– Justice blocks the merger between two American publishing giants
The publishing house Penguin Random House will no longer be able to acquire its rival Simon & Schuster. A victory for the Biden government.
A federal judge in Washington on Monday blocked the acquisition of the publishing house Simon & Schuster by its rival Penguin Random House, thus granting the request of the American government, which saw a risk of distortion of competition.
Solicited by AFP, Penguin Random House immediately announced its intention to appeal and request an emergency procedure. The operation, involving an amount of 2.18 billion dollars, was announced in November 2020 and would have brought together two of the five largest American publishers.
It is a landmark success for the government of US President Joe Biden, which is much more aggressive than its predecessors in challenging mergers and acquisitions in the name of the principle of competition. The US Department of Justice had taken legal action in November 2021, citing a risk of seeing the number of books published drop and the new group reduce the advances paid to authors.
“Weaken the game of competition”
The two houses respectively occupy first and fourth place in market share of the “Big Five” of American publishing, a group which also includes HarperCollins, Hachette Book Group USA and Macmillan Publishers. With 10,000 employees worldwide and nearly 15,000 books published per year, Penguin Random House, a subsidiary of the German group Bertelsmann, dominates the industry in the United States.
The group notably published the first volume of the memoirs of former President of the United States Barack Obama in 2020, entitled “A Promised Land”, and that of his wife, Michelle Obama, in 2018, which passed in tens of millions of copies. He is also preparing to release Prince Harry’s memoir in early 2023.
The U.S. government has provided evidence that the proposed acquisition “could have the effect of significantly lessening competition” in the bestselling rights market, Judge Florence Pan wrote in the judgment released Monday. .
Stephen King ‘delighted’
The entire legal reasoning that led the magistrate to make this decision has been placed under seal, because it contains “confidential” or “highly confidential” information, said Judge Pan.
Calling the decision “a setback for readers and authors,” Penguin Random House denounced the US government’s argument, which the group said focused more on the possible consequences for authors than for consumers. “It is contrary to its mission to protect fair competition,” argued the publisher.
Simon & Schuster, a subsidiary of the Paramount Global group which publishes around 2000 books a year, has in its catalog authors of international bestsellers such as the novelist Stephen King, or the journalist Bob Woodward. Stephen King said he was “delighted” with the decision, in a message posted on a Twitter account. “The proposed merger was never about readers and writers; it was about preserving (and growing) PRH’s market share.”
“Today’s ruling protects competition in publishing and is a victory for authors, readers and the free exchange of ideas,” Justice Department Jonathan Kanter said in a statement. Paramount, parent company of Simon & Schuster, said it was “disappointed” by the judgment, in a reaction sent to AFP.
Balance sheet mixed
Prior to the US government procedure, the UK competition authority had also taken a close interest in the takeover, as both groups had divisions in the UK. It had issued a favorable opinion in May 2021.
Since Joe Biden took office in January 2021, his government has fired all the woods to try to call into question many business mergers. Prior to Monday’s decision, his record was mixed. He obtained that the insurance brokers Aon and Willis renounce their union, or that Maersk Container Industry and China International Marine Containers do not merge in the refrigerated container sector.
He was, however, dismissed in three other cases, including the takeover of EverWatch Corp by Booz Allen Hamilton in the defense industry. In July, the American consumer protection agency FTC also took legal action to prevent the acquisition by Meta (Facebook) of virtual reality specialist Within Unlimited. The procedure is still ongoing.
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