U.S. Justice Department Sues Penguin Random House to Stop Merger with Simon & Schuster

The U.S. Justice Department is suing Penguin Random House to stop the book publisher from merging with its competitor, Simon & Schuster.

Penguin Random House, the largest book publisher in the world, was just hit with a lawsuit by the U.S. Justice Department, to prevent the company from “buying competitor Simon & Schuster.” According to the suit, the deal would give Penguin Random House “outsized influence over what Americans read.”

Bertelsmann is a German media group that owns Penguin Random House. Last year, it agreed to “pay $2.175 billion in cash to buy Simon and Schuster from ViacomCBS, strengthening its presence in the United States and adding novelist Stephen King, Pulitzer Prize winner Anthony Doerr, and veteran journalist Bob Woodward to its stable of authors.” However, in the suit that was filed in federal court in Washington, the Justice Department argues the “deal would give outsized influence over who and what is published, and how much authors are paid for their work.” It also pointed out that competition is important for companies like Penguin Random House and Simon and Schuster. Attorney General Merrick Garland said:

“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.”

The publishers claim the deal “is needed so they can better negotiate with e-commerce giant, Amazon.com.” However, the Justice Department “quoted a top Penguin Random House executive as saying that he never, never bought into that argument and that a post-merger goal would be to become an ‘exceptional partner’ to Amazon.” 

What exactly would happen if the merger does go ahead? For starters, it would give “Penguin Random House nearly half of the market for publishing rights to blockbuster books while its nearest competitors would be less than half its size,” according to the Justice Department. The complaint also warns that “Simon & Schuster is the fourth-biggest U.S. book publisher and that, if combined with Penguin Random House, its U.S. revenues would be twice that of their closest competitors.”

In response to the complaint from the federal agency, both Penguin Random House and Simon & Schuster said they plan to fight the lawsuit and added the “government did not allege that the deal would harm competition in book sales.” A joint statement from the two companies states:

“The market for selling books is unconcentrated and the combined shares are well below the levels of concern.”

Sources:

U.S. sues to stop Penguin Random House bid to buy Simon & Schuster

Justice Dept. Sues Penguin Random House Over Simon & Schuster Deal