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Brandeis University Law Journal Spring 2023, Volume 10, Issue 2

Antitrust: What is it Good For? The Story of a Failed

Merger Between Penguin Random House and Simon &

Schuster and its Implications for the Labor Market

Gonny D. Nir1

For the last forty years, antitrust cases have largely been
argued on the basis of consumer welfare. This basis has
enabled firms to excuse practices–no matter how pernicious–if
they can show that such practices reduce prices or increase the
value of the goods and services they offer to consumers. In the
fall of 2021, the Department of Justice filed a complaint which
alleged that a proposed merger between Penguin Random
House LLC and Simon & Schuster Inc. improperly stifled
competition in the market for best-selling books and reduced
author advancements within the same market. In December of
2022, the United States District Court for the District of
Columbia enjoined the DOJ’s complaint. This article examines
the threat that monopsonies present in labor markets; it argues
that a shift in antitrust enforcers’ focus from the sell side of a
market to its buy side can bolster economic output and
empower the labor force.

I. The Details Behind the Proposed $2.2 Billion Deal

In November of 2020, Penguin Random House (PRH),
a wholly-owned subsidiary of the German media mogul
Bertelsmann SE & Co., announced its bid to acquire Simon &

1 Brandeis University Undergraduate, Class of 2025, Editor-in-Chief of the
Brandeis University Law Journal.

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Brandeis University Law Journal Spring 2023, Volume 10, Issue 2

Schuster Inc. (S&S) from its parent company ViacomCBS Inc.2

PRH proposed to buy S&S for $2.175 billion, a reported
“premium” against other bidders looking to purchase the
prestigious publishing house.3 At the time of the acquisition’s
announcement, PRH—itself a product of a 2013 merger
between Penguin and Random House—was, and remains to be,
the largest book publisher in the United States.4 In its
complaint filed in the District of Columbia in November of
2021, the Antitrust Division of the Department of Justice
recounted PRH’s staggering extent of market share in US
markets for best-selling books. The complaint uncovered that
in the fiscal year of 2020, PRH, through its ownership of 90
imprints,5 published over 2,000 new titles, amassing over $2.4

5 In the publishing industry, an imprint is a trade name of a smaller press
that is owned by a larger publisher. Imprints enable large publishers to
create smaller “in-house” publishers that focus on specific genres or
readership. For instance, Penguin Classics is an imprint of PRH that
specializes in printing classic works of literature.

4 Julie Bosman, “Penguin and Random House Merge, Saying Change Will
Come Slowly,” The New York Times, July 1, 2013.
https://www.nytimes.com/2013/07/02/business/media/merger-of-penguin-an
d-random-house-is-completed.html (accessed January 4, 2023).

3 Brent Kendall & Jeffrey A. Trachtenberg, “Justice Department Sues to
Block Penguin Random House’s Acquisition of Simon & Schuster,” The
Wall Street Journal, November 2, 2021.
https://www.wsj.com/articles/justice-department-sues-to-block-penguin-ran
dom-houses-acquisition-of-simon-schuster-11635866422?mod=article_inlin
e(accessed December 28, 2022).

2 Viacom CBS has, as of February 2022, merged with Paramount Inc.,
creating Paramount Global which is a subsidiary of National Amusements
Inc.; Benjamin Mullin & Jeffrey A. Trachtenberg, “Penguin Random House
Parent to Buy Simon & Schuster from ViacomCBS,” The Wall Street
Journal, November 25, 2020.
https://www.wsj.com/articles/penguin-random-house-parent-near-deal-to-bu
y-simon-schuster-from-viacomcbs-11606268232?mod=article_inline
(accessed December 27, 2022).

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Brandeis University Law Journal Spring 2023, Volume 10, Issue 2

billion in total revenue in the US market.6 Consequently, as a
report by The Wall Street Journal found,7 between January and
October of the same year, PRH dominated sales in the market
for printed books, accounting for 25 percent of all printed
books sold in the US market.8

S&S, being the third-largest publisher in the United
States,9 operates over 30 imprints in the US market. The
company publishes over 1,000 new titles annually, leading it to
amass over $760 million in revenues in 2020.10 From January
to October of the same year, S&S accounted for 9.1 percent of
printed book sales in the US market, with its sellers including
some of the best-selling books of the year, such as Mary L.
Trump’s memoir Too Much and Never Enough and John
Bolton’s The Room Where it Happened: A Whitehouse
Memoir.11 Although the publishing house has enjoyed industry
prestige for decades, it has recently garnered particular praise
for its publishing streak of critically acclaimed political

11 Benjamin Mullin & Jeffrey A. Trachtenberg, “Penguin Random House
Parent to Buy Simon & Schuster from ViacomCBS.”

10 United States Department of Justice, United States v. Bertelsmann SE &
CO. KGaA, Penguin Random House, LLC, ViacomCBS, INC., and Simon
& Schuster, INC., 8.

9 The second-largest publisher in the United States market is HarperCollins,
a subsidiary of News Corp since 1987. HarperCollins accounted for 11
percent of printed books sold in the US market in the fiscal year of 2020;
Benjamin Mullin & Jeffrey A. Trachtenberg, “Penguin Random House
Parent to Buy Simon & Schuster from ViacomCBS.”

8 In addition to its US presence, PRH also operates 325 imprints in 22
countries; Benjamin Mullin & Jeffrey A. Trachtenberg, “Penguin Random
House Parent to Buy Simon & Schuster from ViacomCBS.”

7 The Journal is a wholly-owned subsidiary of News Corp.

6 United States Department of Justice, United States v. Bertelsmann SE &
CO. KGaA, Penguin Random House, LLC, ViacomCBS, INC., and Simon
& Schuster, INC., Case 1:21-cv-02886, United States District Court in for
the District of Columbia: filed 11/02/2021,
https://s.wsj.net/public/resources/documents/dojlawsuit1102.pdf (accessed
December 27, 2022), 8.

