A planned merger between Bertelsmann’s Penguin Random House (PRH) and Simon & Schuster has been blocked by the Department of Justice antitrust division as harmful to authors.
On November 2, The DOJ filed a civil suit in the U.S. District Court of Columbia to stop Penguin Random House—already the world’s largest publisher– from absorbing Simon & Schuster. A hearing is set for January 3, 2022.
The DOJ said in a press release that such a merger “would enable Penguin Random House, which is already the largest book publisher in the world, to exert outsized influence over which books are published in the United States and how much authors are paid for their work.”
“The complaint filed to ensure fair competition in the U.S. publishing industry is the latest demonstration of the Justice Department’s commitment to pursuing economic opportunity and fairness through antitrust enforcement,” said Attorney General Merrick B. Garland.
“Books have shaped American public life throughout our nation’s history, and authors are the lifeblood of book publishing in America,” said Attorney General Merrick B. Garland, “but just five publishers control the U.S. publishing industry,” If the world’s largest book publisher is permitted to acquire one of its biggest rivals, it will have unprecedented control over this important industry. American authors and consumers will pay the price of this anticompetitive merger – lower advances for authors and ultimately fewer books and less variety for consumers.”
“In stopping Penguin Random House from extending its control of the U.S. publishing market, this lawsuit will prevent further consolidation in an industry that has a history of collusion,” said Acting Assistant Attorney General Richard A. Powers of the Justice Department’s Antitrust Division. “I want to thank the Attorney General and senior leadership of the department for their support of antitrust enforcement.”
As described in the complaint, publishers compete to acquire manuscripts, which they edit, package, market, distribute and sell as books. Publishers pay authors advances for the rights to publish their books. In most cases, the advance represents an author’s total compensation for their work.
The publishing industry is already highly concentrated, as the complaint details. Just five publishers, known as the “Big Five,” are regularly able to offer high advances and extensive marketing and editorial support, making them the best option for authors who want to publish a top-selling book. Most authors aspire to write the next bestseller and selling their rights to the Big Five offers the best chance to do so.
While smaller publishers occasionally win the publishing rights to anticipated top-selling books, they lack the financial resources to regularly pay the high advances required and absorb the financial losses if a book does not meet sales expectations. Today, Penguin Random House, the world’s largest publisher, and Simon & Schuster, the fourth largest in the United States, compete head-to-head to acquire manuscripts by offering higher advances, better services, and more favorable contract terms to authors. However, as the complaint alleges, the proposed merger would eliminate this important competition, resulting in lower advances for authors and ultimately fewer books and less variety for consumers.
The complaint alleges that the acquisition of Simon & Schuster for $2.175 billion would put Penguin Random House in control of close to half the market for acquiring publishing rights to anticipated top-selling books, leaving hundreds of individual authors with fewer options and less leverage. According to its own documents as described in the complaint, Penguin Random House views the U.S. publishing