Penguin Random House Deal for Simon & Schuster Blocked by Judge

Penguin Random House’s $2.18 billion acquisition of rival book publisher Simon & Schuster Inc. was blocked by a federal judge who found the merger would lessen competition.

Judge Florence Y. Pan ruled in favor of the Justice Department, which sued last year arguing the tie-up would give Penguin -- the largest US book publisher owned by Bertelsmann SE -- too much leverage over author payouts. Simon & Schuster is the fourth largest book publisher, owned by Paramount Global.

“The court finds that the United States has shown that ‘the effect of [the proposed merger] may be substantially to lessen competition’ in the market for the US publishing rights to anticipated top-selling books,” the judge wrote in a two-page order Monday.

The reasons for the decision will be released later, after the publishers agree on what confidential information should be redacted, the judge said.

Penguin Random House said in a statement that it “strongly” disagrees with the decision and would seek an expedited appeal immediately.

The Justice Department’s antitrust division has stepped up its enforcement under President Joe Biden, bringing an unprecedented 10 merger challenges since taking over last year. The win in the book publisher case comes after DOJ’s antitrust lawyers lost three challenges in a row, though some of those cases are now being appealed.

Earlier: DOJ Antitrust Losses in Court Flash Trouble for Biden Clampdown

The ruling also represents a victory for the Biden administration’s increased focus on competition issues in labor markets: At trial, DOJ lawyers leaned heavily on the argument that authors would be harmed by having fewer publishing houses to compete for their titles.

“Today’s decision protects vital competition for books and is a victory for authors, readers, and the free exchange of ideas,” Assistant Attorney General for Antitrust Jonathan Kanter said in a statement.

The ruling also comes on the heels of the Justice Department’s first criminal conviction for monopolization in decades.

At trial, executives of Penguin’s rival backed the Justice Department’s case. HarperCollins Publishers LLC, owned by News Corp., also sought to buy Simon & Schuster and the company’s chief executive officer said the publisher was still interested in a tie-up if Penguin’s bid was blocked.

In closing arguments before Pan in August, the two sides clashed over how to define the publishing market and the ability of other publishers to act as a check on the combined company.

The case is US v. Bertelsmann SE, 21-cv-02886, US District Court, District of Columbia (Washington).

(Updates with Penguin statement, context on DOJ challenges starting from fifth paragraph)

--With assistance from Sabrina Willmer.

To contact the reporter on this story:
Leah Nylen in Washington at lnylen2@bloomberg.net

To contact the editors responsible for this story:
Katia Porzecanski at kporzecansk1@bloomberg.net

Joe Schneider

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