The U.S. Department of Justice is suing to block Penguin Random House from acquiring its smaller rival Simon & Schuster, alleging that the proposed merger would harm American authors and consumers by shrinking an already highly concentrated market and ultimately decreasing the quantity and variety of books.
The Justice Department alleges that the deal would allow Penguin Random House, already the largest book publisher in the world, to exert “outsized influence” over which books are published and how much authors are paid. While the market for book publishing should encourage the two publishing houses to compete to acquire manuscripts, offering authors higher advances and sweetening the terms of their contracts, the proposed merger would eliminate this crucial competitiveness, the government alleges.
The complaint, filed in U.S. District Court for the District of Columbia, on Tuesday alleges that the nearly $2.2 billion deal would grant Penguin Random House control of nearly half the market for acquiring publishing rights to anticipated top-selling books, which would leave individual authors with fewer options and less power to negotiate deals.
With less competition, authors would be paid less for their writing, government lawyers argue, in turn diminishing the number and variety of books available to consumers.
“Books have shaped American public life throughout our nation’s history, and authors are the lifeblood of book publishing in America. But just five publishers control the U.S. publishing industry,” said Attorney General Merrick Garland, in a news release Tuesday. “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.”
In a memo to staff Tuesday, Simon & Schuster President and Chief Executive Jonathan Karp said that both publishers are committed to working together to fight the government’s lawsuit, and that Penguin Random House is determined to bring the deal to fruition. Karp said the publishers “strongly disagree with the DOJ that this transaction will harm competition and believe firmly that there is no basis for these claims.”
He also emphasized that the Justice Department has not alleged that the transaction would harm competition in the sale of books. According to the government’s complaint, the case against the proposed merger centers on the harm to American workers, specifically authors, who rely on publishers to compete with one another to ensure they are paid fairly for their work, and who would be placed at a disadvantage when buyers consolidate. Karp said the company will do all it can to help close the deal.
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