US begins court battle against publishing giants’ merger

The government and publishing titan Penguin Random House exchanged opening salvos in a federal antitrust trial Monday as the U.S. seeks to block the biggest U.S. book publisher from absorbing rival Simon & Schuster. The case comes as a key test of the Biden administration’s antitrust policy.

The Justice Department has sued to block the $2.2 billion merger, which would reduce the Big Five U.S. publishers to four.

The government’s star witness, bestselling author Stephen King, is expected to testify at Tuesday’s session of the weekslong trial in U.S. District Court in Washington, D.C. King’s works are published by Simon & Schuster.

At Monday’s opening session, opposing attorneys for the two sides presented their cases before U.S. District Judge Florence Pan.

Justice Department attorneys called the merger “presumptively wrong” because it would shrink competition and, inevitably, the vital public discourse that books help engender. Penguin Random House countered that the new company would “enhance” competition because the combined company could turn out books more efficiently.

The government contends that it would hurt authors and, ultimately, readers if German media titan Bertelsmann, of which Penguin Random House is a division, is allowed to buy Simon & Schuster, the fourth-largest publisher, from U.S. media and entertainment company Paramount Global. It says the deal would thwart competition and give Penguin Random House gigantic influence over which books are published in the U.S., likely reducing how much authors are paid and giving consumers fewer books to choose from.

The publishers counter that the merger would strengthen competition among publishers to find and sell the hottest books, by enabling the combined company to offer bigger advance payments and marketing support to authors. It would benefit readers, booksellers and authors, they say.

The two New York-based publishers have impressive stables of blockbuster authors, who’ve sold multiple millions of copies and have scored multimillion-dollar deals. Within Penguin Random House’s constellation are Barack and Michelle Obama, whose package deal for their memoirs totaled an estimated $65 million, Bill Clinton, who received $15 million for his memoir, Toni Morrison, John Grisham and Dan Brown.

Simon & Schuster counts Hillary Clinton, who received $8 million for her memoir, Bob Woodward and Walter Isaacson. And King.

Bruce Springsteen splits the difference: His “Renegades: Born in the USA,” with Barack Obama, was published by Penguin Random House; his memoir, by Simon & Schuster.

The Justice Department contends that as things now stand, No. 1 Penguin Random House and No. 4 Simon & Schuster, by total sales, compete fiercely to acquire the rights to publish the anticipated hottest-selling books. If they are allowed to merge, the combined company would control nearly 50% of the market for those books, it says, hurting competition by reducing advances paid to authors and diminishing output, creativity and diversity.

The Big Five — the other three are Hachette, HarperCollins and Macmillan — dominate U.S. publishing. They make up 90% of the market for anticipated top-selling books, the government says.

The Biden administration is staking out new ground on business concentration and competition, and the government’s case against the publishers’ merger is an important test.