Paramount Global’s attempt to sell publisher Simon & Schuster to the owner of Penguin Random House has been blocked, a Washington DC judge ordered Monday. The companies responded that they are evaluating options and would like to appeal.
“After examining the extensive file and carefully examining the arguments of the parties, the Court finds that the United States has shown that ‘the effect of [the proposed merger] could significantly reduce competition in the market for the US publishing rights for anticipated best-selling books,” US Circuit Court judge Florence Y. Pan wrote, in a two-page sequence.
In response to the order, a Penguin Random House representative called the move a “setback” and promised to appeal. “We strongly disagree with today’s decision, which is an unfortunate setback for readers and authors, and we will immediately file an accelerated appeal,” Penguin Random House wrote in a statement.
The publisher then addressed the government’s claim that the merger would hurt competition for literary work, saying, “As we demonstrated at trial, the Department of Justice’s focus has been on advances to the world’s highest-paid authors rather than consumers or whether the intense competition in the publishing industry conflicts with its mission to ensure fair competition.We believe this merger will be pro-competitive and we will continue to work closely with Paramount and Simon & Schuster for the next steps. ”
The $2.175 billion deal was originally unveiled by ViacomCBS (before rebranding itself as Paramount Global) in November 2020 as part of the Shari Redstone-controlled media conglomerate’s effort to sell off assets that were not the core of its streaming strategy, as it was intended to scale up its Paramount+ platform. That effort by Paramount CEO Bob Bakish resulted in the sale of tech site CNET for $500 million, CBS’ New York headquarters BlackRock for $760 million and CBS’ Studio City lot for $1.85 billion.
The proposed sale of Simon & Schuster to German media giant Bertelsmann, owner of the Markus Dohle-run Penguin Random House, would have created a book-selling behemoth. Bertelsmann and Paramount originally expected the deal to close in 2021, but the U.S. government filed a lawsuit in November last year alleging that the deal “would give Penguin Random House too much influence over who and what gets published, and how much authors are paid for their work.”
Unveiling the deal two years ago, Jonathan Karp-led Simon & Schuster praised a selection of best-selling authors, including Stephen King, Doris Kearns Goodwin and Jason Reynolds. However, King testified in the case and opposed the deal.
Following the judge’s order to block the merger, Simon & Schuster CEO Karp wrote a letter to staff saying: “While we are disappointed with this decision, I would like to reassure you all that, despite this news, our business continues to thrive. Today we are more successful and more valuable than ever, thanks to the efforts of all of you on behalf of our many great authors.”
In its bid to stop the deal, the Justice Department argued in its complaint that Penguin Random House and Simon & Schuster, if combined, would have revenues “twice that of their closest closest competitor,” and would be much higher than the publisher of “Big Five”. rivals like HarperCollins, Hachette Book Group and Macmillan. (Notably last May, News Corp.-owned HarperCollins was able to complete an acquisition for Houghton Mifflin Harcourt’s book division, which includes the English language rights to JRR Tolkien’s works, in a $ 349 million.)
The Justice Department’s antitrust division argued in its lawsuit that the proposed merger of Simon & Schuster and Penguin Random House would harm not only consumers but also authors seeking to sell their work. “If completed, this merger would likely result in significant harm to authors of anticipated best-selling books and ultimately consumers,” the November 2021 complaint reads. “Penguin Random House would control nearly half of the market for the acquisition of publishing rights for anticipated best-selling books.”
The government added: “After the merger, the two largest publishers would collectively control more than two-thirds of this market, leaving hundreds of authors with fewer alternatives and less influence.”
In response to the October 31 order, a representative of Paramount Global stated: “Paramount is disappointed with the ruling in this case. We are reviewing the decision and discussing next steps with Bertelsmann and Penguin Random House, including seeking an accelerated appeal.”