- Share this article on Facebook
- Share this article on Twitter
- Share this article on Email
- Show additional share options
- Share this article on Print
- Share this article on Comment
- Share this article on Whatsapp
- Share this article on Linkedin
- Share this article on Reddit
- Share this article on Pinit
- Share this article on Tumblr
The U.S. government has filed an antitrust suit seeking to block ViacomCBS from selling its publishing unit, Simon & Schuster, to Penguin Random House.
The lawsuit, which was filed Tuesday morning, alleges that the $2 billion deal “would give Penguin Random House outsized influence over who and what is published, and how much authors are paid for their work.” In particular, the government alleges that the merger would be harmful to authors of “anticipated top-selling books” by depriving them of competition in the publishing market.
“If consummated, this merger would likely result in substantial harm to authors of anticipated top-selling books and ultimately, consumers,” the complaint says. “Penguin Random House would control close to half of the market for the acquisition of publishing rights to anticipated top-selling books. Penguin Random House’s next largest competitor would be less than half its size. Post-merger, the two largest publishers would collectively control more than two-thirds of this market, leaving hundreds of authors with fewer alternatives and less leverage.”
Notably, the government is going after a “hypothetical monopsonist,” that is, a buyer of services and rights. The focus is on authors, not consumers (the book-reading public). That’s a move labor guilds have been advocating for decades, and one that signals Hollywood mergers will have a tough time getting past these regulators.
The government also says that while the publishers talk publicly about acting as a counterweight to Amazon, in private they expressed skepticism of such claims and spoke of Amazon as a important partner.
And while Penguin announced that it would permit its units and Simon & Schuster to continue competing against one another for top offers, the government was unconvinced by that offer.
“In short, after securing nearly half the market for publishing rights to anticipated top-selling books, Penguin Random House asks this Court to trust that Penguin Random House will not use its market power to maximize profits for the benefit of its shareholders but rather, it will essentially compete with itself to reduce those profits,” the suit says. “This proposal defies economic sense, can be evaded or violated without detection, and is unenforceable.”
Penguin Random House has enlisted top Hollywood attorney Daniel Petrocelli as the publishing giant aims to fight the lawsuit over the Simon & Schuster acquisition. “DOJ’s lawsuit is wrong on the facts, the law, and public policy,” Petrocelli stated. “Importantly, DOJ has not found, nor does it allege, that the combination will reduce competition in the sale of books. The publishing industry is strong and vibrant and has seen strong growth at all levels. We are confident that the robust and competitive landscape that exists will ensure a decision that the acquisition will promote, not harm, competition.”
Markus Dohle, CEO of Penguin Random House, added of the lawsuit: “Our goal is for the new combined company to be truly greater than the sum of its parts, and our focus is to grow our community of distinct imprints that will operate independently and autonomously and will continue to compete vigorously among themselves and with outside competitors, a process that best serves the objective that every author finds the right editor and the best imprint for their work to develop and flourish.”
ViacomCBS, led by CEO Bob Bakish, announced its deal to sell Simon & Schuster a year ago, as part of a larger strategy to shed “noncore” assets and focus on entertainment and streaming, as well as to fund its dividend and cut debt. The company also sold CBS’ iconic Manhattan headquarters Black Rock to an investment firm for $760 million, and the tech news outlet CNET to Red Ventures for $500 million.
Eriq Gardner and Georg Szalai contributed reporting.
Sign up for THR news straight to your inbox every day