After an initial phase of investigation, the UK’s Competition & Markets Authority (CMA) has decided that the loss of competition brought about by the proposed merger between Cengage and McGraw-Hill could raise the price of university textbooks.
In a statement on its site, the CMA said it had decided that "it is or may be the case that this merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom."
The CMA launched the first phase of its investigation in January, during which it identified where what McGraw-Hill and Cengage offer overlap, finding 379 courses where both companies offered textbooks. Using the companies’ own documents, and feedback from retailers, lecturers and publishers, the CMA identified 51 courses where McGraw-Hill and Cengage would have high combined market shares—"in some cases over 80%"—or where there would be limited competition if the merger went ahead.
McGraw-Hill and Cengage must address the CMA’s concerns within five working days, if they are to avoid the merger being referred for an in-depth investigation.
Joel Bamford, senior director of mergers at the CMA, said: “Record numbers of people are going to university, with more than 700,000 applying in 2019. This reinforces just how important it is that we look at this deal. This proposed merger would bring together two important suppliers in the UK and could lead to students paying more for essential textbooks and educational materials.”
The merger was originally planned to complete by 1st February 2020, but in January the two companies extended their merger deadline to 1st May. The US Department of Justice anti-trust division is also reviewing the merger.
A spokesperson for Cengage and McGraw-Hill said: "We continue to have a constructive dialogue ongoing with Department of Justice and other regulators outside the US.”
The spokesperson added: “The sources of higher education content, and the means of distributing that content, have expanded significantly over the past 10 years. As a result, Cengage and McGraw-Hill have experienced a steady reduction in their higher education shares. Given the increasing number of alternatives available to faculty and students, the companies estimate that the merged company would account for only 18% of all student course material decisions."