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Brandeis University Law Journal Spring 2023, Volume 10, Issue 2

memoirs, award-winning biographies, and other best-selling
works of non-fiction.12

Subsequently, when the deal between two of the
industry’s most influential publishing houses was announced,
the Antitrust Division of the Justice Department (DOJ) quickly
moved to block the merger. Although the government’s swift
action was not entirely surprising given the size of the
proposed merger, the theories which the government deployed
to block the deal did indeed come as a surprise to many.13

II. The Legal Theories Behind the Case

A. The Consumer Welfare Standard

The theories which the government deployed to argue
against this merger notably depart from traditional antitrust
arguments used before courts. For the last forty years, the use
of the Consumer Welfare Standard (CWS) in the practices of
law and economics has dominated, and therefore framed,
debates over lawful mergers and acquisitions in courtrooms
around the country. The CWS is a measurement derived from
market analyses which assesses whether actions that a firm(s)
is apt to take within a given market—such as merging with a
competitor—will raise prices, decrease economic output, or

13 In March of 2020, after ViacomCBS announced its wish to sell S&S to
another media company, S&S CEO Jonathan Karp, wrote to one of the
publishing house’s best-selling authors,“I’m pretty sure that the Department
of Justice wouldn’t allow Penguin Random House to buy us, but that’s
assuming we still have a Department of Justice.” Needless to say, as Karp
very quickly found out, we definitely still do have a Department of Justice
and it was not pleased about the proposed merger; United States
Department of Justice, United States v. Bertelsmann SE & CO. KGaA,
Penguin Random House, LLC, ViacomCBS, INC., and Simon & Schuster,
INC, 6.

12 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 49.

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Brandeis University Law Journal Spring 2023, Volume 10, Issue 2

suppress innovation within that market. The standard was
developed by a group of economists and law professors at the
University of Chicago in the 1970s; it remains the dominant
standard by which economists and antitrust lawyers assess
whether the economic consequences incurred by consumers
from a firms’ practices warrant government action.14

The CWS is anchored by two premises: that buyers
benefit from the lowering in cost of the goods or services they
consume, and that buyers benefit from an increase in the value
or quality of the products or services firms offer to them.15 The
standard effectively illustrates where inefficiencies in a market
may precipitate given a firm’s actions, but as former Federal
Trade Commissioner Christine S. Wilson wrote in a 2019
paper, “…if consumers are not harmed… antitrust agencies do
not act.”16 Under the CWS, so long as the difference between
what each consumer actually pays and their willingness to pay
for a product or service is maximized, any actions that a firm
may take, regardless of if those actions amount to the hyper
consolidation of an industry or the loss of political autonomy
among the populace, are excusable in court.17

Under the CWS, a challenged practice can only be
defeated before a court were it to either raise the price that

17 Wilson, “Welfare Standards Underlying Antitrust Enforcement: What You
Measure is What You Get,” 5.

16 Wilson, Christine S., “Welfare Standards Underlying Antitrust
Enforcement: What You Measure is What You Get,” Luncheon Keynote
Address at George Mason Law Review 22nd Annual Antitrust Symposium:
Antitrust at the Crossroads? (Arlington, VA: United States of America
Federal Trade Commission, 2019),
https://www.ftc.gov/system/files/documents/public_statements/1455663/wel
fare_standard_speech_-_cmr-wilson.pd, 2.

15 Robert Bork. The Antitrust Paradox: A Policy at War with Itself (New
York: Free Press, 1978).

14 The group most prominently consists of Professors Robert Bork and
Richard Posner from UChicago Law and Professor Milton Freedman of the
Stigler Center at UChicago School of Economics.

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Brandeis University Law Journal Spring 2023, Volume 10, Issue 2

consumers would ordinarily pay for a good or service, or
depress market-wide outputs for the products or services a
market would otherwise provide to its consumers. However, in
this case, the government’s theories to block PRH and S&S’s
merger did not rely on the CWS.

B. The Government’s Theory

The DOJ argued that the proposed merger between
PRH and S&S would, in the market for best-selling books,

i) Disincentive publishers to offer superior editorial
and marketing services to prospective best-selling
authors whose publishing rights they hope to secure
and,18

ii) Depress the sum of advancements authors would
receive for selling the rights to their books to a
publisher19

a. Therefore, reducing the number (and variety) of
books published.20

Notice that the real crux behind these arguments does
not lie in a concern for the consumers of best-selling books,
rather, the concern is primarily for the writers of best-selling
books. These arguments are concerned with the laborers (i.e.,
the authors) in the market for best-selling books, notably, not
the buyers of best-sellers. The sub-argument for the second
major argument does account for the lessened volume and
variety of materials buyers (i.e., readers) will encounter, but the
subargument exists only in relation to the broader argument
regarding author advances. Advances are negotiated, up-front,

20 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 1.

19 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 2.

18 This is how publishers compete against each other.

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quarterly21 payments that authors receive from a publisher upon
waiving the publishing rights to a work and are an author’s
primary source of revenue for a written work.22 Hence, the
sub-argument concerning a lessened quantity and variety of
published material exists only in relation to the lessened wage
authors would earn were this merger granted by the court.

