Books

U.S. District Court Judge Blocks Proposed Merger of Major Book Publishers Penguin Random House and Simon & Schuster

Emma QuinnNews & Insights

By Emma Quinn

The proposed merger was never about readers and writers; it was about preserving (and growing) PRH’s market share. In other words: $$$.[1]

This was acclaimed horror-fiction author Stephen King’s tweeted response to the recent block by U.S. District Judge Florence Y. Pan of a proposed merger of two of the world’s largest book publishers, Penguin Random House (PRH), and Simon & Schuster (S&S).[2] PRH and S&S are two of the top five book publishing companies which together control approximately 80% of the book market in the United States.[3] This decision by Judge Pan not only impacts the book publishing world but also stands to have a broader effect on the future of other major corporate consolidations as “monopsonies in many other industries (Hollywood, for instance, as well as Big Tech) could face much more aggressive government scrutiny than before.”[4]

In 2020, Paramount Global (formerly ViacomCBS), the parent company of S&S, put S&S up for sale, and Bertelsmann, the parent company of PRH, successfully bid to buy the publishing house for $2.175 billion.[5] Bertelsmann won the bid at auction, setting up PRH and S&S to merge, thereby dominating the industry.[6] However, roughly one year later, the Antitrust Division of the U.S. Department of Justice filed suit against both PRH and S&S in the U.S. District Court for the District of Columbia, alleging that the proposed acquisition “would result in substantial harm to authors, particularly authors of anticipated top-selling books.”[7]

The DOJ’s argument, although similar to the idea that the merger would create a monopoly, actually claimed that the merged companies would form a “monopsony”: an unfair buying market that, due to the lack of competition among buyers, would drive down the money paid to authors because the publisher can set the price, and amount of advance paid, however they like.[8] The DOJ argued that this monopsony would allow the combined PRHS&S to offer lower advances, and authors would have to accept these low offers, which would affect their ability to make a living.[9] Antitrust laws, beginning with the Sherman Act, are “aimed at preserving free and unfettered competition as the rule of trade.”[10] The Clayton Antitrust Act, for example, prohibits mergers where the effect “may be substantially to lessen competition, or to tend to create a monopoly.”[11]

In response to this argument, PRH and S&S both argued that the merger would not result in a monopsony because of the “imprint model” that can occur in the publishing industry.[12] Under the imprint model, “editors who work at the same publishing house bid against one another for the same book,” so the competition that the DOJ fears will be diminished will still exist even after the merger.[13] The publishers further argued that the merger would in fact make them more efficient, allowing them to offer authors larger advances, not smaller ones.[14]

On October 31, 2022, Judge Pan blocked the proposed merger, agreeing with the DOJ that the joinder of two of the world’s biggest publishers would “substantially lessen competition in the market for the publishing rights to anticipated top-selling books”.[15] In noting the overarching ramifications of her decision, Judge Pan wrote, “[t]he government has buttressed its market-share analysis with strong evidence of likely unilateral effects and coordinated effects that would hurt competition . . . and [Defendants] have failed to rebut the government’s affirmative evidence of anticompetitive harm.”[16] This, notes Judge Pan, is a violation of the Clayton Act.[17]

This decision represents a significant change from recent activity in the book publishing industry, which “has been consolidating for years with little interference from the government.”[18] However, the decision does seem to align with increasing awareness of the monopsony theory, and the Biden Administration’s recent commitment to a tougher approach to proposed mergers in a variety of industries. In July 2021, President Biden issued an executive order pledging to “enforce the antitrust laws to combat the harmful effects of monopoly and monopsony – especially as these issues arise in labor markets . . . .”[19] Additionally, in 2021, Congress introduced the Competition and Antitrust Law Enforcement Reform Act, with the goal of amending existing antitrust law to explicitly prohibit monopsonies.[20]

Thus, Judge Pan’s decision demonstrates a shift in how the government applies antitrust law. According to a recent New York Times article, “[a]ntitrust policy has largely been guided for decades by an effort to prevent large corporations from imposing higher costs on consumers, rather than focusing on the impact a monopoly might have on workers, suppliers, or competitors.”[21] Indeed, “[b]y zeroing in on the potential harm to authors, the Justice Department signaled that it is taking a broader view of the possible impact of consolidation.”[22] As demonstrated by this case, this broader view may increase the level of government scrutiny towards major attempts at consolidation in all industries with the potential to monopsonize, resulting in power being withdrawn from giant corporations and redistributed to their individual employers.


