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BDD/Random Merger Gets Extra Scrutiny in Washington
John F. Baker -- 5/11/98
Bertelsmann's bid to acquire Random House encountered a glitch on its way to approval in Washington at the beginning of the month, but company spokespeople, both here and at Gutersloh headquarters in Germany, insisted that the deal was likely still to go through as planned.
The planned merger, which would create by far the largest trade publisher in both the U.S. and the English-speaking world, drew the fire of agents' and authors' groups, which had made representations to the Federal Trade Commission in Washington that it would limit competition for authors' works and occupy a disproportionately large share of the American book market (News, Apr. 27). In response, Bantam Doubleday Dell, the existing Bertelsmann U.S. operation, contended that the size of the combined companies in the trade marketplace was being exaggerated.

BDD spokesman Stuart Applebaum told PW that the FTC had advised Bertelsmann to withdraw its previous application for approval and refile it, which it did May 1. This was done, he said, under a precedent established some time ago, when an applicant for FTC approval was given the opportunity to adjust the terms of its application rather than proceed to what is known as the "second request" stage of approval, which can involve months of investigation and could seriously delay the planned acquisition.

"There are obviously some outstanding questions they still have, and they have asked for some additional information, which we are providing," Applebaum said. He added, however, that "at no time" had Washington officials suggested that approval for the acquisition would ultimately be withheld, and he said, "We expect no problems."

As to whether the latest move would delay the ultimate merger of the two companies, Applebaum said: "If the FTC gave its approval today, we still wouldn't be able to complete the deal before the summer, as we originally announced."

Applebaum said he did not know if the Bureau of Competition officials had asked for extra information as a result of the representations by the authors and agents, and the FTC never comments publicly on its deliberations. "There's a lot of misinformation out there," Applebaum commented, "but this is a very high-profile acquisition, and the FTC, in applying a very keen scrutiny, is only doing its job." He discounted early reports of the changed status of the application in Washington, which suggested it might be a major stumbling block, saying: "We weren't thrilled with the overwrought interpretation it was given in some quarters."

Paul Aiken, president of the Authors Guild, which has spearheaded the opposition to the merger, said the Guild was pleased it was getting more attention than seemed to have been the case at first. He said the Guild hoped the FTC would focus on how the merger would be likely to affect readers as well as writers, adding it is the Guild's position that the more publishing houses there are, the more choices consumers will have.

The Guild has contended that the merged companies would have more than a third of the trade book market in the U.S., a figure disputed by BDD, which says it is no more than 10.9%. Aiken said last week that if their claim can be believed, then their sales must be heavily concentrated on the mass market side. "The sales have to come from somewhere," he commented. Other sources suggested it was the mass market concentration represented by the combined houses that was causing the most concern in Washington.

In a statement issued from its German headquarters, Bertelsmann said of the FTC refiling, "All in all, this is more a technical process, which is not unusual, and not a question of changing basic business concepts." It had refiled its application, Bertelsmann said, "with more precisely stated competition aspects."
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