A federal judge blocked Penguin Random House’s planned $2.2 billion acquisition of the rival publishing house Simon & Schuster. It was a win for the Biden administration, which has sought to toughen its antitrust enforcement.
Judge Florence Pan of the U.S. district court for the District of Columbia said in a brief that she found the justice department had shown that the deal would “substantially” harm competition in the market for publishing rights to anticipated top-selling books.
Penguin Random House is the largest book publisher in the world. Simon & Schuster is the fourth largest, and one of its biggest rivals. The largest five publishers control 90 percent of the market.
If Penguin Random House was combined with Simon & Schuster, it would then control a massive 49 percent of the market for blockbuster books. And its nearest competitors would be less than half its size.
Most merger fights are focused on what consumers pay. But this one focused on the authors’ earnings.
The U.S. government argued that fewer publishing houses being in competition with each other would lead to lower advances for authors across the board, but focused on a small part of the market: bestselling writers who were paid $250,000 or more.
The government identified bestselling titles that were the subject of bidding wars between PRH and Simon & Schuster and argued that the competition had driven up what the author was paid.
The ruling matters because it would significantly impact the publishing industry, though Penguin Random House plans to appeal. The case is seen as a precedent-setter for mergers and acquisitions at large under the Biden administration.
Experts from the two publishers had argued during the trial that the merger would save costs and allow the company to allocate more money to buy books, per the New York Times.
The Department of Justice, along with author Stephen King and executives from other major publishing houses, countered that it would result in lower advances for authors, harm writers who are just starting out, and decrease the range of books published.
King is the author of numerous best-sellers, including The Shining, The Stand, and IT. He was among a number of top-selling authors and agents who testified during the three-week trial. He said consolidation is bad for competition, and it would have caused slow but steady damage to writers, readers, independent booksellers, and small publishing companies.
“Today’s decision protects vital competition for books and is a victory for authors, readers, and the free exchange of ideas,” said Assistant Attorney General Jonathan Kanter of the DOJ’s Antitrust Division in a statement.
“The decision is also a victory for workers more broadly,” Kanter added. “It reaffirms that the antitrust laws protect competition for the acquisition of goods and services from workers.”