U.S. Government Blocks Major Book Publishing Merger

  • M&A
  • November 3, 2022
  • 848
  • 5 minutes read

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The antitrust arm of the United States government has something to rejoice about lately. It has successfully blocked a deal that would have seen two book publishing giants merge into one stronger powerhouse.

  • A federal judge ruled in favor of the U.S. Justice Department in a lawsuit seeking to block the acquisition of Simon & Schuster by Penguin Random House. The judge scuttled the deal on the grounds that it would lessen competition in the U.S market for book publishing rights.

In November 2020, Penguin Random House reached an agreement to buy Simon & Schuster for $2.2 billion in cash from the media conglomerate Paramount Global (formerly ViacomCBS). The U.S. Justice Department filed a lawsuit a year after, arguing that the acquisition will harm book authors and consumers by concentrating too much power in one company.

The American book publishing market is famously dominated by the “big five” publishers, namely Penguin Random House, Simon & Schuster, HarperCollins, Macmillan, and Hachette Livre. The proposed merger would have cut it down to the “big four”, so it’s easy to see why the U.S. government opposed it.

  • A thirteen-day trial for this case took place this August, with both sides arguing their case. Lawyers for Penguin Random House argued that the deal would bring “enormous benefits” for readers and authors as the imprints owned by the two book publishing giants would still compete against each other. This antitrust case focused on authors’ earnings, unlike most cases that focus on consumer prices.

 

  • Penguin’s legal team was led by Daniel Petrocelli, a high-profile lawyer who defeated a previous U.S. government suit to block the merger between AT&T and Time Warner. Petrocelli has represented many other high-profile clients including former Enron CEO Jeff Skilling, ex-US President Donald Trump, boxing celebrity Manny Pacquiao, and rapper Travis Scott.

 

  • Penguin said it’ll appeal the ruling, calling it “an unfortunate setback for readers and authors”.

The U.S. government has sharpened its antitrust blades under the Biden administration. It has filed considerably more lawsuits than the previous Trump administration and successfully scuttled major deals like aerospace giant Lockheed Martin’s proposed acquisition of Aerojet Rocketdyne and chip giant Nvidia’s agreement to acquire Arm Holdings.

However, the U.S. government has lost several recent antitrust cases, including in the healthcare sector (UnitedHealth Group’s $13bn acquisition of Change Healthcare) and the sugar industry (U.S. Sugar’s deal for Imperial Sugar).

 

  • With this acquisition in shambles, Paramount Global may seek another buyer for Simon & Schuster. News Corp, the media and publishing giant led by Rupert Murdoch, was a reported bidder before Simon & Schuster agreed to sell to Penguin, so it could make another offer.

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