** FILE** Outside view of the German media giant Bertelsmann pictured March 13, 2003 in Guetersloh, Germany. (AP Photo/Michael Sohn) (AP Newsroom)
The Department of Justice filed an antitrust suit in the U.S. District Court for the District of Columbia Tuesday in the first major antitrust action by the Biden administration, saying the deal would let Penguin Random House "exert outsized influence over which books are published in the United States and how much authors are paid for their work."
"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," said Attorney General Merrick Garland in a statement.
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The purchase of Simon & Schuster would reduce the so-called Big Five, which dominate American publishing and include HarperCollins, Hachette Book Group and Macmillan, to four.
The deal raised concerned from writers and from rival publishers. The Authors Guild, a writers’ organization, has said it opposes the acquisition because there would be less competition for authors’ manuscripts. Rupert Murdoch's News Corp, which owns HarperCollins and had reportedly also been interested in buying Simon & Schuster, slammed the deal. Its CEO Robert Thomson said last fall that Bertelsmann was "buying market dominance as a book behemoth."
In a statement, the publishers said they would fight the lawsuit and blocking the deal would harm authors. "DOJ’s lawsuit is wrong on the facts, the law, and public policy," said Daniel Petrocelli, Penguin Random House's lawyer. "Importantly, DOJ has not found, nor does it allege, that the combination will reduce competition in the sale of books."
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Petrocelli, the vice chair of O’Melveny & Meyers, is a high-profile attorney who defended AT&T against the Justice Department's failed attempt to block its Time Warner purchase under the Trump administration.
The companies say that their publishing imprints will continue to compete against one another for books after the deal closes, and that Penguin Random House is not planning to reduce the number of books acquired or the amounts paid for the book deals.
Penguin Random House’s proposed acquisition of Simon & Schuster follows decades of consolidation in the publishing industry. Penguin and Random House themselves merged less than a decade ago, in 2013. Acquisitions have intensified in recent years as publishers seek a stronger bargaining position with the country’s biggest bookseller, Amazon.com.
"Today’s decision by the DOJ was unexpected given that so many other major mergers and acquisitions in the publishing industry have gone through recently and over the last few decades with nary a raised eyebrow from DOJ," said Mary Rasenberger, CEO of the Authors Guild, in a statement Tuesday.
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President Joe Biden has called for greater scrutiny of mergers as part of his effort to increase competition and stanch corporate power. He has assembled a team of regulators and advisers to try to counteract monopoly power, including installing Big Tech critic Lina Khan as chair of the Federal Trade Commission and nominating antitrust lawyer Jonathan Kanter to head DOJ's antitrust division.
In its complaint, the Justice Department alleges that should Penguin Random House buy Simon & Schuster, it would control nearly half the market for acquiring anticipated top-selling books. The government argues that this would lead to less lucrative advances for writers, since the two companies would no longer compete against each other for the right to publish a book. Lower author pay would make it harder for writers to make a living by writing books, the government says, and eventually mean fewer books published and less variety of books out there for readers.
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