PRH and S&S head to court as antitrust case begins

Penguin Random House and Simon & Schuster head to court today (1st August) in a battle with the US Department of Justice (DoJ) over the publishers’ $2.2bn deal.

Scheduled to last three weeks, the trial takes place at the Washington District Court of Columbia Federal Court. It is likely to be followed by a flurry of further court filings by both sides. A final decision by judge Florence Pan is not expected until November, two years after PRH owner Bertelsmann’s purchase of Simon & Schuster was first announced.

In its pre-trial brief the DoJ said the merger would reduce the US Big Five to a Big Four, with one publisher "towering" over the rest.

It said: “Penguin Random House’s proposed acquisition of Simon & Schuster would further entrench the largest publishing giant in the United States (and the world) and give the merged company control of nearly half the market to acquire anticipated top-selling books from authors.” "Anticipated top-selling books” are defined by the DoJ as those by authors with advances of $250,000 or more. 

The US government says this market dominance would drive down advances and would lead to fewer authors being able to make a living from writing and fewer and less diverse books being published.

Lawyers for PRH and S&S will argue that the deal is good for competition and the government’s decision to focus on “anticipated top-selling books” is flawed, based on a tiny portion of the market and stems from a misunderstanding of how the rights market works.

They argue in a pre-trial briefing: “The merger… will enhance competition by creating efficiencies that will enable the combined entity to make better offers to more authors, especially for those books most likely to succeed with consumers. And by making the combined entity a stronger competitor downstream, it will incentivise other publishers to compete harder to acquire the books they, too, need to win sales among consumers.”

Much media attention will focus on the government’s star witness Stephen King, who is published in the US by S&S. He told the New York Times at the weekend: "The more the big publishers consolidate, the harder it is for indie publishers to survive. And that is where the good writers are currently starting out and learning their chops.”

Alongside King and a host of agents, a number of major c.e.o.s are due to take the stand during the case. Among them is S&S boss Jonathan Karp, who sought to rally his staff last week in an email.

He told them: “I am hopeful that Simon & Schuster will become part of Penguin Random House. I spent 16 years at Random House, and I know their culture is a lot like ours—wholeheartedly devoted to books and deeply committed to its employees and authors. Penguin Random House’s parent company, Bertelsmann, has been in the book business since 1835 and shares Penguin Random House’s profound commitment to improve public readership. I strongly believe that Penguin Random House will be an excellent steward of Simon & Schuster’s legacy and that we, and our authors, will benefit greatly from becoming a part of this superb publishing company.”