Antitrust watchdogs get big on drama, light on plot

Penguin books are seen in a used bookstore in central London October 29, 2012. Britain’s Pearson has agreed to merge its Penguin book division with Bertelsmann’s Random House to create the world’s leading consumer publisher, in a apparent snub to Rupert Murdoch’s News Corp. REUTERS/Stefan Wermuth

NEW YORK, Aug 2 (Reuters Breakingviews) – Competition watchdogs are throwing the book at some strange targets. The Justice Department went to court on Monday with book publisher Penguin Random House over its $2.2 billion acquisition of smaller rival Simon & Schuster, a case whose witnesses include horror author Stephen King. Separately, the Federal Trade Commission is fighting Facebook owner Meta Platforms over its purchase of Within Unlimited, the maker of a virtual reality fitness app. Both cases test new and important ideas. Meanwhile, confidence hunters risk missing the big picture.

Penguin Random House, owned by the German media conglomerate Bertelsmann (BTGGg.F), is the largest book publisher in the United States, so it’s not unusual for its merger with a rival to attract the attention of regulators. The strange thing is that top US antitrust litigator Jonathan Kanter and his team are primarily concerned that the deal will lower writers’ pay, rather than increase the price of books. And FTC Director Lina Khan has complained that Meta purchase of Within, for an undisclosed price, is an attempt to “buy your way to the top,” even though the FTC didn’t screw up Mark Zuckerberg’s company’s earlier takeover of customer service software maker Kustomer. for $1 billion.

Admittedly, it makes sense for antitrust watchdogs to spend more time worrying about the little things. Facebook was allowed to buy Instagram in 2012, a deal that presented no threat that consumers would be saddled with increased prices since both companies’ products are free. However, that merger helped what is now Meta skyrocket to its current market value of $430 billion, with a dominant position in online advertising. The Justice Department argues that the Penguin Random House deal will diminish quality, choice and innovation, reflecting the reality that consumers can be harmed without directly impacting their wallets.

However, there are larger deals to examine, for more conventional reasons. amazon.com (AMZN.O) closed the purchase of the MGM movie studio for $8.5 billion even though Khan has been an outspoken critic of Jeff Bezos’ e-commerce empire and what she says is its effect on competition. Microsoft (MSFT.O) is also seeking its biggest acquisition to date, shelling out $69 billion for “Call of Duty” video game maker Activision Blizzard. (ATVI.O) even though the software giant is home to one of the world’s most prominent gaming consoles, the Xbox. Since regulators only have finite resources, the pursuit of a new plot creates the risk that the real story will be lost.

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CONTEXT NEWS

The US Justice Department is asking a judge to stop publisher Penguin Random House, owned by German media conglomerate Bertelsmann, from buying smaller rival Simon & Schuster from Paramount for $2.2 billion.

Horror author Stephen King is expected to testify on behalf of the United States on August 2.

On July 27, the Federal Trade Commission filed a lawsuit to stop Meta Platforms from acquiring Within Unlimited, the maker of a virtual reality fitness app.

Edited by John Foley and Thomas Shum

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