What’s at stake as the book publishing merger faces an antitrust trial

Penguin Random House announced its offer to acquire Simon & Schuster in November 2020. The deal – which includes two of the five largest book publishers in the US – is usually still in effect. But the Justice Department stands in its way, and an antitrust trial is set to begin on Monday.

Judge Florence Bane of the US District Court in Washington, D.C. will hear about three weeks of oral arguments. The government says, in a pre-trial brief, that the publishers’ group “will cement the largest publishing giant in the United States (and the world) and give the combined company control of nearly half of the market to capture the highest expected sales of books from the authors.”

The publishers say that “after the merger, the market dynamic will be the same” and reject the arguments that the authors will struggle with.

Publishers Weekly reporter Andrew Albanese writes that “the closely watched issue bears major implications for a publishing industry that has been struggling to integrate for years.” “It also looms as a major test for the government amid growing calls for greater antitrust vigilance, and in the wake of a scathing defeat in 2018 in its attempt to prevent the massive $85 billion merger between AT&T and Time Warner.”
Other publishing houses argue that the merger would be an anti-competitive one. But the government bears the burden of proof. “The lawsuit will test whether the government can bring more antitrust cases targeting the effects of companies’ focus on how much workers — in this case, the authors of the big books — pay,” the New York Times overview of the lawsuit notes.

The judge is expected to rule in November…

in-depth reading

Paramount Global will somehow sell Simon & Schuster (which I fully disclosed was the publisher of my latest book). There is much speculation about potential bidders in private equity. But for now, the buyer is Penguin Random House, “We and our writers would benefit greatly from becoming a part of this wonderful publishing company,” Jonathan Karp, CEO of S&S (previously spending 16 years at PRH) said in a recent note to employees.

>> Karp wrote: “Regardless of the outcome, there will be a new owner, and the best and most important thing we can do is continue to focus on achieving excellence on behalf of our authors and their books, emphasizing in our goal…”

>> Vanity Fair’s Joe Pompeo (the publisher of his HarperCollins, who lost in the S&S bid) reports that “the witness list is those of publishing chiefs, power agents, and authors,” including Stephen King…
>> “The appearance of King at some point, whose work was published by Simon & Schuster, would be very unusual for an antitrust trial and would draw widespread attention,” AP’s Marcy Gordon wrote in this great commentary…
>> Another big antitrust trial takes place in the capital on Monday: The government is also trying to prevent insurance company UnitedHealth Group from buying Change Healthcare. “The cases represent a conscious strategy by the Department of Justice to extend the boundaries of merger enforcement,” says the Wall Street Journal.

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