The arguments the DOJ made in its complaint were
claims for the protection of a labor force, rather than a
consumer block. In an ordinary antitrust case, the government
is chiefly concerned with harms enacted upon a market when
one firm gains substantial seller market power.23 In analyzing
seller market power, the government’s chief suspicion lies with
monopolies, and whether a merger of the proposed size of PRH
and S&S would monopolize an industry.24 However, in this
case, the government was chiefly concerned with the status of a
monopsony firm and its labor market power.25 Arguments

25 Benjamin Mullin & Jeffrey A. Trachtenberg, “Penguin Random House
Parent to Buy Simon & Schuster from ViacomCBS.”

24 It should be noted here, that—in what is perhaps the most smirk-worthy
distinction in law—it is not illegal for a firm to be a monopoly under the
Sherman Act of 1890 (one of the two chief antitrust laws), but it is illegal
for one firm to monopolize an industry.

23 Market power refers to the ability of a single firm to raise the prices of its
goods or services without losing sizable sales to its competitors; Stevenson,
Betsey & Wolfers, Justin, Principles of Microeconomics 1st ed., (New
York: Worth Publishers, 2021), Chapter 14, Section 14.

22 In the DOJ’s complaint, advancements were described as how authors
“fund their writing and pay their bills.” United States Department of Justice,
United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 2.

21 Authors used to receive advancements in two payments. However, due to
the consolidation of the publishing industry, publishers have been able to
strike this schedule for payments because of increased leverage of authors’
literary agents. Instead, because of their preference to pay less upfront,
publishers prefer to spread the sum of an advancement over a series of
quarterly payments made to authors for their work; United States v.
Bertelsmann SE & CO. KGaA, Penguin Random House, LLC, ViacomCBS,
INC., and Simon & Schuster, INC., 45.

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against monopolies are concerned with markets that are
dominated by a single seller of a good(s) or service(s), whereas
arguments against monopsonies are concerned with markets
dominated by a single buyer of a good(s) or service(s). Hence,
the peculiarity of the government’s argument in this case is that
its theory is concerned with a single buyer of labor in a market,
rather than a single buyer of goods within that market.26

For the past half-century, the publishing industry has
been subject to hyper-consolidation by five publishing houses
(the Big Five): PRH, HarperCollins, S&S, Hachette Book
Group, and Macmillan (named in descending order of market
share).27 According to Alexandra Alter, a reporter for The New
York Times, such consolidation has “completely transformed
the industry.”28 If one accepts the government’s argument, such
consolidation enables the Big Five to adversely manipulate the
conditions upon which they purchase their labor. This
argument equates monopsonist harms to monopolist harms,
looking to the labor rather than seller market to assess the
damages of a merger. The argument advances that a firm the
size of a consolidated PRH and S&S can purchase its labor at a
reduced cost without facing the risk of losing that labor to its
competitors. The government argued that a firm with this
extent of buying power in a given market is too big.

This argument is only reached because of the argument
that precedes it, one that is a more-traditional, pro-competition
argument. The government’s first major argument, that the
proposed merger would stifle competition between publishers

28 Lauren Hodges, Christopher Intagliata, & Mary Louise Kelly, “Federal
Judge Blocks Penguin Random House from Buying Simon & Schuster.”

27 Lauren Hodges, Christopher Intagliata, & Mary Louise Kelly, “Federal
Judge Blocks Penguin Random House from Buying Simon & Schuster,”
NPR, November 1, 2022,
https://www.npr.org/2022/11/01/1133375227/federal-judge-blocks-penguin-
random-house-from-buying-simon-schuster, (accessed December 28, 2022).

26 Rittenberg, Libby & Tregarthen, Timothy. Principles of Microeconomics
2nd ed., (New York: Flat World Knowledge, 2008), Ch. 14, Section 14.1.

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to secure rights to a prospective best-seller, is much more
in-line with traditional anti-merger arguments.29 This argument
holds that a merger which would create a firm whose market
share is nearly twice the size of its strongest competitor gives
too much influence and control over the industry to one firm in
a given market.30 Such a firm, the government argues, could
unfairly guide the trajectory of industry practices in their favor,
reinforcing already high barriers of entry for new firms and
choking existing competition among even the most prominent
industry players.31

C. PRH and S&S’s Theoretical Response

In response to the government’s allegations, in their
briefs to the Court, PRH and S&S reasoned that,

i) a consolidated publishing house could have more
leverage with associated retailers such as Amazon
and other large book distributors,

ii) which would enable both authors and publishing
houses to write and publish riskier material, print a
greater quantity of content, and enlarge the house’s
distributing capacity.32

In a statement for The Journal, Lorraine Shanley, the
president of Market Partners International, a consulting firm in
the publishing industry, shared that the theory conveys that

32 Brent Kendall & Jeffrey A. Trachtenberg, “Justice Department Sues to
Block Penguin Random House’s Acquisition of Simon & Schuster.”

31 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 22; United States v.
Bertelsmann SE & CO. KGaA, Penguin Random House, LLC, ViacomCBS,
INC., and Simon & Schuster, INC., 5-6.

30 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 2.

29 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 11-17.

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through its acquisition of S&S, PRH could make S&S’s
existing catalog more widely accessible for domestic and
international markets,33 leading to higher sales for the “book
behemoth.”34

The defendants argued that leverage against “the
behemoth that has actually dominated the publishing industry
for the past three decades [is] (and that dwarfs Penguin
Random House—or PRH/S&S, for that matter): Amazon,”35

which enables publishers to take greater risks regarding what
they publish. Securing rights to a book, especially a
prospective best-seller, is a risky and expensive process
involving two traditional avenues: auctions or private
negotiations.36 An author’s literary agent will hold an auction
for the rights to a work, where publishers gather and place their
bets for a book, hoping to out-bet their competitors by offering

36 Initial bids at book-auctions among the Big Five can start from anywhere
between $150,000 to $400,000, and catapult to well over $700,000. As
publishers experience what is coined as “auction fever,” when their peers
essentially validate their own senses regarding how much a book is worth.
Auction fever drives up the amount a book’s publishing rights are sold for,
benefiting the author and their agent; United States v. Bertelsmann SE &
CO. KGaA, Penguin Random House, LLC, ViacomCBS, INC., and Simon
& Schuster, INC., 11-14.

