US student groups oppose McGraw-Hill/Cengage merger

US student groups oppose McGraw-Hill/Cengage merger

Over 40 student organisations in the US have urged the Department of Justice to block the proposed merger of publishers Cengage and McGraw-Hill.

The student bodies, which include organisations from Bryn Mawr, Florida State University, Kansas State University, Northeastern University and the University of Oregon, warn, in a letter to the Assistant Attorney General Delrahim drafted by US Public Interest Research Group (US PIRG): “The merger threatens to consolidate more power in the grasp of a handful of publishers, who have used their enormous market share to drive up prices for consumers over the course of the past few decades.”

Five publishers – Pearson, Cengage, MrGraw-Hill, Macmillan and Wiley – control 80% of the US college textbook market, the letter says. “Because there are so few publishers…the normal rules of supply and demand have broken down...To maintain profit margins, publishers have put out custom or frequent new editions to make it difficult to find a used book for our classes, and have transitioned to offering expiring materials like access codes to eliminate the used market entirely.”

The students say they are “sceptical” that the merger will do anything but exacerbate the problem. “By reducing the need to compete, and then using access codes, subscription services, and ‘inclusive access’ to strong-arm students into buying materials, Cengage and McGraw-Hill will be able to continue their decades-long pattern of raising prices. Eventually, they will reach their goal of eliminating the used book market entirely and set themselves up as the sole provider of class materials. This kind of control of the market will not be in students’ best interests.”

Noting the recent record of textbook price rises, the students say: “That same concern of rapid inflation extends to the Cengage Unlimited Model – if consolidation continues and they are able to bring even more titles into their collections, there is nothing to keep Cengage from raising prices in the future.”

Meanwhile another letter to the DOJ, from signatories including US PIRG, the Open Markets Institute and the Economic Policy Institute, claims “the problems of the college textbook industry are poised to become much worse as the industry shifts toward a digital-centric model”, telling the DOJ: “A shift to the digital medium allows Cengage and McGraw-Hill to pursue strategies to rapidly eliminate the secondary market for print textbooks.” The organisation says the proposed merger is unlawful under antitrust law because the merged entity’s market share in the higher education market would produce “competitive harm.”

A spokesperson for Cengage and McGraw-Hill Education said: “We are working closely with the Department of Justice on the HSR [Hart-Scott-Rodino Antitrust Improvements Act] review of the transaction. The transaction is expected to close by early 2020, subject to customary closing conditions, including receipt of regulatory approvals. The companies remain confident that the transaction will benefit our customers." The spokesperson added: “By combining, the merger will enable both companies to expand the missions of their respective affordability programmes.”

The planned merger of McGraw-Hill with Cengage was announced in May, with an anticipated closing date in early 2020 subject to regulatory approval.

At the announcement, Cengage c.e.o. Michael Hansen – who will lead the combined company - said: “The new company will offer a broad range of best-in-class content – delivered through digital platforms at an affordable price. Together, we will usher in an era in which all students can afford the quality learning materials needed to succeed – regardless of their socioeconomic status or the institution they attend. Additionally, the combined company will have robust financial strength to invest in next-generation products, technology and services that create superior experiences and value for millions of students.”