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Wednesday, December 01, 2021

Explained: Why US Justice Dept wants to stop Penguin Random House’s deal with Simon and Schuster

The department wants to block the $2.2 billion deal since it sees the deal as giving more control to Penguin Random House over the US publishing market.

By: Explained Desk | New Delhi |
Updated: November 4, 2021 10:54:37 am
The complaint also states that Penguin Random House’s strategic goals through this merger is to cement itself as the number 1 publisher in the US. (Photo: Wikimedia Commons)

The US Department of Justice filed a civil antitrust lawsuit on Tuesday to stop Penguin Random House, the world’s biggest book publisher, from buying competitor Simon & Schuster.

The department wants to block the $2.2 billion deal since it sees the deal as giving more control to Penguin Random House over the US publishing market.

An organisation called Authors Guild supports the DOJ’s complaint and said in a statement, “The DOJ’s statements recognize the burden book authors currently face and we hope that today’s decision is a signal that the DOJ may be finally expanding the definition of antitrust to consider the impact on creators.”

But the organisation has also highlighted Amazon’s domination over book retail which “gives it the ability to extract unreasonable terms from publishers, especially smaller ones.”

Why is the DOJ taking this step?

In a statement, the DOJ said that the complaint, which has been filed in the US District Court for the District of Columbia, the acquisition would have enabled Penguin Random House, “which is already the largest book publisher in the world, to exert outsized influence over which books are published in the United States and how much authors are paid for their work.”

The statement also quoted Attorney General Merrick B. Garland, who has said, “The complaint filed today to ensure fair competition in the U.S. publishing industry is the latest demonstration of the Justice Department’s commitment to pursuing economic opportunity and fairness through antitrust enforcement.”

Calling the acquisition an “anticompetitive merger”, Garland said that letting the world’s largest publisher acquire one of its biggest rivals would give them unprecedented control over the industry, for which American authors and consumers will have to pay the price. This could mean lower advances for authors, fewer books and less variety for consumers.

What does the complaint say?

The DOJ’s concern is limited to the US and because it wants to ensure fair competition in the country’s publishing industry, it is against this acquisition.

“If Defendants’ proposed merger is allowed to proceed, Penguin Random House would be, by far, the largest book publisher in the United States, towering over its rivals. The merger would give Penguin Random House outsized influence over who and what is published, and how much authors are paid for their work,” the complaint states.

The complaint also states that Penguin Random House’s strategic goals through this merger is to cement itself as the number 1 publisher in the US. Simon and Schuster is currently the fourth largest publisher in the US.

It also says that since Penguin Random House and Simon and Schuster are two of the “Big Five” of the publishing world, they are able to pay higher advances to their authors and are able to spread the costs and risks associated with publishing over larger numbers of books and authors.

Reducing the Big Five to four would also reduce competition because of which a lot of authors benefit when it comes to securing good deals on their books from publishing houses. “Competition between Penguin Random House and Simon & Schuster has resulted in higher advances, better services, and more favorable contract terms for authors.”

The complaint also maintains that this merger, apart from eliminating competition between these two publishers, would likely cause author income to be less than it would have been otherwise, would likely cause a reduction in the quantity and variety of books published and likely reduce quality, service, choice and innovation.

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