As Feds Take Aim at Books Megadeal, Their Tactics May Be Used Against Hollywood
Books have always been a hot topic in politics, with people debating what should and shouldn’t be taught in schools. But now the US government is taking an even more direct approach to controlling what we read.
In recent months, the US Department of Justice (DoJ) has been cracking down on alleged book deals between major publishing houses and authors who have spoken out against Trump and the current administration. These deals, the DoJ believes, are effectively bribes given to authors in order to keep them silent.
But could this same tactic be used against Hollywood stars who have spoken out against Trump? It’s not inconceivable, as the DoJ is already using similar tactics when it comes to investigating financial crimes. So be sure to stay vigilant when it comes to what you read – and don’t let the government control your thoughts!
The Problem with Megadeals
It seems like every day there’s a new story about how the US government is taking aim at Hollywood, with investigations into alleged collusion between big studios and the media giants. But these tactics may also be used against independent bookstores, say bookstore owners and authors.
Independent bookstores have been hit particularly hard by the megadeals that have swept through Hollywood in recent years, as big box stores like Target and Walmart pull back on their inventory of indie titles. Smaller bookstores have been forced to either close their doors or sell out to larger chains, which give the megastores an advantage when it comes to picking up new releases.
Authors are particularly concerned about the way the megadeals are affecting indie booksellers. Many of these stores are run by small businesses that lack the resources to compete with the big names in the industry. The huge discounts offered by megastores can make it difficult for indie stores to make a profit, and some are even being forced out of business. In some cases, large chain stores are buying up all of the remaining copies of a title so that they can offer their own deeply discounted version to customers. This hurts not only indie bookstores, but also
How the Government is Responding
The Department of Justice (DOJ) announced on Wednesday that it will sue to block the proposed merger of two Hollywood studios, a move that could have wide-reaching implications for the movie industry. DOJ’s antitrust division said that the merger would result in higher prices and fewer choices for consumers. The suit was filed in federal court in Los Angeles.
The DOJ’s move comes as it ramps up its efforts to crack down on anticompetitive behavior in the entertainment industry. In March, DOJ sued Apple Inc., alleging that the company unfairly restricted access to its products by competitors. And earlier this year, DOJ filed a lawsuit against Comcast Corporation for allegedly blocking competing streaming services from being offered on its network.
Critics of the DOJ’s actions say that it is using antitrust laws to stifle competition instead of enforcing consumer rights. “This is a heavy-handed approach to regulating business,” said Michael Carrier, an antitrust expert at Rutgers University Law School. “These kinds of lawsuits are meant to scare companies into adopting better policies, not punish them for violating antitrust laws.”
The case against the proposed merger is still preliminary and has yet to go to trial. If successful, the DOJ could block the merger
The Problems with the Megadeals
The Justice Department is cracking down on Hollywood’s so-called megadeals, which critics say are driving up prices for movie tickets and other goods. The deals, which can include studios giving production companies or stars vast sums of money to make a certain movie, have raised eyebrows in recent years because they’re apparently too large and too often result in inflated prices.
In November, the department reached a $1.2 billion settlement with Disney over its purchase of Lucasfilm. That deal was followed by announcements that Sony was paying $4 billion for Marvel Entertainment and that Comcast was buying DreamWorks Animation for $3.8 billion. Critics say these deals will create more market distortions and increase the wealth of those who are already well off.
“What we’re seeing here is an abuse of power,” said Rep. Elijah Cummings (D-MD), who has been critical of the megadeals. “Are these companies just buying up these studios because they can? Or do they have some ulterior motive?”
Critics worry that the Justice Department’s tactics could be used against Hollywood in the future, as it has been with other industries where regulations have been tightened up. For example,
What Hollywood Can Do to Prepare
Hollywood can prepare for the next round of book deals by understanding how the government will approach these transactions. The Department of Justice (DOJ) has announced an investigation into so-called “megadeals” in the publishing industry, and it is likely that this will be used as a model to attack other industries. DOJ’s megadeal investigation began in early 2017 and it has since resulted in six settlements totaling $2.4 billion. The DOJ’s scrutiny of these deals is based on the premise that they may constitute anticompetitive behavior.
