DoJ steps up scrutiny of PRH deal for S&S

Penguin Random House owner Bertelsmann's purchase of Simon & Schuster is facing further scrutiny by the US Department of Justice (DoJ).

On 22nd March, the UK's Competition & Markets Authority announced it was launching a merger investigation into the $2.2bn deal, which would see S&S managed as a separate publishing unit under the PRH umbrella. The CMA will decide by 19th May whether to refer the merger for a second, more in-depth investigation.

The DoJ, which has been urged by American writers' groups to intervene, has now stepped up its own review of the deal, making a “second request” for information. According to the DoJ, such a move indicates “a transaction might raise competitive problems and more information is needed to evaluate it”.

Second requests often involve issuing a subpoena called a Civil Investigative Demand to obtain market share information and documents on markets and the transaction's competitive implications.

DoJ guidance notes that, in the period between issuing a second request and compliance by involved parties, staff should “conduct a thorough investigation that will allow it to decide whether the transaction is anticompetitive and should be challenged in court”.

A recent review of second requests by law firm Winston & Strawn showed the DoJ challenged 17 out of 19 transactions it made second requests for in 2018. Eight of those were settled, one was lost in court by the DoJ and the other eight were either abandoned or restructured to resolve antitrust concerns.

The Bookseller understands a second request was made for both Bertelsmann's acquisition of Random House in 1998 and the merger with Penguin in 2013. Both deals went on to be approved without conditions.

A Penguin Random House spokesperson said: “We are continuing to co-operate with the DoJ and continue to expect a closing during 2021.”