By: Louis Naiman
After years upon years of writing, you have finally done it! You finished your book and are ready for the world to read it. However, there’s a problem: you need a publisher to print and promote your wonderful, new book, and the market is unaccommodating. With only a handful of companies in the book publishing market, you, the author, are at the mercy of whatever offers these companies extend. The competition for publishing rights is so diminutive that you can hardly weigh rival publishing bids and must accept whatever you are offered.
To prevent this very scenario, in November 2021, the Antitrust Division of the Department of Justice filed suit to block Penguin Random House’s acquisition of its rival Simon & Schuster. The proposed $2 billion merger would unite two titans of the book publishing industry – Penguin Random House is the world’s largest book publisher, and Simon & Schuster is the fourth largest book publisher in the United States. The case is significant, in part, because the Antitrust Division is challenging the acquisition to prevent a monopsony rather than a monopoly. Monopsony and monopoly are inverse concepts that both describe the aggregation and use of market power. Defined by the U.S. Supreme Court as “the power to control prices or exclude competition,” monopoly occurs when a seller possesses market power and can set prices above competitive levels. Monopsony, in contrast, occurs when a buyer possesses market power and sellers have no option but to meet the buyer’s price and quality demands.
The Antitrust Division’s complaint alleges that a monopsony would emerge from the merger. The complaint states that the deal 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.” The parties are two of the “Big Five” companies that dominate the U.S. book publishing market and can offer higher advances and greater services (editorial, marketing, production, and publicity support) to authors.
The complaint is notable because it centers on competition in the upstream market for authors, from whom companies like Penguin Random House and Simon & Schuster purchase publishing rights, rather than the price effects in downstream markets of retailers and customers. Interestingly, the complaint also identifies the sub-market for top-selling books authors who generally receive greater book advances than other, less popular authors. The government alleges that the proposed deal would give the merged parties even greater bargaining power and result in “lower advances for authors and ultimately fewer books and less variety for consumers.”
The suit shows that the antitrust enforcers (Federal Trade Commission and DOJ) are increasingly concerned about monopsonies and labor markets. Though there have been other complaints involving elements of monopsony, the political emphasis on monopsony is a decidedly new development. For instance, Jonathan Kanter, the new head of the DOJ Antitrust Division, gave a speech last month in which he decried that the “monopsony power of employers in labor markets tends to depress wages, erode quality of life, and make it harder for workers to switch jobs.” In 2018, the FTC held a series of hearings that included extensive discussions about the state of antitrust law and the quality of the evidence of monopsony power. And in his 2021 Executive Order titled, “Promoting Competition in the American Economy,” President Biden similarly highlighted “the harmful effects of monopoly and monopsony — especially as these issues arise in labor markets.” The complaint signals that enforcement against monopsonies is likely going to be an increasingly relevant consideration in federal merger analysis across industries, especially as it pertains to labor markets and the bargaining power of workers.
 Press Release, U.S. Dep’t of Just., Justice Department Sues to Block Penguin Random House’s Acquisition of Rival Publisher Simon & Schuster (Nov. 2, 2021), https://www.justice.gov/opa/pr/justice-department-sues-block-penguin-random-house-s-acquisition-rival-publisher-simon.
 Complaint, United States v. Bertelsmann SE & Co., No. 1:21-cv-02886 (D.D.C. Nov. 2, 2021).
 United States v. E. I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956).
 Jay M. Zitter, Annotation, What Constitutes Monopsony Within Meaning of § 2 of Sherman Act, 49 A.L.R. Fed. 2d 515, 2 (“A monopsony is the mirror image of a monopoly, in the sense that instead of a seller cornering the market, the buyer controls the market. The price paid by the monopsonist for the input over which it has monopsony power is artificially decreased below the competitive level by the purchaser’s buying less of that resource than is socially optimal.”).
 U.S. Dep’t of Just., supra note 1.
 Complaint, supra note 3, at 3.
 U.S. Dep’t of Just., supra note 1. (Note that the argument is that diminished competition in the market for publishers will ultimately harm consumers via a reduction of published works and variety. However, the complaint does not allege that consumers will necessarily pay higher prices. It also does not define consumer book purchasers as the relevant market).
 See, e.g., Complaint, United States v. Anthem, No. 1:16-cv-01493 (D.D.C. July 21, 2016) (alleging harm in healthcare services markets).
 Bernard (Barry) A. Nigro Jr. et al., DOJ Sues to Block Penguin Random House from Acquiring Simon & Schuster Based on Concerns That the Combined Firm Would Have Too Much Purchasing Power, Fried Frank (Nov. 12, 2021), https://www.friedfrank.com/siteFiles/Publications/FFANTITRUSTPenguin11122021.pdf.
 Jonathan Kanter, Assistant Att’y Gen., Antitrust Div., Dep’t of Just., Remarks to the New York State Bar Association Antitrust Section (Jan. 24, 2022), https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-antitrust-division-delivers-remarks-new-york.
 Press Release, Fed. Trade Comm’n, FTC Hearing #2: Monopsony and the State of U.S. Antitrust Law (Sept. 21, 2018), https://www.ftc.gov/news-events/events-calendar/2018/09/ftc-hearing-2-competition-consumer-protection-21st-century.
 Exec. Order No. 14036, 86 Fed. Reg. 36,987 (July 9, 2021).