PRH and S&S merger 'must be stopped', DoJ tells trial

Penguin Random House owner Bertelsmann’s $2.2bn deal for Simon & Schuster (S&S) “must be stopped”, the Department of Justice (DoJ) has said on the first day of the trial over the merger.

S&S parent company ViacomCBS, now Paramount Global, announced the publisher’s sale to the German giant Bertelsmann in 2020. In November the DoJ sued to block the deal. 

On the first day of the Washington DC trial on 1st August, the DoJ claimed the merger will result in one publishing giant taking almost 50% of the market for "top-selling books", and will be damaging to authors who would see a reduction in their advances. Should the merger be greenlit, PRH would expand and remove one of the other "Big Five" houses, the court heard.

Deadline reported that John Read, the Justice Department’s attorney, told the court: "This proposed merger must be stopped". A chief concern for the department is the merger may reduce the number of bidders for the rights to publish what the government has called “anticipated top-selling books,” defined as those whose authors earn advances of $250,000 or more. It is claimed that this would decrease the value of advances paid. “This lawsuit is designed to protect those authors and those books,” he said.

Read gave the bidding war for an unnamed author’s memoir as an example. PRH and S&S were the top bidders, with the former winning out at $825,000, while Hachette left the race at $650,000. “Competition results in authors being paid more,” he told the court.

He also referenced a piece written in 2019 by former c.e.o. of S&S Carolyn Reidy stating the Big Five publishers were one another’s biggest competitors, and eliminating one would increase coordination between the four. 

Michael Pietsch, c.e.o. of Hachette Book Group, told the court he believed the merger would result in a loss in variety of books and decrease advances for authors. He added that he hoped Hachette’s parent company would consider buying S&S if the proposed merger was not allowed to take place. 

In his own opening statement, Dan Petrocelli, representing Penguin Random House, argued the market for “anticipated top-selling books” was invented by the government. “Every book starts out as an anticipated bestseller in the gleam of an author’s or an editor’s eye,” he said.

“The government has created an artificial market to create artificial concentration to create artificial harm,” he added.

Petrocelli stated he intends to show that publishers who pay advances of $250,000 or more are not confined to the Big Five, but that more than 30 publishers of varying sizes compete too. He said that non-Big Five publishers come second in 23% of the auctions.

“You cannot define an antitrust market on the idea that you think a book is going to be a top seller,” he added.

The trial is due to last up to three weeks with a judgment expected in November. S&S writer Stephen King is expected to testify in the case today.