•  
  •  
 

Cardozo Law Review

Abstract

United States v. Bertelsmann SE & Co. KGaA is a unique antitrust case that has reframed decades of precedent. In November 2020, Bertelsmann SE & Co. KGaA ("Bertelsmann"), the parent company of PRH, announced its plan to acquire S&S from its parent company, Paramount Global ("Paramount'). This announcement positioned the merged entity ("S&S + PRH") to control a third of the book market, the largest market share held by a publishing house. The following year, the Department of Justice Antitrust Division ("DOJATR") sued to block the merger. In United States v. Bertelsmann SE & Co. KGaA, the DOJATR's case was distinct because the merger arguably posed a risk of a monopsony instead of a monopoly. Monopsony actions like this case are a noted departure from the "consumer welfare prescription," which focuses solely on potential consumer price increases and has dominated modern antitrust jurisprudence. Much to the surprise of antitrust scholars, the presiding judge blocked the merger, finding overwhelming evidence that the merger would decrease authors' compensation and thus lessen competition. This decision was hailed as a victory for the neo-Brandeisian movement. However, the victory celebration might have been premature. In August 2023, Kohlberg Kravis Roberts & Co. (KKR), a private equity firm, agreed to purchase S&S. Private equity firms are notorious for aggressive revenue driving and "efficient" reallocation of assets, normally translating to cutting costs through layoffs and other downsizing maneuvers. In theory, tantamount anticompetitive harms could arise through a private equity acquisition of a publishing company as much as through a horizontal merger between two competing publishing houses. The persistence of this risk and the departure from precedent begs the following question: Was Bertelsmann correctly decided?

This Case Note will argue that the judge crucially erred in her decision. The judge's departure from consumer price points, the antitrust norm, was too dramatic. Specifically, the decision's cited findings of increased concentration, history of collusion, and lack of efficiencies were much more correlated to book-reader harm as opposed to that of authors. Furthermore, this Case Note explores the potential underlying rationale behind choosing to frame this action as protecting authors, evaluating why this approach fell short of its intended goals beyond the proposed merger itself. The failure to incorporate the aforementioned rationale into the case is significant, because while focusing on book readers rather than authors might not have changed the case's outcome, this departure from precedent deviates too far from the original intent of American antitrust laws. Changes in antitrust precedent have taken place to realign jurisprudence with the originally intended meaning of these laws, not the reverse. This Case Note will argue that this push beyond the bounds of American antitrust jurisprudence is not unwarranted, in fact quite the opposite; rather, that this case is indicative of some much needed changes to Section 7 merger cases. Moreover, this Case Note will argue that the precedential value of choosing to base the decision around authors will create a false flag for emboldened antitrust regulators as to the bounds of the Clayton Act. As such, this Case Note will highlight that this decision will not prevent monopsony-like conditions in publishing due to private equity acquisitions' ability to evade antitrust regulators' radar and the FTC's track record of failure during the Biden administration. Consequently, this Case Note proposes that consumers once again become the crux of Section 7 merger cases until a change in the statutory language occurs- not to undermine the goals of the Neo-Brandeisian movement, but because current case law does not provide a workable framework to achieve those goals.

Disciplines

Law

Download

Included in

Law Commons

Share

COinS