Publishing’s Big Five will not become the Big Four anytime soon. Penguin Random House and Simon & Schuster lost the federal antitrust trial over their proposed $2 billion merger, a legal development that may well protect authors. Judge Florence Y. Pan, who oversaw the Washington, D.C., federal trial, issued her decision on October 31, blocking the publishing giants’ would-be merger. The trial was a legal thriller for publishing insiders and booklovers alike after President Joe Biden’s Justice Department sued to block the potential merger in November 2021, claiming that it would harm authors by leaving them with little leverage. Pan agreed.
“The Court finds that the United States has shown that ‘the effect of [the proposed merger] may be substantially to lessen competition’ in the market for the U.S. publishing rights to anticipated top-selling books,’” Pan wrote in a two-page order. “Accordingly, judgment shall be entered in favor of the Plaintiff and the merger shall be enjoined.” In addition to blocking the merger, Pan’s ruling said that the companies had to “take any and all necessary steps” to prevent any of their execs or business entities from doing anything that would merge the companies. Pan did say more about how she’d reached her decision, but the complete memo explaining her reasoning remains under seal due to alleged “confidential” or even “highly confidential information.” Both sides have to get together within the next few days to decide what they want redacted from this document before it’s publicly posted.
In the meantime, Penguin Random House has vowed to fight Pan’s ruling. “We strongly disagree with today’s decision, which is an unfortunate setback for readers and authors, and we will immediately request an expedited appeal. As we demonstrated throughout the trial, the Department of Justice’s focus on advances to the world’s best-paid authors instead of consumers or the intense competitiveness in the publishing sector runs contrary to its mission to ensure fair competition,” the company said in a statement. “We believe this merger will be pro-competitive, and we will continue to work closely with Paramount and Simon & Schuster on the next steps.”
Stephen King, the government’s star witness, celebrated the ruling. “I am delighted that Judge Florence Pan has blocked the merger of Penguin Random House and Simon & Schuster,” the self-described “freelance writer” said on Twitter. “The proposed merger was never about readers and writers; it was about preserving (and growing) PRH’s market share. In other words: $$$”
During the three-week trial, the government contended that whittling down the Big Five (Penguin Random House, Hachette, HarperCollins, Simon & Schuster, and Macmillan) would lessen competition when it came to publishing houses’ acquisition of books. According to Publishers Weekly, Justice Department lawyer John Read said in his closing, “This merger will end that competition which benefits authors, and authors will earn less money for what they write … We brought this case because the best protection for authors is robust competition. This is not about the passion of publishers for books and authors. Yhis is about the largest publisher, Penguin Random House, cementing its position at the top of the market.”
Penguin Random House’s team slammed the Justice Department’s focus on blue-chip authors who secure advances in excess of $250,000 — a figure used to show how a merger would hurt writers. “I enjoyed listening to Stephen King,” Penguin Random House attorney Daniel Petrocelli reportedly said in his closing statement. “But no one is disputing his earnings. There are writers in this market who are billionaires. I mean, Stephen King could buy Simon & Schuster.”
Petrocelli contended that focusing on writers with these mega-advances reflected a “false market,” since there were so few people in this category: “The only reason we are here is because the government has created artificial concentration to create artificial harm.” (Per journalist Alex Shephard, even though people with these sizable advances make up a mere 2 percent of authors and the majority of the other 98 percent sell fewer than 2,000 copies of their respective books, the government maintained that “the existence of so many books with negligible sales” didn’t thwart this potential harm.) Stephen Fishbein, Simon & Schuster attorney, argued that the publisher agreed to merge with Bertelsmann, Penguin Random House’s parent company, because it had “offered the best price. We also believe that the deal will benefit S&S authors.”
The trial provided a glimpse into the largely opaque publishing industry. Jonathan Karp, Simon & Schuster’s chief executive, testified that publishers value every title they acquire but conceded that books with huge advances get more attention compared to those of a “mid-list writer,” per the Associated Press. Karp testified that a “mid-list writer” — which the AP defined as “a broad and intrepid corps of noncommercial authors, a kind of publishing middle class” — is a term employed by publishers so as not to call people “low-list” authors, thereby acknowledging some kind of class system within publishing.
But if there’s a class system at play, the elephant in the room throughout all of this continues to be Amazon, as the Big Five still seemingly feel like David to Amazon’s Goliath. With this merger now blocked, Amazon continues to write everyone’s rules.