35 Alex Shephard, “The Penguin Random House-Simon & Schuster Merger
Has Been Blocked. What Now?” The New Republic, November 3, 202,
https://newrepublic.com/article/168444/penguin-random-house-merger-bloc
ked, (accessed December 28, 2022).

34 Chief Executive of News Corp, Robert Thomson’s words for the merger
between PRH and S&S. As was aforementioned, News Corp owns
HarperCollins, which has since shown reinterest in acquiring S&S from
ViacomCBS following the failure of its merger with PRH. Such a merger
would allot HarperCollins and S&S an estimated 20 percent of market share
in the US market for best-selling books. So, no self-interested irony on
Thompson’s end here; Benjamin Mullin & Jeffrey A. Trachtenberg,
“Penguin Random House Parent to Buy Simon & Schuster from
ViacomCBS.”

33 Brent Kendall & Jeffrey A. Trachtenberg, “Justice Department Sues to
Block Penguin Random House’s Acquisition of Simon & Schuster.”

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a higher bid backed by superior marketing services such as
book tours, day-time talk show appearances by the author, and
other editorial perks that build public anticipation. These
auctions are scenes of intense competition between rival
publishing houses, making them crucial to authors looking to
make a living off of their writing. Because publishers know
that it “[only] takes one passionate editor at another imprint to
win that book away,”37 they are driven to offer more in
advancements and perks to the author for publishing rights of
the auctioned work.

Stephen King, the beloved fiction writer who publishes
through S&S, testified at trial that under his understanding of
the publishing industry, “consolidation makes it tougher and
tougher for writers to find enough money to live on.”38 The
average writer makes an estimated $20,000 annually from
publishing their work, which, as Mr. King rightly underscores,
is “well below the poverty line.”39 Literary agents also hold
private, one-on-one negotiations with prospective publishers.
Even in these private sessions, however, publishers are
cognizant of the fact that “I am negotiating exclusively, but I
always have my competition in my rearview mirror,”40 as an
agent’s foremost task is to secure the highest advancement with
the best perks for their author. Although there are “no other

40 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 13.

39 JanWolfe and Jeffrey A. Trachtenberg, “Trial Ends in Government
Challenge to Penguin Random House and Simon & Schuster Merger.”

38 Jan Wolfe and Jeffrey A. Trachtenberg, “Trial Ends in Government
Challenge to Penguin Random House and Simon & Schuster Merger,” The
Wall Street Journal, August 19, 2022.
https://www.wsj.com/articles/trial-ends-in-government-challenge-to-pengui
n-random-house-and-simon-schuster-merger-11660932615?mod=article_inl
ine (accessed December 27, 2022).

37 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 11.

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market inputs,”41 publishers will often preemptively offer
agents a high advancement to entice them into doubting
whether another publisher could match or exceed their offer.42

PRH and S&S argued that the challenged merger would
create a firm whose size can adequately ensure that authors are
at liberty to write unconventional material which would
otherwise not garner high advancements in an auction or
private negotiation, thus increasing the quantity and variety of
books which get published.43 This argument rests on the
premise that backlists, which are books formerly purchased by
a publisher that still earn a profit for every print, are profitable
enough to negate any losses a publisher assumes by overpaying
for a book’s publishing rights.44 Although it should be noted
here that a book “need not earn out its entire advance for a
publisher to profit; publishers begin to profit at around 70
percent of earnout for most books.”45 PRH, for example, has
the largest backlist in the publishing industry, which is the
“most significant”46 portion of its annual revenue.

46 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 16.

45 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 16 footnote 8.

44 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 16.

43 JanWolfe and Jeffrey A. Trachtenberg, “Trial Ends in Government
Challenge to Penguin Random House and Simon & Schuster Merger.”

42 In these ways the market system, in publishing, is working exactly as it
should. Every good capitalist dreams of a market whose conditions are such
that firms (publishers) must compete (via advancements) and innovate
(through fashioning new editorial systems or offering more effective
marketing strategies) to offer the best goods and services to its consumers
(literary agents and their clientele) to gain customer loyalty and market
share. Perhaps there is hope for the market system, after all; United States v.
Bertelsmann SE & CO. KGaA, Penguin Random House, LLC, ViacomCBS,
INC., and Simon & Schuster, INC., 13-16.

41 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 13.

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Midsize competitors confirm that publishers of the Big
Five’s scale can take on riskier books or overpay for
best-sellers because of this existing source of continual
revenue.47 Hence, the capital that the Big Five have enables
them to entice authors to publish under their imprints, whilst
covering any losses they may incur from a disappointing deal.48

If one accepts the defendants arguments, a firm the size of the
proposed merger could empower authors to write more
avant-garde material without fear that a publisher would
decline to bid for the work due to the publisher’s doubts
regarding whether the investment could be recouped. A
consolidated firm has a larger distributive capacity which
enables more books with unconventional themes or plots to
circulate across markets.

III. The Opinion of the Court

The case, which was heard before circuit judge
Florence Y. Pan in the United States District Court for the
District of Columbia (D.C.),49 ultimately sided with the
government. In an economic Memorandum Opinion, Judge Pan
deduced that the merger between the defendants under Section
7 of the Clayton Act, which in relevant part reads, “[that
mergers and acquisitions whose effect] may be substantially to

49 Judge Pan assumed the former seat of now-Justice Ketanji Brown Jackson
in the United States Court of Appeals for the District of Columbia Circuit
on September 26, 2022; “Florence Y. Pan,” District of Columbia Circuit,
United States Court of Appeals, accessed January 11, 2022.
https://www.cadc.uscourts.gov/internet/home.nsf/Content/VL+-+Judges+-+
FYP.

