Calif. Challenges Merger of Textbook Giants

     SAN FRANCISCO (CN) – California filed a federal antitrust complaint over the $4 billion merger of textbook publishers Houghton Mifflin and Harcourt Education Group, claiming “The merged entity now commands over 50 percent of aggregate primary and middle school textbook sales in the U.S.”

     Combined with its competitors Pearson and McGraw, the three giants now “account for roughly 87 percent of the aggregate commerce in U.S. primary and middle school textbooks.”
     California claims that December 2007 merger will reduce competition, raise prices and “the value of the materials and services likely will decline.”
     Textbook publishing is an economically and politically important and explosive topic, as entire states may order a single, expensive textbook, for which sales, and profits can be in the millions. Publishers accordingly are under tremendous political pressure to avoid topics or points of view that may offend state school board members or state administrations, which approve the textbook sales. States such as Kansas pressure publishers to denigrate evolution in biology textbooks, for example, and constitutional issues in history textbooks are even more fraught with peril. Because of the profits, and prestige involved, publishers may tailor editions of textbooks to appeal to state school boards. Because of the cost involved, and the lengthy list of topics and attitudes that states may require for their texts, the mass purchasing process often excludes from competition all but the largest and wealthiest publishing groups.
     California claims that “there are no publishers of the textbooks and other educational materials described below to which California purchasers would be likely to turn in the face of a small but significant price increase by the dominant companies in the market.”
     It says that the new, combined company will have “reduced incentives to improve the programs and textbooks” and will “significantly increas(e) concentration in the relevant markets which are already concentrated”. It wants Houghton Mifflin’s acquisition of Harcourt enjoined as a violation of the Clayton Act.
     Houghton Mifflin bought the Harcourt Education Group from Reed Elsevier in December 2007. Elsevier had bought the K-8 textbook assets of Harcourt School Publishers and Holt, Rinehart and Winston in 2001.

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