Judge Blocks Paramount’s Sale of Simon & Schuster to Penguin Random House

Paramount Global’s attempt to sell publisher Simon & Schuster to the owner of Penguin Random House has been blocked, a Washington D.C. judge ordered on Monday.

“Upon review of the extensive record and careful consideration of the parties’ arguments, 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 U.S. publishing rights to anticipated top-selling books,” U.S. Circuit Judge Florence Y. Pan wrote in a two-page order.

In reply to the order, a Penguin Random House rep called the decision a “setback” and pledge to appeal. “We strongly disagree with today’s decision, which is an unfortunate setback for readers and authors, and we will immediately request an expedited appeal,” Penguin Random House wrote in a statement. “As we demonstrated throughout the trial, the Department of Justice’s focus on advances to the world’s best-paid authors instead of consumers or the intense competitiveness in the publishing sector runs contrary to its mission to ensure fair competition. We believe this merger will be pro-competitive, and we will continue to work closely with Paramount and Simon & Schuster on next steps.”

The $2.175 billion deal was originally unveiled by ViacomCBS (before it renamed itself Paramount Global) in November 2020 as part of the Shari Redstone-controlled media conglomerate’s effort to sell off assets that weren’t core to its streaming strategy. That effort resulted in sales last year of CBS’ New York BlackRock headquarters building for $760 million and CBS’ Studio City lot for $1.85 billion.

The proposed sale of Simon & Schuster to German media giant Bertelsmann, owner of the Markus Dohle-run Penguin Random House, would have created a book-selling behemoth. Bertelsmann and Paramount originally expected the deal to close in 2021, but the U.S. government filed a lawsuit in November of last year alleging that the deal “would give Penguin Random House outsized influence over who and what is published, and how much authors are paid for their work.” 

In unveiling the deal two years ago, the Jonathan Karp-led Simon & Schuster touted a roster of top selling authors including Stephen King, Doris Kearns Goodwin and Jason Reynolds. However, King went on to testify in the case and oppose the deal.

The government had argued in its complaint that, if combined, Penguin Random House and Simon & Schuster would have revenues “twice that of their nearest closest competitor,” and far outpace “Big Five” publisher rivals like HarperCollins Publishers, Hachette Book Group and Macmillan Publishing Group. (Notably, in May of last year, the News Corp owned HarperCollins had been able to close an acquisition for the books division of Houghton Mifflin Harcourt, which includes the English language rights to J.R.R. Tolkien’s works, in a $349 million deal.)

The Justice Department’s antitrust division argued in its lawsuit that the proposed Simon & Schuster and Penguin Random House merger would not only harm consumers but also authors looking to sell their work. “If consummated, this merger would likely result in substantial harm to authors of anticipated top-selling books and ultimately, consumers,” read the government’s Nov. 2021 complaint. “Penguin Random House would control close to half of the market for the acquisition of publishing rights to anticipated top-selling books.”

Paramount and Simon & Schuster reps didn’t immediately reply for comment on the judge’s order.

More to come.