48 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, 16.

47 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 17-20.

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Brandeis University Law Journal Spring 2023, Volume 10, Issue 2

lessen competition, or to tend to create a monopoly,”50 would
likely “substantially lessen competition in the market for the
publishing rights to anticipated top-selling books.”51 The
opinion deployed two primary modes of analysis to reach its
final judgment: the Baker Hughes Burden Test (1990) and the
Herfindahl-Hirschman Index (HHI).

A. The Baker Hughes Burden Test

The Baker Hughes Burden Test (or Baker Hughes as it
will be referred to henceforth) is derived from the 1990 D.C.
Circuit Court decision, United States v. Baker Hughes Inc.52

The test is used to analyze whether a merger or acquisition
between defendants would, in all likelihood, raise prices or
produce anticompetitive effects in an affected market.53

Baker Hughes has a preliminary requirement that the
government must fulfill as well as three subsequent steps:54

54 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 22.

53 Ordinarily, Baker Hughes is deployed to stop mergers or acquisitions on
the sell-side of a given market. Hence, its utility in mitigating the
monopolization of industries. However, the government’s theory in this case
is that “the combined defendants would exercise market power on the buy
side of the publishing market, i.e., monopsony…. [but] the kinship between
monopoly and monopsony suggest similar legal standards should apply to
claims of monopolization and to claims of monopsonization”; United States
v. Bertelsmann SE & CO. KGaA, Penguin Random House, LLC,
ViacomCBS, INC., and Simon & Schuster, INC., 21 footnote 13.

52 United States v. Baker Hughes Inc., 908 F.2d 981, 982-83 (D.C. 1990).

51 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 80.

50 “The Antitrust Laws,” Federal Trade Commission, accessed January 11,
2022.
https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-l
aws/antitrust-laws.

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i) At the outset, the government must point to the
existence of a relevant market—followed by the
three accompanying steps:
a. By demonstrating excessive concentration

within the relevant market, the test permits the
government to “establish a prima facie55 case
and a presumption of anticompetitive effects.”56

b. The burden then shifts to the defendants to show
why non-ideal circumstances demonstrate that
merely pointing to market concentration alone is
not reliably indicative of the merger’s supposed
anticompetitive effects.

c. Finally, if the defendants succeed in rebuttal, the
burden shifts back to the government to
ultimately persuade the Court of the merger’s
undesirable effects.57

The Court found the government’s identification of the
market for anticipated best-selling books in the US satisfactory
in fulfilling the preliminary requirement for the Baker Hughes
test. Further, the Court affirmed the government’s reasoning
that hyper-consolidation within this market would result in
“lower advances for authors of such books and less favorable
contract terms”58 for the authors of best-sellers. At trial, the
defendants confirmed the merger would result in “fewer books
being published, less variety in the marketplace of ideas, and

58 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 23.

57 This so-called burden of persuasion remains with the government
throughout the duration of the case; United States v. Bertelsmann SE & CO.
KGaA, Penguin Random House, LLC, ViacomCBS, INC., and Simon &
Schuster, INC., 22.

56 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 22.

55 Meaning, on its face.

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an inevitable loss of intellectual and creative output.”59 Yet, the
defendants contest that advancement sums would decrease
following the merger. They argue that competition among
existing publishers would go unaffected and that eventually,
author advancements would actually rise because of the
merged house’s increased access to capital and continuous
revenue.60

Defining a relevant market has two components: the
government must identify the geographic market and the
product market. In this case, both parties agreed that the
relevant geographic market is that of publishing rights in the
United States. However, the parties contested the boundaries of
the product market.61 The government argued that the relevant
product market at stake was that of publishing rights to
anticipated best-selling books, being those that are expected to
generate high revenue and produce a higher advancement for
authors. Following the government’s theory, the “targeted
sellers against whom the merged defendants might lower the
prices paid”62 are authors looking to sell rights to their works.63

63 It helps to understand that in the monopsony context, “[a] submarket
exists when [buyers] can profitably [cut] prices to certain targeted [sellers]
but not to others.” Applied in this case, the submarket for best-selling
authors could reasonably exist as—if one buys the government’s
position—the consolidated parties could profitably cut the wages (i.e., the
amount paid to authors in advancements) they pay to best-selling authors,
but refrain to cut the wages of non-best-selling authors. United States v.
Bertelsmann SE & CO. KGaA, Penguin Random House, LLC, ViacomCBS,
INC., and Simon & Schuster, INC., 25.

62 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 25.

61 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 24.

60 Refer to sub-section C of the second section in this article, pp. 7-10, for a
detailed analysis of this rebuttal.

59 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 23.

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The Court primarily relied on qualitative practical indicia64 to
outline the relevant product market.65

To draw the boundaries of the relevant product market,
the Court utilized the government’s threshold of a minimum of
$250,000 (being the sum publishers pay in advances to
prospective best-selling authors).66 The Court found that books
which meet this threshold, though only making up two percent
of all book acquisitions in the US, account for 70 percent of
advance spending by publishers.67 In the market for books
which earn a minimum of $250,000 in advancements, the Big
Five comprise 91 percent of the market share, while
mid-to-small publishing houses make up the remaining nine
percent. Yet, in the market for books whose advancements are
below the $250,000 threshold, the Big Five only hold 45
percent of the market share.68 Such a difference between
market share among the Big Five and mid-to-small sized
publishing houses, alongside the common practice among
publishers, that books which do receive advances at or above
the threshold require the approval from senior members of the
house, signal the probable existence of a submarket.69

In rebuttal, the defendants argued that defining a
submarket by the price certain books garner for advances is

69 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 28.

68 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 27.

67 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 26.

