Reuters: “U.S. Judge Says Penguin Random House Giant Book Merger Cannot Go Forward”

UPDATED: Full Text of US Dept. of Justice Statement

From Reuters:

“A planned $2.2 billion merger of Penguin Random House, the world’s largest book publisher, and rival Simon & Schuster cannot go forward, a judge ruled on Monday.

Unlike most merger fights, which are focused on what consumers pay, this one focused on authors’ earnings. The government argued that the deal would lead to lower advances for authors who earn $250,000 or more.

Judge Florence Pan of the U.S. District Court for the District of Columbia said in a brief order that she had found that the Justice Department had shown that the deal may substantially lessen competition “in the market for the U.S. publishing rights to anticipated top-selling books.”

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In a statement, Penguin Random House called the decision “an unfortunate setback for readers and authors” and argued that “the Department of Justice’s focus on advances to the world’s best-paid authors instead of consumers or the intense competitiveness in the publishing sector runs contrary to its mission to ensure fair competition.”

The trial, which unfolded over three weeks in August in the U.S. District Court for the District of Columbia, was a test case for the government’s new, more aggressive approach to curbing consolidation. It was closely watched by the literary world for what it revealed about the inner workings of the industry and about the effects of consolidation on publishing, which has already been significantly reshaped by mergers in recent years.

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From the Associated Press

Pan’s finding was not surprising — through much of the 3-week trial in August she had indicated agreement with the Justice Department’s contention that Penguin Random House’s plan to buy Simon & Schuster, for $2.2 billion, might damage a vital cultural industry.

But it was still a dramatic departure from recent history in the book world and beyond. The publishing industry has been consolidating for years with little interference from the government, even when Random House and Penguin merged in 2013 and formed what was then the biggest publishing house in memory. The joining of Penguin Random House and Simon & Schuster would have created a company far exceeding any rival and those opposing the merger included one of Simon & Schuster’s signature writers, Stephen King, who testified last summer on behalf of the government.

King tweeted Monday that he was “delighted” by the ruling, adding: “The proposed merger was never about readers and writers; it was about preserving (and growing) PRH’s market share. In other words: $$$.”

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