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Penguin Random House merger: Why is the government suing?

Some tech analysts are a bit baffled by the move and, subsequently, the DOJ’s priorities.

Penguin Random House merger: Why is the government suing?
[Source Images: Karolina Grabowska/Pexels; cottonbro/Pexels]

The Justice Department on Tuesday filed a lawsuit against publisher Penguin Random House that seeks to block its proposed merger with rival Simon & Schuster. It’s one of the Biden administration’s first big antitrust challenges, and it alleges Penguin’s acquisition would give it too much control over what books are published in America and how much authors get paid.

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Antitrust activists have been buoyed by the new administration’s more aggressive swing at corporate consolidation, but they may be surprised to see it so concerned about a merger in book publishing. Notwithstanding, the industry is undeniably dominated by a select few—Penguin and Simon & Schuster, plus NewsCorp’s HarperCollins, Hachette, and Macmillan—and it has entered a period of increasing concentration. Hachette just bought Workman Publishing (of What to Expect When You’re Expecting and 1,000 Places to See Before You Die fame), and back in May, Lord of the Rings publisher Houghton Mifflin Harcourt became part of HarperCollins.

Yet even after these mergers, those publishers were no match for Penguin. It controls 300 imprints globally, and accounts for 21% of all U.S. book sales each year. Meanwhile, Simon & Schuster is America’s third-largest publisher, cranking out about 2,000 titles a year under 3 dozen imprints, or about 6% of the U.S.’s total annual book sales.

The DOJ wasn’t cool with that amount of firepower being under one roof: “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 in a statement. “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.” Rather than focus solely on the possible harm to consumers, the DOJ is making the case that their merger would hurt authors through what’s known as a monopsony—something that exists when one company becomes the dominant buyer of a service or good versus the dominant producer like in a monopoly.

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Some tech analysts are a bit baffled by the move and, subsequently, the DOJ’s priorities—though the Biden administration’s answer may be that, in its mind anyway, this is an easier fight than taking on Big Tech.

Penguin is vowing to “fight vigorously” against the government’s challenge. According to the New York Times, Daniel Petrocelli has been hired to represent the company in court. He’s the lawyer who defeated the DOJ when it tried to thwart AT&T and Time Warner’s $100 billion merger in 2017, and also won the wrongful-death lawsuit against O.J. Simpson back in the ’90s.

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