66 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 26-33.

65 The Court also engages with the “hypothetical monopsonist test” on pp.
40-43 of the Memorandum Opinion. Although this discussion is worthy of
further mention, it is beyond the reach of this article’s scope and page count.

64 A term derived from the Supreme Court’s 1962 case, Brown Shoe Co. v.
United States, 370 US 294, 325 (1962), used to describe signs or situations
which render a hypothetical scenario likely.

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insufficient to firmly establish the existence of a submarket of
best-selling books. The defendants argued that “any correlation
between advance level and expected sales shows only that
books are ‘valued along a continuum.’”70 The Court was
unpersuaded by the rebuttal, underscoring that the $250,000
threshold serves as a necessary starting benchmark, which
“’support[s] the appropriateness of regarding’ anticipated
top-selling authors as a ‘distinct [seller] group’ that buyers can
target.’”71 The Court added that, in addition to the $250,000
threshold top-sellers typically meet, authors within this
submarket have unique demands regarding the reputation of the
publishers who distribute their books, the contract terms
authors receive for working with particular houses, and the
different competitive conditions these authors face due to the
substantial share the Big Five control in the market for
best-sellers.72

B. Market Concentration and HHI

Courts turn to analyses of market concentration to
determine whether the effects of a merger or acquisition would
substantially increase concentration within a given market.
Typically, markets comprised of many buyers and sellers—all

72 “It is precisely those specialized needs that make the authors of
anticipated best-selling books vulnerable to targeting for price reductions.
Publishers of anticipated top-selling books know that such authors are not
able to find adequate substitutes for publishing their books because of their
unique needs and preferences. Those publishers therefore can target authors
of anticipated top-selling books for a decrease in advances (prices) because
it is not as likely that such a price decrease will cause the publishers to lose
a book”; United States v. Bertelsmann SE & CO. KGaA, Penguin Random
House, LLC, ViacomCBS, INC., and Simon & Schuster, INC., 36 and
33-34.

71 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 32.

70 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 32.

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Brandeis University Law Journal Spring 2023, Volume 10, Issue 2

of which hold little to no market share or power—enjoy the
greatest degree of competition. When there are relatively few
firms competing amongst each other in a given market,
coordinated behavior aimed at reducing output and raising
profits above those of competitive thresholds is more
common.73 In the 1963 decision United States v. Philadelphia
Nat’l Bank, the Supreme Court ruled that any merger or
acquisition which results in a combined market share of at least
30 percent establishes a legal presumption that the merger
likely violates Section 7 of the Clayton Act.74

The Court found that in the market for books at or
exceeding the $250,000 threshold, PRH holds 37 percent of the
market share and S&S maintains 12 percent. Conversely, in the
market for books below the $250,000 threshold, that of
non-best sellers, PRH holds 16 percent, while S&S only hold 9
percent. Consolidated, the two houses would hold a staggering
49 percent of the market for best-selling books, which is just
over double the 24 percent market share that HarperCollins,
their direct competitor, would control.75 Considering these
statistics, it is important to note that rights to a book are sold to
the highest bidder 93 percent of the time, while 60 percent of
anticipated best-sellers (books that meet or exceed the
$250,000 threshold) include a negotiated advancement sum.76

This means that not only do the rights to a best-seller often
hinge on how much a publisher is willing to pay for them, but
also that authors use this opportunity to amass the highest
possible wage for their work. Hence, the remaining

76 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 9.

75 Hachette would own 10 percent, while Macmillan would hold nine
percent; United States v. Bertelsmann SE & CO. KGaA, Penguin Random
House, LLC, ViacomCBS, INC., and Simon & Schuster, INC., 44.

74 United States v. Philadelphia Nat'l Bank, 374 US 321 (1963).

73 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 43.

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Brandeis University Law Journal Spring 2023, Volume 10, Issue 2

small-to-medium independent publishers would only hold a 9
percent share of the submarket following such a merger. The
Court referred to the already “undeniable trend in
consolidation”77 within the publishing industry, along with the
substantial raise in market share the combined defendants
would hold, to justify its presumption that anticompetitive
effects would follow from a merger.

To ground its final judgment on the post-merger effects
of the market’s concentration, the Court used the
Herfindahl-Hirschman Index (HHI), a measuring tool used by
economists to evaluate the competitiveness of a market based
on the number of firms and their size in a market. By summing
the squared share of the market every firm holds within the
market, the index provides an insightful analysis regarding the
conditions of the market post-merger.78 In an HHI analysis, the
figures of the post-merger HHI and the increase in the HHI
from pre-and-post-merger indicate whether a merge or
acquisition is detrimental to competition in a given market.

Any merger that increases the HHI of a given market by
more than 200 points, with a post-merger HHI of over 2,500 is
“presumptively anticompetitive.”79 In this case, the post-merger
HHI would amount to 3,111 with an increase of 891 points.80

As the Court noted, this is “well above the threshold required
to trigger the [anticompetitive] presumption.”81 The Court
addended that in addition to this high market concentration, the
merger would also likely harm authors by eliminating the

81 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 46.

80 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 46.

79 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 46.

78 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 45.

77 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 45.

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Brandeis University Law Journal Spring 2023, Volume 10, Issue 2

yields82 of the direct competition between two of the most
powerful publishers83 and increase the risk of coordinated
anticompetitive conduct between the post-merger Big Four
publishing houses.84 In settling its determinations regarding the
detrimental effects to the best-seller submarket, the Court
concluded that a merger between PRH and S&S would “distill
the Big Five to a Big Four, with an overwhelmingly dominant
top firm … controlling 49 percent of the market and dwarfing
its nearest competitor. In the newly configured market, the top
two firms … would have 74 percent market share,”85 making
price leadership and coordination between firms a serious
threat in an already highly consolidated market.

