A U.S. judge rules that the merger of Penguin Random House and Time Inc. cannot proceed.
The largest book publisher in the world, Penguin Random House, and rival Simon & Schuster, cannot combine for $2.2 billion, a U.S. judge has declared.
In a succinct ruling on Monday, Judge Florence Pan of the U.S. District Court for the District of Columbia determined that the Justice Department has demonstrated that the agreement may significantly lessen competition “in the market for the U.S. publication rights to expected top-selling novels.”
Related: Bertelsmann intends to challenge the book merger decision with Penguin Random House.
Contrary to most merger disputes, which centre on consumer prices, this one was concerned with writers’ remuneration. The government argued that the agreement should be scrapped because it would lessen the competition for best-selling novels and result in smaller advances for authors who make at least $250,000.
The decision, according to Penguin Random House, was “unfortunate,” and the publisher stated it will “immediately request an expedited appeal.”
According to Bertelsmann, the owner of Penguin, chief executive Thomas Rabe, “A combination would be healthy for competition” and “The court’s ruling was based on wrong underlying assumptions.”
Ina Garten, a recipe author, and the authors Zadie Smith and Danielle Steele are published by Penguin, whereas Stephen King, Jennifer Weiner, and Hillary Rodham Clinton, among others, are published by Simon & Schuster.
Simon & Schuster is owned by Paramount Global, whereas Penguin is owned by German media company Bertelsmann.
According to a statement from Jonathan Kanter, assistant attorney general for the United States, “the planned combination would have limited competition, decreased author pay, diminished the breadth, depth, and diversity of our tales and ideas, and ultimately impoverished our democracy.”
In November 2021, the U.S. Justice Department filed a lawsuit to block the agreement.
The government contended during hearings in August that the top five publishers account for 90% of the market and that Penguin and Simon & Schuster combined would have about half the market share for publishing rights to best-selling novels, while its closest rivals would be less than half its size.
Daniel Petrocelli, a lawyer for Penguin Random House who previously defeated the government in a merger challenge, asserted during the trial that the deal would have “enormous benefits” for both readers and authors because the two companies’ imprints, or brands, would still be in direct competition with one another.
This commitment was disputed by best-selling author Stephen King, who testified during the three-week trial. “You may just as well claim that a husband and wife will compete with each other for the same residence. “It’s kind of absurd,” King briefed the court.
The top five publishers are Walt Disney (NYSE:DIS) Co., HarperCollins, Macmillan, Simon & Schuster, and Hachette, with Amazon.com Inc. (NASDAQ:AMZN) and Simon & Schuster rounding out the list. News Corp. is the owner of HarperCollins (NASDAQ:NWSA).
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President Joe Biden proposed Pan for the U.S. District Court for the District of Columbia, after which he proposed her for the appeals court in Washington. In September, her confirmation came.
