United States: justice blocks the merger between two American publishing giants

A federal judge in Washington on Monday blocked the takeover of the Simon & Schuster publishing house by rival Penguin Random House, thus upholding the US government’s request, which saw a risk of distortion of competition.

Urged by the AFP, Penguin Random House immediately announced its intention to appeal and request an urgent procedure. The deal, worth $ 2.18 billion, was announced in November 2020 and would bring together two of the five largest US publishers.

It is a historic success for the government of US President Joe Biden, which is far more aggressive than its predecessors in challenging mergers and acquisitions in the name of the principle of competition. The United States Department of Justice had taken legal action in November 2021, citing the risk of seeing the number of books published decrease and the new group reducing the advances paid to authors.

The two houses respectively occupy the first and fourth place in market share of the “Big Five” of American publishing, a group that also includes HarperCollins, Hachette Book Group USA and Macmillan Publishers. With 10,000 employees worldwide and nearly 15,000 books published annually, Penguin Random House, a subsidiary of the German Bertelsmann group, dominates the industry in the United States.

The group notably published the first volume of memoirs of former US President Barack Obama in 2020, entitled “A Promised Land”, and that of his wife, Michelle Obama, in 2018, which passed in the tens of millions of copies. It is also preparing to publish Prince Harry’s memoirs in early 2023.

The US government has provided evidence that the proposed acquisition “could have the effect of significantly reducing competition” in the market for best-selling rights, Judge Florence Pan wrote in the ruling released on Monday.

The entire legal reasoning that led the magistrate to make this decision has been sealed because it contains “confidential” or “highly confidential” information, Judge Pan said.

Calling the decision “a setback for readers and authors,” Penguin Random House denounced the US government’s argument, which the group said focused more on the possible consequences for authors than consumers. “It is contrary to its mission to protect fair competition,” the publisher said.

Simon & Schuster, a subsidiary of the Paramount Global group that publishes about 2,000 books a year, has international bestselling authors such as novelist Stephen King or journalist Bob Woodward in its catalog. Stephen King said he was “happy” with the decision in a message posted on a Twitter account. “The proposed merger has never concerned readers and writers; it was about preserving (and growing) PRH’s market share ”.

“Today’s ruling protects competition in publishing and is a win for authors, readers and the free exchange of ideas,” Department of Justice Jonathan Kanter said in a statement. Paramount, the parent company of Simon & Schuster, said it was “disappointed” by the ruling, in a reaction sent to AFP.

Prior to the US government procedure, the UK competition authority was also very interested in the takeover, as both groups had divisions in the UK. It had issued a favorable opinion in May 2021.

Since Joe Biden took office in January 2021, his government has sacked all woods to try to question many business mergers. Before Monday’s decision, his record was mixed. He got insurance brokers Aon and Willis to give up their union, or that Maersk Container Industry and China International Marine Containers don’t merge in the refrigerated container business.

However, he was fired in three other cases, including Booz Allen Hamilton’s acquisition of EverWatch Corp in the defense sector. In July, the American consumer protection agency FTC also took legal action to prevent Meta (Facebook) from acquiring virtual reality specialist Within Unlimited. The procedure is still ongoing.