IV. Case Conclusions & the Decision’s Implications

A. The Labor Market

The government’s victory in this case is not merely a
win for the authors of best-selling books or small-to-medium
sized publishing houses who compete with the Big Five. This
victory could represent a pathway to strengthening labor
protections through existing antitrust law. While the general
public may not think of authors as traditional laborers for a
slate of sociocultural reasons, writers are ultimately laborers.

85 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 61.

84 United States v. Bertelsmann SE & CO. KGaA, Penguin Random House,
LLC, ViacomCBS, INC., and Simon & Schuster, INC., 48.

83 The government’s expert found that “PRH is S&S’s closest competitor,
and that S&S is a significant competitor to PRH… if PRH lowered
advances, between 19 and 27 percent of its authors would divert to S&S;
and that if S&S lowered advances, between 45 and 59 percent of its authors
would divert to PRH”; United States v. Bertelsmann SE & CO. KGaA,
Penguin Random House, LLC, ViacomCBS, INC., and Simon & Schuster,
INC., 50.

82 Editorial offerings and marketing techniques.

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They participate in the labor market in the same capacity as
every other worker in the greater labor force, and this case
came down in their as well as the greater labor force’s favor.
As former DOJ antitrust lawyer Taylor Owings told The
Journal, the case “demonstrates that the DOJ is going to test
new theories in cases that focus on older industries … [this
case is] an important one for setting an agenda in the labor
space.”86

Cases which advance enforcement actions against
agreements between firms that restrain competition in labor
markets is a significant drift away from the traditional
consumer welfare notions of how antitrust law ought to be
applied.87 The high-risk strategy is emerging as influential
enforcers and scholars across the country are increasingly
concluding that practices by firms which encroach upon
workers’ ability to secure higher pay and better working
conditions are, in fact, enforceable antitrust issues.88 A panel,
hosted by New York University’s (NYU) School of Law in
May of 2022, saw scholars and enforcers discuss the challenges
and prospects of bringing these kinds of cases before courts.
Professor Steven C. Salop of Georgetown University Law
argued that the Philadelphia National Bank approach to labor

88 Karen Hoffman Lent & Kenneth Schwartz,“Expect Aggressive Antitrust
Enforcement and Novel Theories,” New York Law Journal, Vol. 267, No. 89
(2022).
https://www.skadden.com/-/media/files/publications/2022/05/expect_aggres
sive_antitrust_enforcement_and_novel_theories.pdf. 1.

87 Geoffrey A. Manne, the president of the Center for Law and Economics,
told The Journal in the response to the peculiar nature of the PRH and S&S
merger that, “labor markets just have not been the subject of much
[antitrust] litigation”; Jan Wolfe, “Key Tests Loom in 2023 for US Antitrust
Enforcers,” The Wall Street Journal, December 28, 2022.
https://www.wsj.com/articles/key-tests-loom-in-2023-for-u-s-antitrust-enfor
cers-11672234668?cx_testId=3&cx_testVariant=cx_168&cx_artPos=1&mo
d=WTRN#cxrecs_s (accessed December 28, 2022).

86 Brent Kendall & Jeffrey A. Trachtenberg, “Justice Department Sues to
Block Penguin Random House’s Acquisition of Simon & Schuster.”

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restraints, which regards laborers as consumer-equivalences,
blocks courts from balancing consumer benefits, such as lower
prices, against labor harms, such as decreases in wages.89

Such tactics appear viable even in the Supreme Court.
In Justice Brett Kavanaugh’s concurrence in NCAA v. Alston
(2021), he argued that defendants in antitrust suits ought not to
be able to balance anticompetitive harms in one relevant
market against the benefits deductible from another relevant
market.90 Kavanaugh wrote that “price-fixing labor is
price-fixing labor. And price-fixing labor is ordinarily a
textbook antitrust problem because it extinguishes the free
market in which individuals can otherwise obtain fair
compensation for their work.”91 Evidently, there are Justices,
even in the highest Court, that may be receptive to these
arguments. Diana Moss, president of the American Antitrust
Institute, underscored at the NYU’s Spring panel, that
regulators’ “historic neglect”92 of the effect of firms’
anticompetitive practices in the labor market is a serious issue
which requires immediate attention. Moss advanced that this
neglect has had depressive implications on the quantity of
economic output and the liberty of workers within the labor
force.93

In his most-recent book, How Antitrust Failed Workers,
Professor Eric Posner94 of the University of Chicago School of

94 In a simple twist of scholastic-fate, Professor Posner is the son of
former-professor and judge of the Ninth Circuit, Richard Posner, who was

93 Karen Hoffman Lent & Kenneth Schwartz, “Expect Aggressive Antitrust
Enforcement and Novel Theories,” 3.

92 Karen Hoffman Lent & Kenneth Schwartz, “Expect Aggressive Antitrust
Enforcement and Novel Theories,” 3.

91 National Collegiate Athletic Association v. Alston et al., (2021), 43.
90 National Collegiate Athletic Association v. Alston et al., 594 US (2021).

89 Professor Salop’s areas of expertise include trade and regulation in the
antitrust realm as well as law and economics, more broadly; Karen Hoffman
Lent & Kenneth Schwartz, “Expect Aggressive Antitrust Enforcement and
Novel Theories,” 3.

