Advocacy Group to DOJ: Cengage-McGraw Hill Merger Could Create a ‘Platform Monopoly’ in Education
An open-access advocacy group on Wednesday sent a formal filing to the U.S. Department of Justice opposing the proposed merger of two of the world’s largest textbook publishers, Cengage and McGraw-Hill Education. The 49-page brief argues that the merger would hurt competition, limit innovation and could lead to an eventual “platform monopoly” in education, just as Facebook dominates social networking.
The group joins others who have spoken out against the merger, including a letter sent last month by the U.S. Public Interest Research Group on behalf of several student organizations.
This week’s filing was made by the Scholarly Publishing and Academic Resources Coalition, or SPARC, and it says that in the short run, allowing the marriage of the companies would create a duopoly in the textbook market, with the new combined publisher rivaled in size only by Pearson.
"Cengage and McGraw-Hill’s proposed merger is a step toward forming a monopoly over higher education data."—The Scholarly Publishing and Academic Resources Coalition, in a brief opposing the merger of two of the largest textbook publishers.
But the group also argues that the merger would change the dynamics of the textbook market. Specifically, that it would accelerate two trends that major textbook publishers have been driving in recent years: creating subscription services that give students access to all of a company’s digital textbooks for a per-semester fee, and selling “inclusive access” programs to colleges where the educational institutions buy licenses to digital content on behalf of students and then pass along the costs as a course materials fee.
The group points to a history of price increases by the publishers, and argues that once students and colleges become accustomed to these new digital arrangements, the publisher will raise prices.
And it paints a picture of a future in which the publishing giant created by the merger controls an “enormous data empire” that would be extremely difficult for new entrants to compete against. “Cengage and McGraw-Hill’s proposed merger is a step toward forming a monopoly over higher education data,” it argues.
Leaders of the two companies have, in fact, publicly stated that they plan to create an unlimited subscription service that would combine all of both company’s digital titles if the merger is allowed to proceed. But they argue that their new business models—subscription options and inclusive access plans—benefit students and colleges and reduce the cost of course materials thanks to economies of scale.
“Industry data show that there has been a significant decline in student spending on course materials over the last decade,” said a spokesperson for Cengage and McGraw-Hill, in a statement Wednesday. “Cengage and McGraw-Hill’s initiatives focused on affordability saved students more than $115 million last year alone. The joining of our two companies will allow us to offer students even more value and more affordable options to access textbooks and course materials.”
Critics question the amount that students will save, and say that publisher estimates (like the claim of $115 million in savings) often assume that all students would buy new books, while the reality is that many students currently go with much cheaper options, like rentals or used copies.
And students have complained that moving to digital textbooks removes the option of borrowing from the library or a friend and avoid paying for course materials.
"The joining of our two companies will allow us to offer students even more value and more affordable options to access textbooks and course materials."—A spokesperson for Cengage and McGraw-Hill, in a prepared statement defending the merger.
That issue came into focus earlier this year when a former adjunct professor at Arizona State University accused the university of firing him because he pushed back against a department-wide decision to adopt a digital textbook. An independent investigation commissioned by the university found no evidence of unethical behavior by the university, however.
Officials from Cengage and McGraw-Hill said in their statement Wednesday that they will work closely with the Department of Justice and expect the merger to be complete by 2020.
New Lawsuit by Authors
Meanwhile, a group of textbook authors this week filed a class-action lawsuit against Cengage, saying that the company’s move to a digital subscription service, called Cengage Unlimited, violated their author agreements.
The lawsuit, filed in a federal court in New York, argues that the publisher is “not fairly or accurately” paying revenue to the authors in the subscription system it created.
Cengage officials issued a statement this week defending their payment practices. “We have communicated clearly with our authors that the subscription service is consistent with the terms of their contracts, which we continue to honor,” it said. “Our authors, like those at our competitors, saw declining royalties as a result of high prices that lowered students’ demand. The Cengage Unlimited subscription service was created to address this longstanding problem. It also enables a more sustainable business model for the company and our authors.”