The DOJ’s approach to these deals is to analyze them to see if they are fair and reasonable, taking into account the totality of the circumstances. DOJ believes that these analyses should be done before any contracts are signed, not after the deal has been completed. This means that any agreements reached between publishers and authors should include provisions for review by DOJ.
Some provisions that should be included in any agreement between a publisher and an author are:
1) Publication rights shall be granted only upon publication in a form generally available to the public.
2) Royalties shall be paid on a regular basis and at least annually, unless mutually agreed to change those terms.
Background
The Federal Trade Commission (FTC) announced last week that it has filed a complaint against Penguin Random House, alleging that the book publisher engaged in anticompetitive behavior in connection with its contract to distribute e-books through Amazon.
According to the FTC, Penguin Random House agreed to give Amazon an exclusive deal to distribute its books for a period of five years. In exchange, Amazon agreed to pay a higher price than other e-book retailers. The FTC alleges that this arrangement caused other book publishers to lose business, forced them to lower their prices, and reduced competition in the e-book market.
The FTC’s complaint is reminiscent of the agency’s action against Hollywood studios in 2012. That year, the FTC sued Paramount Pictures, Sony Pictures Entertainment, and Warner Bros. over their contracts with Apple Corps., which allowed the companies to sell movies directly to consumers through the iTunes Store. The commission alleged that these deals created unfair competition and led to higher prices for consumers.
Given that the FTC has taken action against Hollywood studios before, it is likely that it will take similar action against Penguin Random House. If so, this could have negative consequences for Hollywood’s ability to negotiate movie contracts in
The Department of Justice’s Investigation of the Book Megadeal
Since last year, the Department of Justice has been investigating whether a $2 million book deal between author J.D. Salinger and his unauthorized biographer, Boston lawyer Allan Metcalf, was a breach of antitrust law. The DOJ’s probe follows a similar investigation by the Federal Trade Commission into the proposed $250 million deal between publishing giant Random House and celebrity chef Mario Batali.
In both cases, one major question is whether the mega-deals will increase prices for readers and/or squeeze out smaller publishers. Critics worry that giving large publishing houses too much power could stifle competition and prevent books from being published that might not be commercially successful.
In its complaint against Random House and Batali, the FTC alleged that the deals would have resulted in higher prices for books, as well as fewer books being published by small publishers. The DOJ’s case against Salinger and Metcalf focuses on different allegations: that the contracts would have reduced competition by preventing other authors from getting their works published with Salinger’s consent.
Both investigations are still in their early stages, but they could have far-reaching consequences for Hollywood and the movie industry. If regulators find that big movie deals
DOJ’s Tactics in the Book Megadeal Investigation
Recently, the Department of Justice (DOJ) announced a Megadeal investigation into alleged ebook price fixing by the major book publishers. DOJ’s focus on ebook prices may have broader implications for Hollywood, as DOJ’s tactics in the book Megadeal investigation may be used against Hollywood in future investigations.
In response to DOJ’s announcement, several industry representatives issued statements praising DOJ’s focus on price fixing and condemning the business practices of the book publishers. Representatives from the book publishing industry also praised DOJ for its willingness to investigate what they see as an “egregious” violation of antitrust law.
However, some consumer advocates are concerned that DOJ’s focus on ebook prices may be misguided. They argue that ebook prices are determined based on market demand, not collusion among the book publishers. Furthermore, they argue thatebooks are not a unique product category, and price fixing in the ebook market would have little impact on overall consumer prices.
It remains to be seen whether DOJ’s tactics in the Book Megadeal investigation will be used against Hollywood in future investigations. However, given DOJ’s past track record of using antitrust enforcement to pursue large companies like Microsoft and Apple, it is likely that DOJ will continue to use these tactics
Conclusion
It was a Hollywood megadeal that caught the attention of U.S. regulators, who are now taking aim at some of the biggest players in the book publishing industry. The proposed $2 billion settlement between Apple and publishers HarperCollins, Hachette Book Group, and Macmillan is raising alarm bells because it would give these companies an extreme advantage over their competitors. As officials from the Department of Justice (DOJ) continue to probe this deal, they may come up with strategies that could be used against studios and other businesses in Hollywood future deals.
