Penguin Random House bid to acquire Simon & Schuster blocked by Richter
The government focused its arguments on a narrow segment of the market, arguing that authors of books expected to be among the best-selling books receiving advances of US$250,000 and more would see their earnings fall if fewer major publishers attended auctions would compete for their books. They identified deals where Simon & Schuster and Penguin Random House were the top two bidders and cranked up the advance.
In its defense, Penguin Random House tried to convince the judge that the Justice Department had fundamentally misunderstood the dynamics of the publishing industry. The company said there was no separate market for writers earning advances of $250,000 or more, stressing that direct bidding wars between the two companies are rare.
Judge Pan was undeterred by these arguments.
When the $2.175 billion deal first came announced In 2020, most of the publishing industry assumed it would pass after regulatory review. Many were stunned when the government blocked them. However, as the trial progressed, Judge Pan’s skepticism about Penguin Random House’s position became increasingly apparent.
The study’s outcome could have profound implications for the industry, with repercussions extending beyond the two companies.
In recent decades, the publishing business has already undergone a series of mergers and acquisitions as large publishers have bought out mid-sized companies and competitors and the number of large publishers has dwindled to five. When Penguin and Random House merged in 2013, the deal accelerated the race for mass. Competing companies like HarperCollins and Hachette also went on a buying spree, buying smaller companies to expand their catalogs and backlists.
But the Justice Department’s decision to block Penguin Random House from buying Simon & Schuster suggests future mergers are likely to come under government scrutiny, especially if it’s an attempt by one of the so-called Big Five publishers, one to buy competitors.
Some antitrust experts say the trial’s outcome also raises questions about whether the Justice Department might decide to challenge another big player in the book business: Amazon.
“The target immediately moves to Amazon,” said Barry Lynn, executive director of the Open Markets Institute, an antitrust think tank. “Once you come in and say that this type of consolidation and this type of action is bad for writers and readers, you look at Amazon and you see a company with 80 percent market share, there’s only one conclusion.”
David McCabe contributed reporting.
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