The Department of Justice has filed a civil antitrust lawsuit to block Penguin Random House's proposed acquisition of Simon & Schuster, which was first announced by Bertelsmann last November, from ViacomCBS.
Filed in the U.S. District Court for the District of Columbia, the complaint alleges that if the proposed merger is allowed to proceed, PRH "would be, by far, the largest book publisher in the United States, towering over its rivals. The merger would give Penguin Random House outsized influence over who and what is published, and how much authors are paid for their work. The deal... would likely harm competition in the publishing industry and should be blocked."
The complaint also alleges that the acquisition of S&S for $2.175 billion would put PRH in control of close to half the market for acquiring publishing rights to anticipated top-selling books, leaving hundreds of individual authors with fewer options and less leverage.
"The complaint filed today to ensure fair competition in the U.S. publishing industry is the latest demonstration of the Justice Department's commitment to pursuing economic opportunity and fairness through antitrust enforcement," said Attorney General Merrick B. Garland. "Books have shaped American public life throughout our nation's history, and authors are the lifeblood of book publishing in America. But just five publishers control the U.S. publishing industry. 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."
Acting Assistant Attorney General Richard A. Powers of the DOJ's Antitrust Division commented: "In stopping Penguin Random House from extending its control of the U.S. publishing market, this lawsuit will prevent further consolidation in an industry that has a history of collusion."
PRH "said it planned to vigorously fight the challenge and hired Daniel Petrocelli as its trial lawyer," the New York Times reported, noting that Petrocelli "successfully defended AT&T and Time Warner against the Justice Department when it tried to block their $100 billion merger."
"The government should only be challenging those mergers where they can prove that, as a result of the combination, consumers are going to be harmed--typically in the form of higher prices. And here there is no such evidence," Petrocelli said, adding: "The government does allege that consumers will have fewer books, but that is completely speculative through a chain of strained logic. They're not going to be able to prove that at the end of the day."
In a joint statement, PRH and S&S responded that the Justice Department "has not alleged that the acquisition would harm competition in the sale of books" and that the company had not planned "any reduction in the number of books acquired or in amounts paid for those acquisitions." The Times noted that they also said the rationale for bringing the companies together was to find efficiencies that would save money on the back end, and that it had no plans to reduce the number of books it acquires or the amounts it pays for them.
"Blocking the transaction would harm the very authors DOJ purports to protect," the companies added. "We will fight this lawsuit vigorously and look forward to PRH serving as the steward for this storied publishing house in the years to come."
PRH CEO Markus Dohle commented (via the Bookseller): “Since ViacomCBS announced that it was contemplating selling S&S, we at Penguin Random House knew S&S would have its best home with us--a place that would be committed to carrying forward its storied legacy. We continue to firmly believe this. Our goal is for the new combined company to be truly greater than the sum of its parts, and our focus is to grow our community of distinct imprints that will operate independently and autonomously and will continue to compete vigorously among themselves and with outside competitors, a process that best serves the objective that every author finds the right editor and the best imprint for their work to develop and flourish."
In a note to staff, S&S president and CEO Jonathan Karp observed: "For all of us, this news is unsettling: nobody likes to work in an atmosphere of uncertainty. But over the last 18 months we have proven our ability to perform at the highest possible levels on behalf of our authors and their books. Our admirable performance during this period is a testament to your dedication, resilience, and ability to adapt under extreme conditions. Your hard work is greatly appreciated.... We are committed to working together with PRH to fight this lawsuit. I expect that there will be further developments along the way as this process unfolds."