Gerard Scimeca – Chairman, CASE
June 24, 2019
In a decision that surprised the many, on Thursday the Department of Justice (DOJ) announced they will block the proposed merger between Quad/Graphics Inc. and LSC Communications.
In a statement, the DOJ claimed the merger harmed competition in the printing industry, saying, “The transaction would combine the only two significant providers of magazine, catalog, and book printing services, denying publishers and retailers throughout the country the benefits of competition…”
The DOJ’s justification for intervening to stop the merger exposes both their ignorance of the current realities facing commercial printing industry, as well as a total lack of understanding of the market dynamics of the digital economy upon the entire economy.
Stating that the Quad-LSC merger would leave only one large print company is alarming in its inaccuracy. Further, the decision to ignore the information revolution and the industry’s shift to digitization and the rapidly rescinding commercial print industry raises questions about the DOJ’s interest in conditional attentiveness to rapidly changing forces impacting markets.
Many publications exist only online now, resulting in fewer daily newspapers for print advertising. Whether we like it or not, most consumers have put down their newspapers and picked up their smart phones, just as they’ve shelved their books and picked up e-readers. The stream of ads that bombard our devices, based on algorithms created by Facebook, Google, and Amazon, have taken the place of full-page ads in newspapers and magazines.
Recall it was government disapproval that scuttled the proposed merger 15 years ago between Blockbuster and Hollywood video for largely the same reasons. And just as they were wrong then for failing to see an evolving marketplace of streaming video, they repeat the past with the same intractable and stale understanding of our economy today.
The juxtaposition between the government’s expressed resolve to curb the power and control of online giants and its scrutiny of the Quad-LSC merger is striking. For Facebook, Google, and Amazon, among others, customers and users have become the product. Conversely, the efficiencies gained by integrating the offerings of Quad and LSC would provide customers more reliable and competitively priced services. Consolidations also make it easier to adopt new technologies for production and distribution.
In essence, consumers would benefit if the DOJ were willing to consider the realities of the evolving industry choosing the dynamic path necessary for survival. Antitrust law is not a servant to centuries-old theoretical concepts but an avenue to protect innovation and market competition. Without this misguided DOJ action, the merger between Quad and LSC would offer customers choices and prices that reflect the world today. That is the intended spirit of competition and it should be the mission of the agency we entrust to oversee it.