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Law, argues that firms who are permitted to engage in
monopsony behavior on the buy-side of markets, leading to an
excessive increase in market concentration, create a loss in
output and equity among workers within a given market.95

Posner concludes that, contrary to the CWS model, the savings
in labor costs does not translate to lower prices for consumers.
Instead, these savings enrich employers and shareholders
because the prices consumers pay are determined by
frameworks of the product market, not the labor market.96 By
exercising market power on the buy-side through purchasing
inputs, such as goods & services and labor, at a reduced cost,
employers are able to concentrate a market to maximize profits
and cut wages without suffering losses. Posner explains that
market concentration enables a monopsony firm to pay workers
wages between competitive and monopsony wages without
losing this labor to other competitors because of its large
holdings in the market. Hence, workers must either accept the
lessened wage, undergo expensive retraining, or retire.97

The options (or lack thereof) that workers in
monopsony markets face ultimately hurt consumers and the
economy as a whole because monopsony power enables firms
to raise the prices of goods or services by reducing output or
wages, just as in product markets. Moreover, employers within
a monopsonied market can more easily engage in explicit or
implicit collusion to decrease output by further suppressing
wages.98 By reducing labor costs through hiring fewer workers,
and paying them less-than-competitive wages, consumers end
up paying higher prices because of a decline in the production

98 Posner, How Antitrust Failed Workers, p. 77.
97 Posner, How Antitrust Failed Workers, 16-18.
96 Posner, How Antitrust Failed Workers, 23.

95 Eric Posner, How Antitrust Failed Workers (Oxford University Press:
Cambridge, UK, 2021). 23

among the leading figures in the Chicago School, and a voiceful advocate of
the Consumer Welfare Standard.

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Brandeis University Law Journal Spring 2023, Volume 10, Issue 2

of goods and services labor monopsonists output. Such actions
not only reduce the number of workers willing and able to
work for firms, but also reduce the quantity of economic output
firms annually contribute to the American economy.99

B. Antitrust as More than Competition and Lower Prices

for Consumers

On their podcast, Capitalisn’t, from UChicago’s Stigler
Center & Booth School of Business, economist Luigi Zingales
and journalist Bethany McLean discussed why we, as
consumers, laborers, and citizens, should support robust
antitrust enforcement. In an episode discussing the case, United
States v. Microsoft Corp.,100 Zingales and McLean advanced
the following thesis: we should support antitrust regulation not
necessarily because it benefits us economically. As in many
cases, especially in the age of the Information Economy,
antitrust regulations will not economically benefit citizens; but
we should want these regulations because they are fundamental
to securing our ideals of self-determination.101 Cases such as
the failed merger between PRH and S&S show us that
corporations which are permitted to grow, and then capture
such an enormous share of a given market, pose a threat to the
welfare of workers, the health of an economy, and, especially
in this case, the liberty of citizens to think for themselves.

101 Luigi Zingales and Bethany McLean, Capitalisn’t, podcast audio January
14, 2021,
https://www.capitalisnt.com/episodes/microsoft-1998-vs-google-2020-antitr
ust-and-big-tech.

100 US v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001).

99 Eric Posner, “The Rise of the Labor-Antitrust Movement,” Competition
Policy International, November 29, 2021.
https://www.competitionpolicyinternational.com/the-rise-of-the-labor-antitr
ust-movement/ (accessed December 29, 2022).

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The defendants in this case are two publishing houses
who publish some of the most widely read and influential
authors in the industry. PRH publishes the Obamas, John
Brown, and Danielle Steel, while S&S has published F. Scott
Fitzgerald, Bob Woodward, and Ernest Hemingway. These are
among the most influential writers and thinkers of modern
thought. Had publishers not provided the “venture capital”102

for these authors to write their ideas and circulate them through
the public sphere, the country may have never been exposed to
such critical material.103 To consumers, who are ultimately
citizens, such a threat should not be dismissed.

The power monopolists wield in labor markets have
real consequences for the economic and intellectual autonomy
of workers and ordinary citizens alike. The threat of a select
few persons in private board rooms deciding who gets to
circulate their ideas in the public sphere and under what
conditions they may do so is not to be dismissed frivolously.
Who controls the basis upon which political, economic, and
cultural issues are debated determines the trajectory of how
those issues are settled in the public arena.104 If we claim to
have deliberative, democratic ideals, then every citizen should
have the opportunity to influence how these issues are
presented and ultimately settled in the public sphere.

The case between the government and PRH and S&S
demonstrates that we, as both consumers and citizens, must

104 À la Foucault’s concept that it is not knowledge that is power, but rather,
that power is knowledge; Michel Foucault, Power/ Knowledge: Selected
Interviews & Other Writings, 1972-1977, ed. by Colin Gordon (New York:
Pantheon, Books, 1980).

103 Hence, diminishing the “breadth, depth, and diversity of our stories and
ideas,” the remarks of Assistant Attorney General of the DOJ, Jonathan
Kanter regarding the block of the merger between PRH and S&S; Brent
Kendall & Jeffrey A. Trachtenberg, “Justice Department Sues to Block
Penguin Random House’s Acquisition of Simon & Schuster.”

102 Alex Shephard, “The Penguin Random House-Simon & Schuster Merger
Has Been Blocked. What Now?”

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come to think of antitrust as more than some brainy-economic
area of law which only focuses on advancing consumer
welfare. Rather, we must come to conceive of it as a critical
tool to bolster the strength of the broader economy and the
health of our civic society. Subsequently, antitrust enforcers
must continue to ground their arguments in equating
monopsony harms to monopoly harms to ensure that labor
markets are competitive, productive, and ethical.

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Cases Cited

National Collegiate Athletic Association v. Alston et al., 594
US __ (2021).

United States v. Baker Hughes Inc., 908 F.2d 981, 982-83 (D.C.
Cir. 1990).

United States v. Bertelsmann SE & CO. KGaA, Penguin
Random House, LLC,

ViacomCBS, INC., and Simon & Schuster, INC., F.2d Case
1:21-cv-02886 (D.C. Cir. 2021).

United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001).
United States v. Philadelphia Nat'l Bank, 374 US 321 (1963).

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