That would be a monster of a book publishing company. But a US judge says no | CBC News

A federal judge on Monday blocked Penguin Random House’s proposed purchase of Simon & Schuster, agreeing with the U.S. Justice Department that a merger between the world’s two largest publishers could “reduce competition” for “back-to-back books.”

U.S. District Court Judge Florence Y. Pan announced the decision in a brief statement Monday, noting that much of her ruling was currently under seal due to “confidential information” and “highly confidential information.” He asked both parties to meet with him Friday and suggest fixes.

Penguin Random House quickly condemned the decision, which it called an “unfortunate setback for readers and authors.” The publisher said in a statement on Monday that it would file an urgent appeal.

Deputy Attorney General Jonathan Kanter of the Justice Department’s Competition Bureau praised the decision

“The proposed merger would have reduced competition, reduced compensation for creators, reduced the breadth, depth and diversity of our stories and ideas, and ultimately impoverished our democracy,” Kanter said.

Pan’s finding was not surprising — for much of the three-week trial in August, he had expressed his agreement with the Justice Department’s argument that Penguin Random House’s plan to buy Simon & Schuster for $2.2 billion could hurt 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 without government intervention, although Random House and Penguin merged in 2013 to form the largest publishing house at the time.

A merger between Penguin Random House and Simon & Schuster would have created a company that dwarfed all competitors, and opponents of the merger included one of Simon & Schuster’s signature authors, Stephen King, who testified last summer on behalf of the government.

Quite a termination fee if the merger fails

The Justice Department’s case against Penguin Random House did not focus on market share as a whole or potential price increases for customers. Instead, the DOJ argued that the new company would dominate the market for commercial books – those with author advances of at least $250,000 – that the size of advances would decrease and the number of publications would decrease.

For Penguin Random House and the New York-based publishing world, the August trial proved to be an often unpleasant affair of business, internal disagreements and missed opportunities. The department heads talked about the sold works they were unable to acquire and admitted that most books do not make money. Emails and private text messages revealed tension among top Penguin Random House officials.

“I apologize for the passionate language,” Penguin Random House global CEO Markus Dohle testified after the text messages.

Dohle had promised that Penguin Random House and Simon & Schuster publications would still be allowed to compete against each other for books. But he admitted under oath during the trial that his bond was not legally binding. Pan otherwise consistently questioned Penguin Random House’s assurances that the merger would not reduce competition.

Simon & Schuster is likely to end up under new ownership regardless of the outcome of the legal appeals. The publisher had been up for sale well before the Penguin Random House deal was announced in late 2020, and the publisher’s parent company Paramount Global has said it doesn’t see Simon & Schuster as part of its future. Among those bidding against Penguin Random House was Rupert Murdoch’s News Corp, which owns HarperCollins Publishers.

Penguin Random House and the company’s owner, Bertelsmann, would have to pay a termination fee of about $200 million to Paramount if the merger fell through under the terms of the proposed sale.

In a company memo shared with The Associated Press on Monday, Simon & Schuster CEO Jonathan Karp sought to reassure employees that “despite this news, our company continues to thrive. We are more successful and valuable today than ever before because of the efforts of all of you, on behalf of so many great writers.”

Monday’s news follows the Justice Department’s recent losses in two landmark antitrust lawsuits in separate federal courts. The DOJ lost its bid to prevent major U.S. sugar producer US Sugar from buying rival Imperial Sugar Co., one of the nation’s largest sugar refiners. It was also an obstacle to its efforts to block the roughly $8 billion acquisition of Change Healthcare, a health care technology company, by UnitedHealth Group, the leader of the largest U.S. health insurer.