Competition regulator challenges publishing giants’ union

Australian authority the latest to review planned merger of Cengage and McGraw-Hill

December 12, 2019
Stack of books
Source: iStock

In a development echoing similar moves overseas, Australia’s competition watchdog has initiated an inquiry into the proposed merger of US-based publishers Cengage Learning and McGraw-Hill Education.

The Australian Competition and Consumer Commission (ACCC) has raised “preliminary competition concerns” about the betrothal of the global publishers, both of which have local subsidiaries and are “significant players in the publishing of Australian higher education resources”.

“This proposed deal involves the merger of two of the four biggest publishers in higher education worldwide,” said ACCC commissioner Stephen Ridgeway. “This may result in higher prices, reduced quality or a more limited product range for students in Australia.”

The ACCC said that alternatives to new textbooks – such as second-hand or rented books, or open educational resources – were “unlikely in most cases” to meet students’ needs.

Mr Ridgeway said the transaction would also reduce the “already limited number” of major publishers with whom academics could publish their works. “[It] may lead to decreased royalties for authors or less attractive contract terms,” he said.

In a “statement of issues” lodged on 12 December, the ACCC says the merged entity’s enhanced bargaining power with authors would incentivise it to saddle authors with “onerous” contracts.

“There are very few firms that operate on a scale comparable to Cengage and McGraw-Hill,” the document says. “Most other competitors are much smaller and are only active in a narrow range of disciplines. The barriers associated with new entry or expansion appear to be high.”

The ACCC has invited submissions by 20 January, ahead of its final decision due on 12 March. It said the proposed merger was also being scrutinised by competition authorities in the US, UK, New Zealand, Austria, Cyprus and Mexico.

New Zealand’s Commerce Commission published a similar “statement of preliminary issues” in mid-November.

The Washington DC-based Scholarly Publishing and Academic Resources Coalition opposes the deal. “The merger would turn the college textbook market into an effective duopoly, dominated by the combined post-merger company…and a single rival, Pearson,” it says. 

Inside Higher Ed reported in early December that the US National Association of College Stores had joined consumer advocacy groups and scores of student organisations in protesting against the merger.

A spokeswoman for Cengage and McGraw-Hill said: “We remain confident that the merger will benefit customers around the world and offer students better and more affordable options for learning materials. 

“We have been working closely with the ACCC and have cooperated fully with their review. Requests for additional information are often part of their review process. We look forward to addressing the ACCC’s concerns and will continue to work closely with them and other regulatory agencies on their review of the merger.”

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