New House for the Random Penguin gets the nod

Published On 09/04/2013 | By Martine Phillips | Mergers

The clearances keep coming with the Unites States, Australia, New Zealand and the European Union’s competition authorities having all unconditionally cleared the merger of two of the world’s biggest publishing houses, Penguin and Random House.  The deal which was announced in October last year (and blogged about in our previous post) decreases the big players from six to five and will encompass all of Random House and Penguin Group’s publishing units in the US, Canada, the UK, Australia, New Zealand, India and South Africa, as well as Penguin’s operations in China.

The Yankees were first off the bat clearing the merger in February this year, the Aussies and Kiwis not far behind in March and the European go-ahead was given at the end of last week.  Each authority had its own take on the affected markets and cited different reasons for their decisions but ultimately they all came to the same conclusion, that a merged Penguin Random House will not substantially lessen competition in any of the relevant markets!

The European Commission (EC) assessed the impact of the transaction in two major markets:

  • the upstream markets for the acquisition of authors’ rights for English language books in the European Economic Area (EEA) and worldwide; and
  • the downstream markets for the sale of English language books to dealers in the EEA,

concluding that the “the new entity Penguin Random House will continue to face competition from several large and numerous small and medium sized publishers. As regards the sale of English language books, the merged entity will furthermore face a concentrated retail base, such as supermarkets for print books and large online retailers for e-books, like Amazon”.  The EC also looked at the merger in the third party book distribution and book production markets but found that the parties have low market shares in both areas and that there are many alternative suppliers for book production in the EEA.

The Australian Competition and Consumer Commission (ACCC) considered the proposed transaction in the context of the following Australian based markets: the acquisition of authors’ rights, the supply of books by publishers, the supply of book sales and distribution services, and the retail supply of books. In these markets, the ACCC predominantly considered that “remaining publishers would be likely to competitively constrain the merged firm post merger”.  Other reasons cited were that “authors face low barriers in switching to alternative publishers” and even though Penguin Random House will be vertically integrated into online retailing in the market for the retail supply of books, “it would not have the incentive to foreclose retailers from access to its catalogue”.

The New Zealand Commence Commission (NZCC) 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. NZCC Chairman, Dr Mark Berry said, “[i]n 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”.

But before completing the merger, the parties still require clearance from other competition authorities around the world including the Canadian Competition Bureau.


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About The Author

is in the Competition team at King & Wood Mallesons, with experience both in the corporate and litigious sides of competition. She loves online shopping and always looks for the fine print!

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