Penguin Random House has about 100 publishers that collectively publish more than 2,000 new titles each year. Through the merger, it will gain about 50 other imprints from Simon & Schuster.
The Justice Department’s focus on author’s income, rather than harming consumers, marked a shift in the way the government applies antitrust laws. Antitrust policy has largely been guided by decades of efforts to prevent large corporations from imposing higher costs on consumers, rather than focusing on the impact that monopolies can have on consumers. employees, suppliers or competitors. By focusing on the potential harm to the authors, the Department of Justice shows that it is taking a broader view of the possible impact of the merger.
“The Biden administration wants to be aggressive about protecting the overall market, and not necessarily just protecting consumers,” said Eleanor M. Fox, an antitrust expert at NYU Law School.
The decision deals a blow to Penguin Random House’s scaling ambitions, at a time when it faces a shrinking market share and a sluggish economy. Although Penguin Random House remains the largest publisher in the United States, it has struggled to maintain its sales share in recent years.
The government focused its case on a small portion of the market, arguing that the authors of the expected bestsellers, who received an advance of $250,000 or more, would see income. Their income falls if fewer major publishers compete to auction their books. They identified transactions where Simon & Schuster and Penguin Random House were the top two bidders and pushed for the advance.
In his defense, Penguin Random House tried to convince the judge that the Justice Department had fundamentally misunderstood the dynamics of the publishing industry. The company says there is no separate market for authors earning an advance of at least $250,000, and it emphasizes that a head-to-head bidding war between the two companies is rare.
Judge Pan was not answered by those arguments.
It remains unclear whether Penguin Random House and its parent company, Bertelsmann, will appeal. Doing so would require approval from Paramount, which owns Simon & Schuster, which would have to agree to an extension of the deadline for the merger.
