November 27, 2022

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Judge rejects Penguin Random House's bid to acquire Simon & Schuster

Judge rejects Penguin Random House’s bid to acquire Simon & Schuster

“The Biden administration wants to be assertive to protect the market as a whole, not necessarily just to protect consumers,” said Eleanor M. Fox, an antitrust expert at New York University School of Law.

The decision dealt a blow to Penguin Random House’s expansion ambitions, at a time when it faces a dwindling market share and a stagnant economy. While Penguin Random House remains the largest publisher in the United States, it has struggled to maintain its share of sales in recent years. Under the sale agreement, Penguin Random House is obligated to pay a fee of approximately $200 million to Paramount Global, the group that owns Simon & Schuster, if the transaction does not go through.

The government has focused its case on a narrow segment of the market, arguing that authors of projected bestsellers, who receive advances of $250,000 and above, will see their profits decline if fewer major publishers compete for their books at auction. They identified deals in which Simon & Schuster and Penguin Random House were the largest bidders, and drove the progress.

In its defense, Penguin Random House attempted to convince a judge that the Department of Justice had misunderstood the dynamics of the publishing industry. The company said there is no separate market for authors who earn upfronts of at least $250,000, and emphasized that direct bidding wars between the two companies are rare.

Judge Ban was not impressed by these arguments.

When the $2.175 billion deal was first announce In 2020, most of the publishing industry has assumed that it will be subject to regulatory review. Many were shocked when the government moved to stop it. But over the course of the trial, Judge Ban’s suspicions of Penguin Random House’s position became increasingly clear.

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The outcome of the experiment could have a profound impact on the industry, with repercussions far beyond the two companies.

Over the past few decades, the publishing business has already gone through a number of mergers and acquisitions as major publishing houses have bought into mid-size companies and competitors, and the number of major publishing houses has been reduced to five. When Penguin and Random House merged in 2013, the deal precipitated the race to increase. Competitors such as HarperCollins and Hachette also set out to buy spreads and buy smaller companies to expand their catalogs and backlists.