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Penguin Random House headquarters in Manhattan.Jeenah Moon/The New York Times News Service

Canadian publishers, authors and industry leaders are calling on Ottawa to follow the lead of the U.S. Justice Department to protect independent Canadian publishers, as the American government takes two major publishers to court for anti-competitive dealings.

In a bid to fend off further consolidation in an already concentrated market, the Biden administration said on Nov. 2 it was suing publishing giant Penguin Random House to prevent it from acquiring rival Simon & Schuster for US$2.2-billion. The merger would see the Canadian operations of the two companies combined.

News of the deal, first announced in 2020, immediately roused antitrust concerns in light of the growing domination of media and publishing by U.S. tech giants such as Facebook, Google and Amazon.com Inc. Penguin Random House, a subsidiary of German-owned Bertelsmann, is already the largest of five major publishers in the United States, and would account for a third of all books published there, according to market researcher NPD Group.

Bertelsmann, and Viacom, owner of Simon & Schuster, said they would fight the suit in court. In a statement, the two giants called the acquisition a “pro-consumer, pro-author, and pro-book seller transaction.” They maintained book publishing is competitive, with three other large firms – Hachette, HarperCollins and Macmillan – creating sufficient options for authors agents.

But many executives in the sector disagree.

“Based on our current estimates, a combined Penguin Random House and Simon & Schuster would dominate more than 40 per cent of the trade market,” said Kate Edwards, executive director of the Association of Canadian Publishers, which represents more than 100 independent publishers. “That does not to me reflect a competitive publishing ecosystem.”

Independent Canadian publishers compete with larger multinational companies on every possible front, said Edwards, including signing authors, recruiting staff, competing for promotional opportunities and purchasing shelf space in bookstores. Large publishers also have economies of scale in their production and supply chains, meaning they can produce books much more cheaply, she said.

Edwards hopes that the U.S. lawsuit will send a message to Canadian authorities about the trend toward market consolidation here. Just 10 years ago, Penguin Group, Random House, McClelland & Stewart Ltd., HarperCollins Publishers and Harlequin Enterprises Ltd. were all separate entities.

But in 2012, Random House bought full control of McClelland & Stewart. The following year, Penguin merged with Random House. In 2014, HarperCollins acquired Harlequin.

“In an already competitive space, further consolidation would tilt the playing fields even more in favour of those large companies,” said Edwards.

John Degen, the executive director of the Writers’ Union of Canada.Handout

Canadian authors will also be hurt from losing a major publisher. Author incomes have declined by nearly 80 per cent in the past 25 years, said John Degen, the executive director of the Writers’ Union of Canada. The organization represents 2,300 professionally published writers and collects industry statistics.

“The numbers have shown that advances are going down, and in a lot of cases, small publishers can’t afford them,” said Degen. Lack of serious copyright legislation in Canada only adds to the precarious situation authors face here, he said.

Canadian publisher and novelist Anna Porter said the federal government should consider blocking the merger in Canada, regardless of the results in the U.S. courts. Porter said a variety of legislative measures proposed over the years to limit foreign ownership in the industry have been swept away or ignored, and that stronger policy preventing major consolidation is required to prevent a total takeover of Canadian publishing. “There’s not much left of what makes this country a country. We need to hold on to what we’ve got,” she said.

Currently, the publishing industry falls under the jurisdiction of Heritage Canada, and legal questions are considered under the Competition Act as well as the Investment Canada Act, which governs significant investments in Canada by foreign companies. The Act requires foreign investments in the book publishing and distribution sector to be compatible with national cultural policies and of net benefit to Canada and to the Canadian-controlled sector.

Porter calls those measures short-term roadblocks to the enduring problem of holding back the wave of U.S. entertainment and products.

Heritage Canada did not respond to The Globe and Mail’s request for comment in time for publication.

Large publishers import American titles at the expense of Canadian books, said Kieran Leblanc, executive director of the Book Publishers Association of Alberta. Stories about Indigenous culture and history, in particular, are at risk of being overlooked in the face of foreign decision-making, Leblanc said.

“The big publishers really aren’t interested in these stories because they don’t live here. They don’t have a sense of place of culture, and so the regional voices get diminished,” she said.

According to data from her organization, which represents 28 publishers in the province, more than 80 per cent of new authors in Alberta are published by local presses, not multinational conglomerates.

While Penguin Random House and Simon & Schuster may be book publishing giants, they face a larger threat: Amazon. Cory Doctorow, a Canadian science fiction author, sees the companies’ proposed merger as an attempt to fight back against the online giant. Now, he hopes that the Biden administration’s attempt to curb concentration is the sign of a move toward limiting the powers of tech giants.

Amazon has a history of anti-competitive behaviour, said Doctorow, including selling Kindle e-books at a loss, effectively locking other publishers out of that market. Amazon does not publicly release book sales data, and estimates about the company’s market share widely vary – anywhere from 40 per cent to 80 per cent.

“Even if the publishers successfully resist Amazon by forming a cartel, it doesn’t benefit writers or readers, it just benefits publishers,” he said. “I think that the right way to address Amazon is with antitrust law, not by creating other supply chain monopolies.”

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