The Justice Department is suing to block a $2.2 billion book publishing deal that would have reshaped the industry, saying consolidation would hurt authors and, ultimately, readers.
German media giant Bertelsmann's Penguin Random House, already the largest American publisher, wants to buy New York-based Simon & Schuster, whose authors include Stephen King, Hillary Clinton and John Irving, from TV and film company ViacomCBS.
The Department of Justice filed an antitrust suit in federal court in Washington, D.C., Tuesday in the first major antitrust action by the Biden administration. The department said the deal would give Penguin Random House “outsized influence" over which books are published in the U.S. and how much authors are paid.
“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," Attorney General Merrick Garland said. “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."
The purchase of Simon & Schuster would reduce the so-called Big Five, which dominate American publishing and include HarperCollins, Hachette Book Group and Macmillan, to four.
Because it targets the prices paid to authors as well as those paid by consumers, the suit shows a possible new direction for the antitrust regulators under the Biden administration, suggested Daniel Crane, a law professor at the University of Michigan who focuses on antirust.
“There’s a desire to think very comprehensively about all the interests that could be harmed,” he said. “It raises lots of interesting questions about publishing and about competition in publishing.”
The government’s case addresses a conventional market of five mammoth old-line publishing houses. Overshadowing it is Amazon, which created an empire and ecosystem of digital books starting back in 1995, controlling not only the bookstore but also the dominant devices for reading e-books and listening to audiobooks, and eventually some of the content. The e-books undercut the prices of conventional books, providing ammunition to the publishing houses in asserting that they have to bulk up to survive the competition.
The deal raised concern from writers and from rival publishers. The Authors Guild has said it opposes the acquisition because there would be less competition for authors’ manuscripts.
Rupert Murdoch's News Corp, which owns HarperCollins and had reportedly also been interested in buying Simon & Schuster, also slammed the deal. Its CEO Robert Thomson said last fall that Bertelsmann was “buying market dominance as a book behemoth.”
In a statement, Penguin Random House and Simon & Simon & Schuster said they would fight the lawsuit. They say blocking the deal would harm authors.
“DOJ’s lawsuit is wrong on the facts, the law, and public policy,” said Daniel Petrocelli, Penguin Random House's lawyer. “Importantly, DOJ has not found, nor does it allege, that the combination will reduce competition in the sale of books."
The new antitrust suit signals that the Justice Department “is willing to use its full authority to combat the wave of consolidation swallowing the American economy,” said Sarah Miller, executive director of the American Economic Liberties Project, an organization that advocates for government action against business concentration.
“This case also reflects how Amazon’s dominance looms as a predatory presence for most firms in the economy,” Miller said in a statement. “The CEOs of the number one and number three publishers openly sought to use this merger to become an ‘exceptional partner’ to Amazon.”
AP National Writer Hillel Italie and Business Writer Marcy Gordon contributed to this report.
Tali Arbel, The Associated Press