Bundeskartellamt issues warning to Random House / Ullstein Heyne List

According to the Bundeskartellamt’s current evaluation the intended acquisition of control of the publishing group Ullstein Heyne List (comprising, among others, the book publishing houses Econ, Ullstein, Heyne, List, Südwest) by the publishing group Random House (part of Bertelsmann AG and comprising, among others, the book publishing houses Goldmann, C. Bertelsmann, Blessing, btb, Omnibus) will lead to the creation of a dominant position held by Bertelsmann in the nationally-defined market for German language paperbacks in the general information literature and light fiction sectors. The companies involved have thus been sent a warning letter today.

Bundeskartellamt President Ulf Böge explicitly pointed out that this warning was not a final decision. However, it was a message to the companies that according to the preliminary evaluation the project could not be cleared in this form under the Act Against Restraints of Competition.

The Bundeskartellamt’s investigations have shown that, contrary to the position of the parties to the merger, the paperback market constitutes a separate market segment from the remaining book market. Paperbacks differ in particular from hardcovers and also other book forms in their size, their design, their monthly publication in series and their low prices. In most cases, paperbacks are second or third prints of literary works first published as hardcovers. Thus they have their proper place in the book utilization chain and at the same time fulfil the special function of making a great number of titles available in bookshops for years. Taken together, these features show that paperbacks satisfy a separate area of demand from the consumers’ point of view.

As a result of the planned takeover, Bertelsmann would clearly exceed the presumption threshold for market dominance, i.e. a market share of one third, and would be by far the market leader in the national market for German language paperbacks. With almost 40 % the company would obtain a market share which would be more than double the share held by its closest competitor, the publishing group Georg von Holtzbrinck (comprising, among others, the book publishing houses Rowohlt, Fischer, Kindler).

According to Böge the market shares of the parties to the merger calculated by the Bundeskartellamt have been confirmed by several studies conducted by recognized market research companies as well as by competitors questioned.

As a consequence of the merger of the two publishing groups Bertelsmann would furthermore obtain strategic possibilities in the relevant market which would prevent competitors from keeping pace with the market share lead. Bertelsmann would even be able to increase its market share lead. According to Böge this was particularly due to Bertelsmann’s excellent access to authors’ rights and also to its powerful position in relation to the book trade. In terms of resources, there was also no doubt about Bertelsmann’s paramount scope of action. None of the competitors represented in the German paperback market belonged even remotely to a group as financially strong as the publishing group Random House which could furthermore obtain additional synergy effects from its activities throughout the entire media sector.

The companies have until 5 June 2003 to comment on the matter before a final decision is made.