Reed, Thomson Attempt to Buy Harcourt
                       Could Face Tough Antitrust Scrutiny

                       By DANIEL GOLDEN
                       Staff Reporter of THE WALL STREET JOURNAL

                       The Department of Justice is expected to take a hard look at potential
                       antitrust problems in the proposed acquisition of publisher Harcourt
                       General Inc. by Reed Elsevier PLC and Thomson Corp., and could seek
                       divestitures as a condition of approval.

                       The Justice Department already has investigated a number of earlier deals
                       in the market for scientific and medical journals and was close to blocking
                       an earlier Reed acquisition in 1998 when that deal was abandoned amid
                       European antitrust objections, people familiar with that investigation said.

                       The latest proposed deal has attracted
                       opposition from the nation's research
                       librarians, who have long complained about
                       fast-rising prices for journals and were
                       instrumental in raising objections to the 1998
                       deal, in which Reed sought to buy Wolters
                       Kluwer NV of the Netherlands.

                       Officials from the Association of Research
                       Libraries, with about 120 members, are
                       expected to meet with Justice Department
                       officials next week to express opposition to the proposed deal on the
                       grounds that it would result in too much market concentration. Reed and
                       Harcourt are the world's two largest publishers of technical and medical
                       journals.

                       A spokesman for Harcourt, Newton, Mass., declined to comment, while
                       executives for Reed, the Anglo-Dutch publisher, couldn't be reached in
                       London. At the time the deal was announced, the companies said they
                       didn't expect significant regulatory difficulty. Publishers say price increases
                       are justified by more content, as scientific journals add pages and come out
                       more frequently to stay abreast of research.

                       Under the deal announced last week, Reed would buy Harcourt for $4.45
                       billion and keep its scientific, technical and medical journals, as well as
                       grade-school and high-school text-publishing units. It would resell
                       Harcourt's higher-education and professional publishing businesses to
                       Canadian publisher Thomson for $2.06 billion.

                       Reed had more than $1 billion in sales in its scientific and technical unit last
                       year, while Harcourt had about $698 million in its comparable division.
                       The Harcourt unit was the company's largest source of earnings, with
                       $117.5 million in operating profits.

                       ARL, mainly a university group, says publications in the scientific and
                       technical field have increased in price 11% a year compared with the past
                       decade and now average $974 for an annual subscription, forcing libraries
                       to boost spending and cut subscriptions at the same time. According to
                       ARL, Reed is the world-wide leader in this market, with a 20.3% share,
                       while Harcourt is second at 13.1%. Thomson is third, and Wolters Kluwer
                       is fourth.

                       In an effort to combat the rising prices for commercially published journals,
                       library organizations have helped start a dozen low-cost, alternative
                       journals in several technical fields. But these titles haven't made much of a
                       dent.

                       According to Mark McCabe, an assistant professor at Georgia Institute of
                       Technology, Atlanta, whose research has been partially supported by
                       ARL, takeovers in the publishing industry have generally been followed by
                       sharp price increases. After Elsevier Science, now a part of Reed, bought
                       Pergamon Press in 1990-1991, the price of Pergamon biomedical titles
                       rose 27% while Elsevier titles increased 5.2%, he said.

                       Mr. McCabe said Reed Elsevier's biomedical journals had an average
                       subscription cost of about $1,500 in 1998. One Reed weekly, Brain
                       Research, costs $17,444 a year, according to the company's Web site.
                       Harcourt biomedical titles averaged about $500, Mr. McCabe said.
                       "There is the potential for the same kind of impact, and perhaps even
                       higher, than what happened with Pergamon," he said.

                       Mr. McCabe, who worked as an economist on the Justice Department
                       staff when it was reviewing the proposed Reed-Wolters merger, said the
                       antitrust probe may hinge on two issues: the size of the scientific-journal
                       market and whether journals that cover related but not identical scientific
                       fields are considered competitors. The publishers are expected to minimize
                       their own market share by contending that hundreds of small or rarely cited
                       journals published by others should be counted as part of the market.

                       Mr. McCabe said the two publishers also are likely to contend that
                       journals covering different aspects of engineering, for example, don't
                       compete with each other -- and thus wouldn't overlap under the proposed
                       deal. Mr. McCabe said librarians budget for journals in such fields as a
                       whole rather than picking and choosing on the basis of a particular niche.
                       That analysis would likely force Reed to divest more publications, he said.

                       -- John Wilke in Washington contributed to this article.

                       Write to Daniel Golden at daniel.golden@wsj.com