The Penguin logo on the spine of books displayed on a shelf at the Book Passage bookstore on November 2, 2021 in Corte Madera, California (GETTY IMAGES NORTH AMERICA/JUSTIN SULLIVAN)
A federal judge in Washington on Monday blocked the acquisition of Simon & Schuster publishing house by its rival Penguin Random House, thus meeting the request of the US government, which saw a risk of distortion of competition.
Asked by AFP, Penguin Random House immediately announced its intention to appeal and requested an emergency procedure.
The operation, involving an amount of 2.18 billion dollars, was announced in November 2020 and would have united two of the five largest US publishers.
It’s a historic success for US President Joe Biden’s administration, which is far more aggressive than its predecessors in challenging mergers and acquisitions in the name of competition.
The US Department of Justice had taken legal action in November 2021, citing the risk of a decline in the number of books published and the new group reducing advances paid to authors.
The two houses occupy first and fourth place respectively in the market share of the “Big Five” of US publishing, a group that also includes HarperCollins, Hachette Book Group USA and Macmillan Publishers.
With 10,000 employees worldwide and nearly 15,000 books published annually, Penguin Random House, a subsidiary of the German Bertelsmann Group, dominates the industry in the United States.
The group notably published the first volume of former United States President Barack Obama’s memoirs in 2020, titled “A Promised Land,” and that of his wife, Michelle Obama, in 2018, which sold tens of millions of copies.
He is also preparing to publish Prince Harry’s memoirs in early 2023.
– Stephen King “satisfied” –
The US government has provided evidence that the proposed purchase “may have the effect of significantly lessening competition” in the market for the best-selling rights, Judge Florence Pan wrote in the ruling issued on Monday.
All the legal reasoning that led the magistrate to make this decision is under seal, as it contains “confidential” or “highly confidential” information, Judge Pan said.
Calling the decision “a setback for readers and authors,” Penguin Random House denounced the US government’s argument, which the group said focused more on the potential consequences for authors than consumers.
“This is contrary to its mission to protect fair competition,” argued the publisher.
Simon & Schuster, a subsidiary of the Paramount Global group which publishes about 2,000 books a year, has in its catalog authors of international best-selling books such as the novelist Stephen King or the journalist Bob Woodward.
Stephen King said he was “pleased” with the decision, in a message posted on his Twitter account. “The proposed merger was never about readers and writers; it was about maintaining (and growing) PRH’s market share.”
“Today’s decision protects competition in publishing and is a victory for authors, readers and the free exchange of ideas,” Department of Justice Jonathan Kanter said in a statement.
Paramount, the parent company of Simon & Schuster, said it was “disappointed” by the judgment, in a statement sent to AFP.
Prior to the US government’s proceedings, the UK competition authority had also taken a close interest in the takeover, as both groups had divisions in the UK. It had issued a favorable opinion in May 2021.
Since Joe Biden took office in January 2021, his government has been pulling out all the stops in an attempt to question many business mergers.
Before Monday’s decision, his record was mixed. It revealed that insurance brokers Aon and Willis call off their merger, or that Maersk Container Industry and China International Marine Containers do not merge in the refrigerated container sector.
However, he was fired in three other cases, including Booz Allen Hamilton’s takeover of EverWatch Corp in the defense industry.
In July, the US consumer protection agency FTC also took legal action to prevent Meta’s (Facebook) acquisition of virtual reality specialist Within Unlimited.
The procedure is still ongoing.