Simon & Schuster, Penguin Random House Abandon Merger After Court Weighs In

An announcement from Simon & Schuster Inc. (S&S) on Monday signaled the end to a legal battle with the Department of Justice over Penguin Random House LLC’s (PRH) proposed acquisition of the competing publisher for $2.18 billion from parent Paramount Global. Last month, Judge Florence Y. Pan of the District of Columbia District Court, halted the deal, citing concerns that it would substantially lessen competition in the market for top-selling books.

The now-unsealed memorandum opinion was issued after a 12-day trial in August. The court explained that “the retail market for books in the United States was over $11.5 billion in 2019 and has only continued to expand.”

Bearing in mind the idea that publishing is “so inextricably intertwined with the intellectual life of our nation,” Judge Pan opined that the merger would impermissibly constrict competition as PRH’s acquisition would cement its role as the United States’ largest publisher with a market share of almost three times that of its closest competitor.

In its 80-page opinion, the court sided with the government’s theory of monopsony, “a market condition where a buyer with too much market  power can lower prices or otherwise harm sellers.” Noting that the publisher industry is already limited to the “Big Five” publishers, Judge Pan ruled that the government presented a compelling case that predicted substantial harm to competition. The court ruled over the companies’ arguments that the market was ill-defined, that market share data does not reflect true conditions, and that the government did not show anticompetitive harm.

For its part, the DOJ celebrated the companies’ decision not to appeal, calling it “a victory for authors, the marketplace of ideas, consumers, and competitive markets,” in a statement.

Simon & Schuster’s CEO, Jonathan Karp, acknowledged the companies’ decision to let the ruling stand, commenting “[y]ou may read or hear rumors and speculation about our future, but you can be assured that I will keep you informed as soon as there is pertinent news I can share.” Karp added, “[a]s we put the finishing touches on one of the single greatest years in our history and head into 2023, I see numerous reasons to be optimistic about our future.”