The US Justice Department filed a lawsuit on Tuesday aimed at stopping Penguin Random House, the world’s biggest book publisher, from buying Simon & Schuster, according to a court filing.
In November, German media group Bertelsmann, which owns Penguin Random House, agreed to pay $2.175 billion in cash to buy Simon and Schuster from ViacomCBS, strengthening its presence in the US.
S&S is the world’s fourth-largest publisher.
In its complaint filed in US federal court in Washington, DC, the Justice Department said the deal would give “outsized influence over who and what is published, and how much authors are paid for their work.”
The government argues that authors who rely on advances for their livelihood would pay the ultimate price for the merger, which would eliminate “head to head competition” the two firms engage in to recruit authors.
In 2020 alone, publishers paid authors over $1 billion in advances, according to the complaint, a sum would likely to shrink under the proposed merger. As a result, consumers would suffer if authors find it hard to earn a living by writing books because there would be fewer books produced and less variety, the government argues.
The combined entity would have twice the revenues of its closest competitor, the government said.
They already control 49 percent of all hardcover best sellers, according to an analysis Publishers Weekly conducted in 2019.
The Biden administration’s focus on the publishing industry, which has been walloped by big tech, including Amazon and Facebook, is “surprising,” said antitrust attorney Paul Swanson of Holland & Hart.
“It makes sense that the DOJ is concerned about a merger that would create a real dominant player in publishing,” Swanson said, “but at the same time this is an industry that is struggling and has been harmed by big tech because of the way in which consumers get entertainment today.”
The government, however, sees an industry that is dominated by the “Big Five” who set the market for how much authors are paid. The complaint quotes a “a senior Penguin Random House executive” who said to another colleague “I would not want to be a big author at Simon & Schuster now . . .” The colleague responded, “I agree. Especially when the price tag [for acquiring Simon & Schuster] is going to be so high.”
The publishers were well aware that the government would oppose their merger, according to the complaint, which refers to a comment Simon & Schuster’s chief executive made to a top author in March 2020 when the company said it was up for sale.
“I’m pretty sure that the Department of Justice wouldn’t allow Penguin Random House to buy us, but that’s assuming we still have a Department of Justice,” the Simon & Schuster executive wrote to the author at the time, according to the complaint.
Penguin Random House and Simon & Schuster issued a joint statement pointing out that the government has not “alleged that the acquisition would harm competition in the sale of books” and added that they had no plans to reduce the number of books they publish or to lower authors’ pay.
They vowed “to fight this lawsuit vigorously,” with Penguin Random House tapping bulldog attorney Daniel Petrocelli as its trial attorney. Petrocelli successfully represented AT&T and Time Warner in their case against the DOJ, which tried to block their $100 billion merger.
With Post Wires
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