Justice Department Sues To Block Penguin Random House Merger With Simon & Schuster

The Justice Department sued to block Penguin Random House’s proposed merger with Simon & Schuster, arguing that the transaction would create a publisher with too much influence over books and author payments.

The lawsuit, filed in U.S. District Court in the District of Columbia, sets up another high-profile antitrust battle in the media sector.

Attorney General Merrick Garland said in a statement, “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 said that the lawsuit “will prevent further consolidation in an industry that has a history of collusion.”

The lawsuit claims that Penguin Random House’s $2.175 billion purchase of Simon & Schuster, currently a unit of ViacomCBS, would give the new company close to half the market for the most anticipated books.

The DOJ said in announcing the lawsuit, “According to its own documents as described in the complaint, Penguin Random House views the U.S. publishing market as an ‘oligopoly’ and its acquisition of Simon & Schuster is intended to “cement” its position as the dominant publisher in the United States.”

The lawsuit also reflects promises of Joe Biden’s administration to take a more robust stance toward antitrust enforcement, even as the president’s nominee to take the reins of the Antitrust Division, Jonathan Kanter, has not yet been confirmed. Biden’s choice to lead the Federal Trade Commission, Lina Khan, also has argued for rigorous enforcement, particularly in the tech sector. The FTC is currently reviewing Amazon’s proposed acquisition of MGM.

Penguin Random House and Simon & Schuster issued a statement in which they said, “The publishing industry is, and following this transaction will remain, a vibrant and highly competitive environment. PRH and S&S compete with many other publishers including large trade publishers, newer entrants like Amazon, and a range of mid-size and smaller publishers all capable of competing for future titles from established and emerging authors.”

The publishers have retained Daniel Petrocelli of O’Melveny & Myers as their lead attorney. He represented AT&T when the Justice Department sued to block its merger with Time Warner. After a trial judge ruled in favor of AT&T-Time Warner, an a federal appeals court upheld the decision.

He gave a preview of his defense in the publishers’ case. In a statement, he argued that the Justice Department “has not found, nor does it allege, that the combination will reduce competition in the sale of books. The publishing industry is strong and vibrant and has seen strong growth at all levels. We are confident that the robust and competitive landscape that exists will ensure a decision that the acquisition will promote, not harm, competition.”

More to come.

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