Federal Judge Blocks Penguin Random House/Simon & Schuster Merger

A federal judge blocked Penguin Random House from buying Simon and Schuster in a move hailed as a win for antitrust advocates and authors.

Judge Florence Y. Pan’s decision stymies a planned merger that would have condensed the so-called Big Five book publishers into a quartet, with the resulting megapublisher controlling nearly half the market. Bertelsmann, the parent company of PRH, said it will appeal.

“The proposed merger was never about readers and writers; it was about preserving (and growing) PRH’s market share,” horror writer Stephen King tweeted Oct. 31 in the wake of Pan’s decision. He testified at the trial against his own publisher, Simon & Schuster. “In other words, $$$.”

The U.S. Department of Justice’s lawsuit hinged on the same argument, albeit in legalese.

In November 2020, ViacomCBS announced it would sell Simon & Schuster to Penguin Random House, the nation’s largest book publisher, for $2 billion. A year later, the DOJ filed a civil antitrust suit to block the merger, saying the deal would give the proposed megapublisher “outsized influence” over which books get published as well as author pay.

“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,” charged Attorney General Merrick Garland.

The government’s focus on authors, advances and publishing contracts resulted in a trial that captivated the publishing industry. The proceedings offered a sometimes-juicy peek into the inner workings of a less-than-transparent business.

Simon & Schuster CEO Jonathan Karp’s two-day testimony drew particular attention, both from industry professionals and the Twittersphere, as he insisted that S&S competed against smaller publishers, not just the Big Five, and that author advances – the amount paid to writers upon signing a contract — did not affect marketing budgets: “Literary agents frequently ask us to guarantee marketing dollars and we don’t do it,” he maintained. “We don’t want to be locked into a plan.”

Pan pushed back on that from the bench, asking, “If you know it’s going to be a hot auction with more interest, do you spend more time developing a marketing plan?” Well, yes, Karp conceded.

But perhaps the most-quoted line was from an email he wrote to John Irving in 2020 that the Justice Department introduced into the trial: “I’m pretty sure the Department of Justice wouldn’t allow PRH to buy us, but that’s assuming we still have a DOJ.” (Hey, that was a joke, Karp said.

Still up for debate is how the decision might eventually affect publishing behemoth Amazon, cited during the trial as a reason to support the PRH merger. In a lengthy Nov. 1 thread, nonprofit director (and steadfast Amazon critic) Stacy Mitchell theorized that the decision laid the groundwork for moves to break up the company:

“Can Amazon’s monopoly power over the book industry be allowed to stand? After all, Amazon is an even more dominant gatekeeper in books than these two publishers combined,” she tweeted. “There’s extensive evidence that Amazon’s stranglehold in books has pushed down authors’ incomes and reduced the range of titles that find their way into print and into readers’ hands – exactly the arguments the DOJ made in this case.”