The merger of Bertelsmann SE & Co. KGaA (owner of Random House) and Pearson PLC (owner of Penguin) to form Penguin Random House has been cleared by New Zealand’s Commerce Commission.
The jointly owned entity will take over the consumer book publishing businesses of the two companies. Consumer books exclude text books and technical books.
In assessing the clearance application, the Commission looked at the potential impact of the merger in the markets for book publishing rights, printed book distribution services provided to third party publishers and the wholesale of books.
Commerce Commission Chairman Dr Mark Berry said, “In reaching our decision, the Commission considered that, in each of the relevant markets, the merged entity would be constrained from raising prices by a combination of existing competitors and the countervailing power of large customers.”
“As a result, the Commission is satisfied that the proposed acquisition would be unlikely to substantially lessen competition in any of the relevant markets.”
Bertelsmann and Pearson applied for clearance in December 2012 to form a new jointly-owned company to be called Penguin Random House. Penguin and Random House both publish, import and distribute books in New Zealand.
When considering a proposed merger, the Commission must decide whether the competition that is lost in a market when two businesses merge is substantial. “We will give clearance to a proposed merger only if we are satisfied that the merger is unlikely to have the effect of substantially lessening competition in a market,” says the Commission.
The US Justice Department cleared the merger in February 2013, thus clearing the way to create the biggest book publisher in the world.
The US watchdog’s clearance still leaves other regulatory hurdles, including an approval by the European Commission.
The $3 billion new entity will reportedly cover 25% of the English-language consumer books market and pose competition to Amazon – an online distributor of books with as much as $100 billion in turnover.
“Still, Penguin Random will control such a huge chunk of the market!” says Dennis Johnson, the co-founder and co-publisher of Melville House. “How much harder is it going to be for a company like Melville House to get its novels into a store where one company controls half the fiction section? And what if a bookstore is a little short of cash one month? It’s gong to have to pay its biggest, most important account first. Penguin Random is going to control their floor space and their budget. It’s a safe bet it will get the lion’s share of media coverage, too.”