been derided as “hipster antitrust” by its critics, but the DOJ’s lawsuit is just the latest sign that the concept is becoming mainstream.  If you’re interested in an in-depth look at how that happened, check out this recent blog by the FTC’s former General Counsel.

John Jenkins