The Justice Department filed an antitrust suit yesterday asking that CBS, Inc. be required to divest itself of Fawcett Publications, Inc.
In a civil suit filed in the United States District Court in New York City, the Antitrust Division alleged that CBS's January 1977 acquisition of the book publishing house lessened competition and increased concerntration in the production and marketing of mass-market paperback books.
CBS said yesterday it would fight the action on the grounds that the acquisition did not violate specific merger guidelines outlined by the Justice Department and complied fully with the antitrust laws.
The government action comes at a time when growing complaints are being heard in the Congress and other agencies about the increasing trend toward concentration in publishing. Besides the Justice Department activity, the Federal Trade Commission also is said to be looking into the effects of last year's acquisition of Book-Of-The-Month Club by Time, Inc., as well as the proposed merger of Harper & Row publishers Inc. with J. B. Lippincott Co.
In its suit against CBS, the division said the mass-market paperback publishing business is concentrated and is experienceing a trend toward further concentration. According to the suit, the eight largest firms in the business accounted for 76 per cent of total sales in 1973 and 81 per cent in 1976. The top four companies had 51 per cent of total sales in 1973 and 53 per cent in 1976.
According to the complaint, CBS's mass-market paperback publisher in 1976 with sales of about $10.4 million. It accounted for about 2.6 per cent of sales in the market. At the same time, Fawcett ranked fifth with sales of about $37 million and a market share of approximately 9.4 percent.
The suit charges that the acquisition eliminated competition between the two in the marketplace and violates Section 7 of the Clayton Act.
Mass-market paperbacks were defined by the division as the small paperbacks distributed predominantly to mass-market outlets such as newsstands, drug stores and variety stores by local wholesale distributors who, in turn, get the books primarily from one of 11 national distributors. Each of the eight largest of the national distributors - who accounted for 93 per cent of the sales through this distribution channel - is owned by a mass-market paperback publisher, the suit says.
The division's suit says there are substantial barriers to entry into the business of publishing mass-market paperback books, resulting in part form allocation of rack space at the retail outlets, the difficulty of obtaining national distribution. There were no significant new entrants in the last 10 years and several small firms have excited the market, the suit says.
In addition to divestiture, the Justice Department asked that CBS be barred from acquiring the stock or assets of any firm engaged in the publishing, distribution or sale of mass market paperback books.