A federal judge on Monday blocked Penguin Random House from acquiring rival book publisher Simon & Schuster for about $2.18 billion, agreeing with the Justice Department that the planned merger would unlawfully lessen competition.
U.S. District Judge
Florence Pan
accepted the Justice Department’s arguments that some writers would likely be harmed if Penguin Random House, the world’s largest consumer-book publisher, was allowed to acquire another of the five largest book publishers in the U.S.
“The Court finds 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,” Judge Pan wrote in a two-page order.
The judge didn’t make her full ruling immediately available for public view because she said it contained confidential business information. A redacted public version of the decision is expected in the coming days.
The ruling follows an August trial in Washington, D.C.
In blocking further publishing-industry consolidation, the decision provided a needed boost to Biden-era antitrust enforcers at the Justice Department after they lost a string of recent merger challenges in court.
German media company Bertelsmann SE, whose holdings include Penguin Random House, agreed to the Simon & Schuster acquisition in November 2020.
Assistant Attorney General
Jonathan Kanter,
the Justice Department’s top antitrust official, said the merger would have decreased author compensation and “diminished the breadth, depth and diversity of our stories and ideas.”
Mr. Kanter added: “The decision is also a victory for workers more broadly. It reaffirms that the antitrust laws protect competition for the acquisition of goods and services from workers.”
A spokeswoman for Penguin Random House said the decision “is an unfortunate setback for readers and authors, and we will immediately request an expedited appeal.” The spokeswoman said Penguin Random House views the deal as “pro-competitive, and we will continue to work closely with Paramount and Simon & Schuster on next steps.”
A spokesman for Bertelsmann couldn’t be immediately reached.
Bertelsmann stated in its 2021 annual report that if the deal failed to go through, or if the agreement’s termination date was reached, Penguin Random House would pay a fee of $200 million to Paramount Global, which owns Simon & Schuster.
A spokesman for Paramount Global declined immediate comment.
The Justice Department, which sued to challenge the merger a year ago, focused its case not on book prices, but on author wages, saying writers of anticipated bestsellers—which the government defined as books acquired for advances of at least $250,000—would likely receive smaller upfront payments, or advances, if the deal was completed.
“This is a straightforward case: the merger would eliminate the significant head-to-head competition between the two companies that benefits authors today,” the department wrote in a court filing.
The Justice Department warned that the combined company would control approximately 49% of the market for anticipated top-selling books.
Penguin Random House and Simon & Schuster estimated the size of that market at roughly 1,200 books annually, or 2% of all books published by commercial publishers.
Penguin Random House argued that owning Simon & Schuster would enable it to better serve authors and consumers.
Markus Dohle,
chief executive of Penguin Random House, testified at trial that “if we allow Simon & Schuster books—frontlist books and their rich catalog—to be plugged into our market-leading supply chain, it would make their books more available on the shelves of more sales outlets, domestic and international, and result in higher sales.” Frontlist books are newly published titles.
On a sales basis, a combination of Penguin Random House and Simon & Schuster would have accounted for nearly 30% of all consumer-book sales in the U.S., according to book tracker NPD BookScan.
If the deal had gone through, the combined companies would have boasted some of the country’s most popular authors, including John Grisham, Stephen King, Margaret Atwood and Jason Reynolds at a time when bestsellers have never been more important to overall publishing success.
Mr. King testified against the merger during the first week of the trial on behalf of the government. “Consolidation is bad for competition,” Mr. King said. “That’s my understanding of the book business. And I have been around it for 50 years.”
Other witnesses at trial included
Brian Murray,
chief executive of HarperCollins Publishers. Mr. Murray, who voiced opposition to the acquisition, said HarperCollins would be interested in buying Simon & Schuster if Penguin Random House’s purchase was blocked. Mr. Murray declined to comment Monday.
HarperCollins bid unsuccessfully for Simon & Schuster after it was put up for sale by Paramount Global in March 2020.
HarperCollins Publishers, like The Wall Street Journal, is owned by News Corp.
Michael Pietsch,
chief executive of Lagardère SCA’s Hachette Book Group, testified against the deal and said Hachette Livre, which includes all of Lagardère’s global book-publishing interests, would also be a potential buyer. Mr. Pietsch declined to comment Monday.
The Authors Guild also opposed the merger. “We’re delighted by the decision and that the court understood the harm that would have befallen authors because of reduced competition,”
Mary E. Rasenberger,
the guild’s chief executive, said Monday night.
