Justice Department Seeks To Block Penguin Random House Acquisition of Simon & Schuster

The U.S. Department of Justice (DOJ) has filed a civil antitrust lawsuit seeking to prevent book publisher Penguin Random House’s proposed acquisition of its rival Simon & Schuster, a ViacomCBS Inc VIAC subsidiary.

What Happened: ViacomCBS first publicly declared its plan to sell Simon & Schuster in March 2020. Penguin Random House, a subsidiary of the German conglomerate Bertelsmann, announced last November it would pay $2.2 billion to buy Simon & Schuster and continue to manage the company as a separate publishing unit.

When the acquisition news was released, it earned a complaint from rival publisher HarperCollins, a division of News Corp NWSA.

“Bertelsmann is not just buying a book publisher, but buying market dominance as a book behemoth,” said News Corp. CEO Robert Thomson in a statement.

“Distributors, retailers, authors and readers would be paying for this proposed deal for a very long time to come. This literary leviathan would have 70% of the U.S. literary and general fiction market. There will certainly be legal books written about this deal, though I wonder if Bertelsmann would publish them.”

The U.K. Competition and Markets Authority approved the acquisition in May.

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What Happened Next: In filing its lawsuit, the DOJ claimed Penguin Random House would “exert outsized influence” on which books are published and how much authors will be paid if the acquisition was enacted. The DOJ noted the U.S. book publishing sector was dominated by a “Big Five” of companies and Penguin Random House would be in the position to dominate nearly half of the market for acquiring publishing rights to best-selling books. (In addition to Penguin Random House, Simon & Schuster and HarperCollins, the "Big Five" include Hachette Book Group and Macmillan.)

“Books have shaped American public life throughout our nation’s history, and authors are the lifeblood of book publishing in America,” said Attorney General Merrick B. Garland in a statement. “But just five publishers control the U.S. publishing industry. 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.”

Simon & Schuster and Penguin Random House issued a joint statement that said the merging was "a pro-consumer, pro-author, and pro-book seller transaction, which will allow increased investment in the publishing programs" at both companies.

"The publishing industry is, and following this transaction will remain, a vibrant and highly competitive environment," the statement added, noting the companies compete against smaller companies as well as Amazon.com, Inc. AMZN.

"Blocking the transaction would harm the very authors DOJ purports to protect," the statement said.