Trial Begins in Justice Department’s Bid to Block Book Publishing Merger
WASHINGTON—Trial proceedings kicked off in the Justice Department’s antitrust challenge to Penguin Random House’s planned acquisition of rival publisher Simon & Schuster, a test for the Biden administration’s efforts to limit corporate consolidation.
“This proposed merger must be stopped,” Justice Department lawyer John Read said in his opening statement Monday. “It would, in the defendants’ own words, cement Penguin Random House’s dominance.”
Daniel Petrocelli, Penguin Random House’s lawyer, countered that the merger would “only enhance the fierce competition” that exists in the publishing industry.
U.S. District Judge Florence Pan has set aside three weeks for the nonjury trial. It could take months before she issues her ruling on whether the publishing merger, valued at more than $2 billion, should proceed.
The trial will include testimony from big names in the publishing industry, including Stephen King, a bestselling Simon & Schuster author who is slated to testify Tuesday in support of the Justice Department’s lawsuit.
The case is part of the Biden administration’s push to be more aggressive in challenging deals that it believes will suppress competition. A different team of Justice Department lawyers separately went to trial Monday in a lawsuit seeking to block
UnitedHealth Group Inc.
from acquiring health-technology firm
—a proceeding unfolding in the same courthouse in Washington, D.C.
The German media company Bertelsmann SE, which owns Penguin Random House, agreed in November 2020 to buy Simon & Schuster from
—now called Paramount Global.
Penguin Random House, already the result of a 2013 merger, is the largest book publisher by revenue. If allowed to acquire Simon & Schuster, Penguin Random House would dominate the U.S. publishing industry with revenues twice that of its next closest competitor, the Justice Department has said.
“That would be good for Penguin Random House but bad for the marketplace of ideas and bad for the authors who contribute to that marketplace,” Mr. Read, the government lawyer, said during his opening remarks. Together Penguin Random House and Simon & Schuster accounted for 31% of all print books sold in the U.S. through July 16, according to book tracker NPD BookScan.
The Justice Department alleges the merger will hurt competition in what it describes as the market for anticipated top-selling books, ones acquired from authors through advances of at least $250,000.
Penguin Random House and Simon & Schuster argue the $250,000 number is an arbitrary one that encompasses about 1,200 books annually, or about 2% of all books published by commercial publishers.
“We’re talking about a tiny increment of the overall market,” Mr. Petrocelli said Monday, adding that industry insiders don’t consider anticipated top-sellers as a separate, distinct market in which publishers compete.
“No one in the publishing industry has heard of this before,” he said. “It does not exist.”
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