In a win for authors and readers, U.S. Department of Justice sues to block merger of Penguin Random House and Simon & Schuster

In a surprising move, the U.S. Department of Justice today filed suit to stop the proposed merger of Penguin Random House and Simon & Schuster, two of the so-called Big Five multinational publishing houses in the U.S.

The Associated Press report on the suit reads in part:

German media giant Bertelsmann’s Penguin Random House, already the largest American publisher, wants to buy New York–based Simon & Schuster, whose authors include Stephen King, Hillary Clinton, and John Irving, from TV and film company ViacomCBS.

The Department of Justice filed an antitrust suit in the U.S. District Court for the District of Columbia Tuesday in the first major antitrust action by the Biden administration, saying the deal would let Penguin Random House “exert outsized influence over which books are published in the United States and how much authors are paid for their work.”

Signalling that the current U.S. administration in Washington may take a very different approach to the area of corporate mergers and antitrust law than previous administrations, Attorney General Merrick Garland echoed other publishers, authors, and various interested associations in saying, “If the world’s largest book publisher is permitted to acquire one of its biggest rivals, it will have unprecedented control over this important industry. American authors and consumers will pay the price of this anticompetitive merger – lower advances for authors and ultimately fewer books and less variety for consumers.”

The PRH/S&S deal, worth a reported $2.175 billion USD, was the subject of industry-wide pushback earlier this year. Ron Charles, books columnist for the Washington Post, called the deal “ill-conceived” and wrote that the proposed consolidation would be “bad for authors, bad for readers, and bad for American culture.” Charles joined Dennis Johnson, publisher of Melville House, in suggesting that the merger would adversely affect American democracy because it would result in less editorial diversity and a narrower range of opinions and ideas reaching the general marketplace. The Authors Guild, an American association advocating for writers, also signalled opposition to the deal, writing in an open letter that if the merger were to go through, “the combined company potentially will have more U.S. revenues than the next three largest publishers in the U.S. – Harper Collins, Hachette, and Macmillan – combined.”

In Canada, the Association of Canadian Publishers issued its own letter, calling on the Canadian government to review its net benefit criterion in any consideration of allowing a merger here. “A combined S&S/PRH would overshadow all other companies active in the Canadian market,” the ACP letter reads. “This would be particularly challenging for the independent Canadian-owned sector, which competes with multinational publishers for authors, media coverage, retail shelf space, and staff. A combined S&S/PRH will make these challenges even more acute.”

While observers on both sides of the border have suggested that the proposed merger is about leveraging the combined houses’ weight against Amazon, the NYT quotes an anonymous PRH executive as saying that the companies together would operate as an enhanced “partner” with the online retail giant.

There is no guarantee that the DoJ’s lawsuit will succeed. According to The New York Times, PRH has hired Daniel Petrocelli, the lawyer who successfully defended AT&T and Time Warner against a 2018 attempt to block a merger of those two companies, to act on their behalf in the current lawsuit. CNN quotes Petrocelli as saying the DoJ’s suit is “wrong on the facts, the law, and public policy.”

The lawsuit may be a trial balloon for a DoJ that is itching to break up other large companies, such as Amazon and Facebook. The success of this endeavour may depend upon avoiding the large swathe of conservative judges appointed during the previous U.S. administration, many of whom can be reliably counted upon to take a laissez faire approach to corporate consolidation, whether online or off. But in the short term, the mere fact that the DoJ is willing to intervene in the merger signals a departure from its approach to similar situations in the past two decades.

Quoted in Publishers Weekly, Authors Guild CEO Mary Rasenberger says that “the decision raises the bigger question that goes beyond traditional publishers to the consolidation of distribution channels and Amazon’s monopsony of book retail.” And Barry C. Lynn, director of the Open Markets Institute, calls the news “a huge win for authors, readers, editors, publishers, and American people as a whole.”

In a win for authors and readers, U.S. Department of Justice sues to block merger of Penguin Random House and Simon & Schuster