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Penguin-Simon Trial to Proceed Without `Efficiencies’ Data

Aug. 18, 2022, 3:47 PM

Penguin Random House LLC must refrain from using certain economic data to justify its $2.18 billion acquisition of Simon & Schuster Inc., after a federal judge threw out defense testimony in the trial over the deal.

US District Judge Florence Pan excluded defendants’ so-called efficiencies evidence from the case, granting a motion from the Department of Justice.

The publishers have argued that the merger would increase efficiencies, or cost-saving moves designed to reduce redundancies and free up resources. Those efficiencies could translate into over $100 million in additional author compensation by 2025, according to the defense’s court filings.

But the department, in its case challenging the merger in the US District Court for the District of Columbia, says the merger between two of the nation’s leading publishing houses would decrease competition and depress advance pay for the most successful authors’ manuscripts.

Merging companies often make efficiencies arguments to buttress their more central claims about a proposed deal’s benefits, said Penn Law antitrust profession Herbert Hovenkamp. But an antitrust case has never been won purely on an efficiencies defense, he said.

The Justice Department filed sealed challenges to some of the defense testimony nearly two weeks before the trial began. It rested its case Aug. 10, handing off the remainder of the trial to the defense.

The case is UNITED STATES OF AMERICA v. BERTELSMANN SE & CO. KGAA et al, D.D.C., no. 1:21-cv-02886.

To contact the reporter on this story: Dan Papscun in Washington at dpapscun@bloombergindustry.com

To contact the editor responsible for this story: Melissa B. Robinson at mrobinson@bloomberglaw.com