Penguin Random House, Simon & Schuster Antitrust Trial Commences

The result of the trial will not only dramatically affect the publishing industry, but it also will set a precedent for M&A at large as the Biden administration continues to challenge corporate consolidation.

The trial is over the proposed $2.2 billion merger of Penguin Random House and Simon & Schuster. The DOJ has sued to block it on antitrust grounds, arguing that the deal would not only raise book prices for consumers, it would also disadvantage authors by reducing their bargaining power for advances of more than $250,000. Even Stephen King will leave his writing dungeon to testify as a witness for the government

“The more the big publishers consolidate, the harder it is for indie publishers to survive,” King said. “And that is where the good writers are currently starting out and learning their chops.”

Last fall, the Biden administration sued to block the $2.18 billion sale as part of its new and more aggressive stance against corporate consolidation. The trial will start on Monday, with oral arguments at the United States District Court for the District of Columbia, where Judge Florence Pan will preside.

The Justice Department and Bertelsmann, Penguin Random House’s parent company, called a parade of high-profile publishing executives as witnesses. They include Markus Dohle, the chief executive of Penguin Random House, and Jonathan Karp, the chief executive of Simon & Schuster, as well as executives from other publishing houses, literary agents and a handful of authors.

At the time the deal was announced, Markus Dohle, chief executive of Penguin Random House, said it shouldn’t raise competition concerns, and noted that over the past decade many small new publishers emerged. “There have been a lot of new successful entrants in the market,” he said.

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