The government and giant publisher Penguin Random House traded fire in a federal antitrust trial Monday as the United States seeks to prevent the largest US book publisher from absorbing rival Simon & Schuster. The case will be a pivotal test of the Biden administration’s antitrust policy.
The Justice Department has filed a lawsuit to block the $2.2 billion merger, which would reduce the five largest US publishing houses to four.
“This proposed merger must be stopped,” said John Reed, a Department of Justice attorney, in his opening argument.
In an unusual move, the star witness to the government will be Stephen King, the famous author and master of the literary genre whose work Simon & Schuster has published. King is expected to testify during the trial in a US district court in Washington, DC.
The government claims it would harm the authors and, ultimately, readers if German media giant Bertelsmann, of which Penguin Random House is a division, were allowed to buy Simon & Schuster from Paramount Global Media and Entertainment. She says the deal will stymie competition and give Penguin Random House a huge influence over books published in the United States, reducing the amount paid to authors and giving consumers fewer books to choose from.
Publishers respond by saying that the merger will boost competition among publishers to find and sell the best books, by enabling the combined company to offer greater upfront payments and marketing support for authors. They say it will benefit readers, booksellers, and authors.
New York based publishers own impressive stables of great authors, who have sold several million copies and racked up multi-million dollar deals. Within the Penguin Random House constellation are Barack and Michelle Obama, whose memoir deal totaled $65 million, Bill Clinton, who took $15 million for his memoirs, Toni Morrison, John Grisham and Dan Brown.
Simon & Schuster counts Hillary Clinton, who received $8 million for her memoirs, Bob Woodward and Walter Isaacson. And the king.
Bruce Springsteen Divides the Difference: His Rebel Writers: Born in the United States with Barack Obama, published by Penguin Random House; His memoirs by Simon & Schuster.
The Department of Justice alleges that, as it stands now, No 1 Penguin Random House and No 4 Simon & Schuster, by total sales, are vying hard for the rights to publishing the anticipated bestsellers. If allowed to merge, the combined company would control roughly 50% of the market for those books, she says, hurting competition by reducing advances paid to authors and reducing production, creativity and diversity.
The Big Five – the other three being Hachette, HarperCollins, and Macmillan – dominate publishing in the United States. The government says it makes up 90% of the projected bestseller market.
The Biden administration is laying new ground on business focus and competition, and the government’s case against publisher mergers can be seen as an important step.
President Joe Biden has made competition a pillar of his economic policy, denouncing what he calls the massive market power of a range of industries and stressing the importance of strong competition for the economy, workers, consumers, and small businesses. Biden, a Democrat, has called on federal regulators, notably the Department of Justice and the Federal Trade Commission, to increase scrutiny of large corporate groups.