How should the competition watchdogs, like our Australian Competition and Consumer Commission (ACCC), respond to these market developments? In the US, competition authorities prosecuted Apple and six publishers for collusion. The case is ongoing, but relates to contractual conditions that limited the ability of publishers to discount e-books.
Matthew Yglesias dismissed this case in Slate, saying: “Worrying about anti-trust issues in the book publishing industry is like worrying about a horse and buggy cartel”.
But Yglesias misses the point. Book publishing is in a period of evolution, and market participants have strong incentives to design the market in a way that limits competition and raises profits. The US authorities correctly kept an eye out for such conduct and pounced when it arose.
What about the PRH deal? It requires clearance by competition authorities around the world. Should they be concerned?
The (unhelpful) answer is yes and no. It all depends on how fast the industry evolves. If evolution is slow, and book publishers remain the gate-keepers for authors for, say, the next five years, then a joint venture between two of the industry giants raises significant concerns. It could lead to higher prices and allow PRH and other large publishers to “massage” the industry in a way that protects their own profits.
In contrast, if evolution is fast, then within five years, book publishers could be reduced to niche players only dealing with back catalogue until copyright expires.
So competition regulators will have to hope their crystal balls are working when considering the PRH joint venture. But whether the deal is cleared or not, it is certain that we will see a lot more change in book publishing over the next few years.
Stephen King is a Professor of Economics and former Dean at Monash University in Melbourne, Australia. This piece was first published on The Conversation.
Myriam Robin is a reporter for SmartCompany and its sister site LeadingCompany. She has degrees in economics, international studies and journalism. She likes writing about businesses taking risks and doing new things.
