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US Judge lays out case for blocking publishing giants merger

WASHINGTON (AP) — A federal judge has laid out a data-laden case for why she blocked Penguin Random House’s proposed purchase of Simon & Schuster , handing a victory to the Biden Justice Department in its contention that combining two of the worl
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FILE - A book published by Simon & Schuster is displayed on July 30, 2022, in Tigard, Ore. A federal judge has laid out a data-laden case for why she blocked Penguin Random House’s proposed purchase of Simon & Schuster, handing a victory to the Biden Justice Department in its contention that combining two of the world’s biggest publishers would hurt competition for top-selling books. (AP Photo/Jenny Kane, File)

WASHINGTON (AP) — A federal judge has laid out a data-laden case for why she , handing a victory to the Biden Justice Department in its contention that combining two of the world’s biggest publishers would hurt competition for top-selling books.

In her ruling filed Monday, U.S. District Court Judge Florence Pan also waved off as not relevant the publishers’ assertion that Penguin Random House would be the best “home” for Simon & Schuster and that other buyers — notably private equity firms — could destroy it. That argument isn’t relevant to the case and her decision, Pan wrote, which turns only on the issue of how the merger would affect competition.

Pan announced her ruling in a brief statement last week, keeping the bulk of it under seal because of confidentiality issues. The full ruling issued this week delves into the data of publishing-market dynamics, replete with charts and graphs. Some company-related material is redacted.

“The government has presented a compelling case that predicts substantial harm to competition as a result of the proposed merger,” Pan wrote. “The post-merger concentration of the relevant market would be concerningly high: The merged entity would have a 49% market share, more than twice that of its closest competitor.”

The merger “is likely to substantially lessen competition in the market for the publishing rights to anticipated top-selling books," Pan wrote.

Penguin Random House, owned by German conglomerate Bertelsmann, is the biggest book publisher in the U.S., as Pan laid out in her ruling. She noted that Simon & Schuster, whose parent is New York-based media giant Paramount Global, is the third-largest U.S. publisher.

Penguin Random House last week called the ruling “an unfortunate setback for readers and authors” and said it will request an expedited appeal in federal court.

Pan's ruling was a victory for the Biden administration’s tougher approach to proposed mergers, a break from decades of precedent under Democratic and Republican leadership.

The Justice Department declined further comment Tuesday on Pan’s decision. Simon & Schuster and Paramount declined to comment.

Pan’s ruling was not surprising. Through much of the three-week non-jury federal trial in August, she had indicated agreement with the Justice Department’s contention that Penguin Random House’s plan to buy Simon & Schuster for $2.2 billion might damage a vital cultural industry.

But it was still a dramatic departure from recent history in the book world and beyond. The publishing industry has been consolidating for years with little interference from the government, even when Random House and Penguin merged in 2013 and formed what was then the biggest publishing house in memory. The joining of Penguin Random House and Simon & Schuster would have created a company far exceeding any rival.

The “Big Five” companies __ the others are Hachette, Macmillan and HarperCollins — publish 91% of anticipated top-selling books, Pan noted in her ruling.

In her 80-page opinion, Pan conjured literary history, opening with a nod to John Steinbeck — the “Grapes of Wrath” author whose publisher was Viking Press, now owned by Penguin Random House.

“John Steinbeck famously said, ‘I guess there are never enough books,’” Pan wrote. “He apparently meant that in the figurative sense, as a comment on the power of books to educate, to enrich and to explore. But today, his statement also rings true in the economic sense: The retail market for books in the United States was over $11.5 billion in 2019 and has only continued to expand.

“People want to read. And book publishers have the enormous power and responsibility to decide which books — and therefore which ideas and stories — will be made broadly available to the public," she added.

Marcy Gordon, The Associated Press

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