A version of this article first appeared in the “Reliable Sources” newsletter. You can sign up for free right here.
Penguin Random House announced its bid to acquire Simon & Schuster in November 2020. The deal – combining two of the top five book publishers in the United States – would normally have taken effect by now. But the Justice Department is standing in the way, and an antitrust trial is set to begin on Monday.
Judge Florence Pan of the US District Court in Washington, DC will hear about three weeks of oral arguments. The government says, in its pre-trial brief, that the publisher combo “would further entrench the largest publishing giant in the United States (and the world) and give the merged company control of nearly half of the market to acquire anticipated top-selling books from authors.”
The publishers say that “after the merger, the market dynamic will be just the same” and reject the arguments that authors will suffer.
“The closely watched case holds major implications for a publishing industry that has been grappling with consolidation for years,” Publishers Weekly reporter Andrew Albanese writes. “It also looms as a key test for the government amid growing calls for more vigilant antitrust enforcement, and in the wake of a stinging defeat in 2018 in its bid to block the massive $85 billion merger between AT&T and Time Warner.”
Other publishing houses argue that the merger would be anti-competitive. But the government bears the burden of proof. “The lawsuit will test whether the government can mount more antitrust cases targeting the effects of corporate concentration on how much workers — in this case, writers of major books — get paid,” the NYT’s overview of the lawsuit notes.
The judge is expected to rule in November…
Simon & Schuster (which, full disclosure, was the publisher of my most recent book) is going to be sold by Paramount Global one way or another. Speculation abounds about potential private equity bidders. But for now, the buyer is Penguin Random House, and S&S CEO Jonathan Karp (who previously spent 16 years at PRH) said in a recent memo to staffers that “we, and our authors, will benefit greatly from becoming a part of this superb publishing company.”
>> “Regardless of the outcome,” Karp wrote, there will be a new owner, and “the best and most important thing we can do is to remain focused on achieving excellence on behalf of our authors and their books, assured in our purpose …”
>> Vanity Fair’s Joe Pompeo (whose book publisher is HarperCollins, which reportedly lost out on the bidding for S&S) reports that “the witness list is a who’s who of publishing bosses, power agents, and authors,” including Stephen King…
>> “An appearance at some point by King, whose works are published by Simon & Schuster, will be a highly unusual for an antitrust trial and will draw wide attention,” the AP’s Marcy Gordon writes in this great explainer…
>> Another big antitrust trial is getting underway in DC on Monday: The government is also trying to block insurer UnitedHealth Group from buying Change Healthcare. “The cases represent a conscious strategy by the Justice Department to expand the frontiers of merger enforcement,” the WSJ says…