Write to Jeffrey A. Trachtenberg at jeffrey.trachtenberg@wsj.com and Jan Wolfe at jan.wolfe@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
A federal judge on Monday blocked Penguin Random House from acquiring rival book publisher Simon & Schuster for about $2.18 billion, agreeing with the Justice Department that the planned merger would unlawfully lessen competition.
U.S. District Judge
Florence Pan
accepted the Justice Department’s arguments that some writers would likely be harmed if Penguin Random House, the world’s largest consumer-book publisher, was allowed to acquire another of the five largest book publishers in the U.S.
“The Court finds 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,” Judge Pan wrote in a two-page order.
The judge didn’t make her full ruling immediately available for public view because she said it contained confidential business information. A redacted public version of the decision is expected in the coming days.
The ruling follows an August trial in Washington, D.C.
In blocking further publishing-industry consolidation, the decision provided a needed boost to Biden-era antitrust enforcers at the Justice Department after they lost a string of recent merger challenges in court.
German media company Bertelsmann SE, whose holdings include Penguin Random House, agreed to the Simon & Schuster acquisition in November 2020.
Assistant Attorney General
Jonathan Kanter,
the Justice Department’s top antitrust official, said the merger would have decreased author compensation and “diminished the breadth, depth and diversity of our stories and ideas.”
Mr. Kanter added: “The decision is also a victory for workers more broadly. It reaffirms that the antitrust laws protect competition for the acquisition of goods and services from workers.”
A spokeswoman for Penguin Random House said the decision “is an unfortunate setback for readers and authors, and we will immediately request an expedited appeal.” The spokeswoman said Penguin Random House views the deal as “pro-competitive, and we will continue to work closely with Paramount and Simon & Schuster on next steps.”
A spokesman for Bertelsmann couldn’t be immediately reached.
Bertelsmann stated in its 2021 annual report that if the deal failed to go through, or if the agreement’s termination date was reached, Penguin Random House would pay a fee of $200 million to Paramount Global, which owns Simon & Schuster.
A spokesman for Paramount Global declined immediate comment.
The Justice Department, which sued to challenge the merger a year ago, focused its case not on book prices, but on author wages, saying writers of anticipated bestsellers—which the government defined as books acquired for advances of at least $250,000—would likely receive smaller upfront payments, or advances, if the deal was completed.
“This is a straightforward case: the merger would eliminate the significant head-to-head competition between the two companies that benefits authors today,” the department wrote in a court filing.
The Justice Department warned that the combined company would control approximately 49% of the market for anticipated top-selling books.
Penguin Random House and Simon & Schuster estimated the size of that market at roughly 1,200 books annually, or 2% of all books published by commercial publishers.
Penguin Random House argued that owning Simon & Schuster would enable it to better serve authors and consumers.
Markus Dohle,
chief executive of Penguin Random House, testified at trial that “if we allow Simon & Schuster books—frontlist books and their rich catalog—to be plugged into our market-leading supply chain, it would make their books more available on the shelves of more sales outlets, domestic and international, and result in higher sales.” Frontlist books are newly published titles.
On a sales basis, a combination of Penguin Random House and Simon & Schuster would have accounted for nearly 30% of all consumer-book sales in the U.S., according to book tracker NPD BookScan.
If the deal had gone through, the combined companies would have boasted some of the country’s most popular authors, including John Grisham, Stephen King, Margaret Atwood and Jason Reynolds at a time when bestsellers have never been more important to overall publishing success.
Mr. King testified against the merger during the first week of the trial on behalf of the government. “Consolidation is bad for competition,” Mr. King said. “That’s my understanding of the book business. And I have been around it for 50 years.”
Other witnesses at trial included
Brian Murray,
chief executive of HarperCollins Publishers. Mr. Murray, who voiced opposition to the acquisition, said HarperCollins would be interested in buying Simon & Schuster if Penguin Random House’s purchase was blocked. Mr. Murray declined to comment Monday.
HarperCollins bid unsuccessfully for Simon & Schuster after it was put up for sale by Paramount Global in March 2020.
HarperCollins Publishers, like The Wall Street Journal, is owned by News Corp.
Michael Pietsch,
chief executive of Lagardère SCA’s Hachette Book Group, testified against the deal and said Hachette Livre, which includes all of Lagardère’s global book-publishing interests, would also be a potential buyer. Mr. Pietsch declined to comment Monday.
The Authors Guild also opposed the merger. “We’re delighted by the decision and that the court understood the harm that would have befallen authors because of reduced competition,”
Mary E. Rasenberger,
the guild’s chief executive, said Monday night.
Write to Jeffrey A. Trachtenberg at jeffrey.trachtenberg@wsj.com and Jan Wolfe at jan.wolfe@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8