[1] Stephen King (@stephenking), Twitter (Oct. 31, 2022, 5:55 PM), https://twitter.com/StephenKing/status/1587246836053676033.

[2] Order Enjoining Merger dated October 31, 2022, United States v. Bertelsmann SE & CO. KGaA, Penguin Random House, LLC, ViacomCBS, Inc., and Simon & Schuster, Inc., No. 1:21-cv-02886-FYP, ECF No. 194 (D.D.C. Nov. 7, 2022).

[3] Constance Grady, The Planned Penguin Random House-Simon & Schuster Merger has Been Struck Down in Court, VOX (Nov. 1, 2022) https://www.vox.com/culture/23316541/publishing-antitrust-lawsuit-merger-department-justice-penguin-random-house-simon-schuster.

[4] Id.

[5] Jim Milliot, Bertelsmann to Buy S&S for $2.2 Billion, Publishers Weekly, (Nov. 25, 2020) https://www.publishersweekly.com/pw/by-topic/industry-news/industry-deals/article/85004-bertelsmann-to-buy-s-s-for-2-2-billion.html; see also Judge blocks Penguin Random House-Simon & Schuster Merger, NPR (Nov. 1, 2022) https://www.npr.org/2022/11/01/1133032238/judge-blocks-penguin-random-house-simon-schuster-merger.

[6] Grady, supra note 3.

[7] Complaint at 2, United States v. Bertelsmann SE & CO. KGaA, Penguin Random House, LLC, ViacomCBS, Inc., and Simon & Schuster, Inc., No. 1:21-2cv-02886, ECF No. 1 (D.D.C. Nov. 2, 2022).

[8] Andrew Albanese, Showdown: DOJ’s Bid to Block PRH Acquisition of S&S Is Heading to Trial, Publisher’s Weekly, (Jul. 22, 2022) https://www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article/89932-doj-vs-prh-and-s-s-book-biz-legal-showdown-of-the-century.html.

[9] Id.; see also Grady, supra note 3.

[10] N. Pac. Ry. Co. v. United States, 356 U.S. 1, 4 (1958).

[11] 15 U.S.C. § 18.

[12] Grady, supra note 3.

[13] Id. 

[14] Id.

[15] Order, supra note 2 at 80.

[16] Id. at 79.

[17] Id. at 80.

[18] Judge blocks Penguin Random House- Simon & Schuster Merger, NPR (Nov. 1, 2022) https://www.npr.org/2022/11/01/1133032238/judge-blocks-penguin-random-house-simon-schuster-merger.

[19] Exec. Order No. 14036, 86 FR 36987 (Jul. 9, 2021) (Executive Order on Promoting Competition in the American Economy).

[20] The bill “applies a stricter standard for permissible mergers by prohibiting mergers that (1) create an appreciable risk of materially lessening competition, or (2) unfairly lower the prices of goods or wages because of a lack of competition among buyers or employers (i.e., a monopsony).” Competition and Antitrust Law Enforcement Reform Act of 2021, S. 225, 117th Cong. (2021).

[21] Alexandra Alter and Elizabeth A. Harris, Judge Blocks a Merger of Penguin Random House and Simon & Schuster, The New York Times, (Oct. 31, 2022) https://www.nytimes.com/2022/10/31/books/penguin-random-house-simon-schuster.html.

[22] Id.