Judge Blocks Penguin Random House Merger With Simon & Schuster
A federal judge ruled in favor of the Justice Department in its effort to block to merger of Penguin Random House with Simon & Schuster.
In granting an injunction to halt the transaction, Judge Florence Pan wrote that the companies were “enjoined and restrained from consummating the proposed merger, or otherwise effecting a combination of Penguin Random House, LLC, and Simon & Schuster, Inc.”
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Pan’s full opinion has yet to be made public, but she wrote that she found that “the United States has shown that ‘the effect of [the proposed merger] may be substantially to lessen competition’ in the market for the U.S. publishing rights to anticipated top-selling books.”
Pan also ordered both sides in the case to meet to discuss proposed redactions to the opinion, which was kept under seal because it included confidential corporate information.
Her ruling is a significant victory for the Biden-era Justice Department, which challenged the $2.2 billion transaction on the basis of its impact on the workforce, rather than on consumers, as is typically the case.
More specifically, the DOJ argued that the merger would diminish advances for high profile titles, or anticipated best selling books, driving down advances for authors. Among those who testified for the government in the 13-day trial was Stephen King, who told the judge in the non-jury trial that “consolidation is bad for the competition.”
Dan Petrocelli, representing Penguin Random House, argued that the government had created “an artificial market to create artificial concentration to create artificial harm.” He also challenged the methodology that the government used to scrutinize the merger.
The DOJ claimed that the Penguin Random House-Simon & Schuster transaction would create a publishing behemoth that commands 49 percent of the market for best sellers. The DOJ’s case was focused on the impact of the merger on author advances of $250,000 or more for the most anticipated titles.
A spokesperson for Penguin Random House said in a statement that they “strongly disagree” with the decision and that they will request an expedited appeal.
“As we demonstrated throughout the trial, the Department of Justice’s focus on advances to the world’s best-paid authors instead of consumers or the intense competitiveness in the publishing sector runs contrary to its mission to ensure fair competition,” the spokesperson said. “We believe this merger will be pro-competitive, and we will continue to work closely with Paramount and Simon & Schuster on next steps.”
A spokesperson for Paramount Global, parent company of Simon & Schuster, said that they were “disappointed by the ruling in this case. We are reviewing the decision and discussing next steps with Bertelsmann and Penguin Random House, including seeking an expedited appeal.”
Jonathan Kanter, the chief of the Justice Department’s Antitrust Division, said in a statement that the decision “protects vital competition for books and is a victory for authors, readers, and the free exchange of ideas. The proposed merger would have reduced competition, decreased author compensation, diminished the breadth, depth, and diversity of our stories and ideas, and ultimately impoverished our democracy.”
He also called the ruling “a victory for workers more broadly. It reaffirms that the antitrust laws protect competition for the acquisition of goods and services from workers.”
The DOJ filed its case last November, as antitrust observers saw it as part of an overall effort by the Biden administration to challenge corporate consolidation.
The Writers Guild of America, West called Pan’s decision a “tremendous victory for authors today who, like screen and television writers, try to make a living selling their work to a handful of powerful conglomerates.”
The WGAW said that the DOJ’s case “shows the vital importance of challenging mergers that harm workers and lays a path for more efforts to stop the endless cycle of corporate consolidation.”
King wrote on Twitter that he was “delighted” by the ruling.
“The proposed merger was never about readers and writers; it was about preserving (and growing) PRH’s market share. In other words: $$$,” he wrote.
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