On Monday evening, a federal court blocked the acquisition of Simon & Schuster by Penguin Random House. The two publishing giants are both part of the book industry refers to as the "Big Five," the five biggest publishing houses in the United States. Less than a decade ago, Random House merged with Penguin to create the world's largest publishing house. But the proposed merger with Simon & Schuster will not go through, because it would "substantially" negatively affect sales competition for the U.S. rights of books, according to the ruling by Judge Florence Y. Pan.
As reported by The New York Times, "the full order laying out Judge Pan's reasoning is temporarily under seal because it contains confidential information, and will be released later after both parties file redactions." The New York Times also reports that Penguin Random House will appeal. What was the story with this case, and why have both writers and readers — not to mention the Biden administration — paid such close attention?
The trial was conducted over a period of three weeks in the U.S. District Court for the District of Columbia. In November 2020, Paramount, Simon & Schuster's parent company, and Penguin Random House, a subsidiary of German company Bertelsmann, announced the sale of Simon & Schuster in a deal worth over $2 billion. It's been a battle for regulatory approval ever since.
At the trial, publishing executives testified, as did literary agents and bestselling authors — like Stephen King, who spoke on the stand of the financial hardships facing writers today. King cited a study showing the current median income of writers as below the poverty line, according to Deadline. "It's a tough world out there now. That's why I came," said King, who volunteered as a witness for the Justice Department.
The Justice Department sought to block the merger in part because, as reported by Deadline, "the deal would adversely impact author advances of $250,000 and above for the most anticipated best sellers." But most book advances are far below that amount, with the smallest advances going to writers of color statistically.
Writers and readers alike stayed glued to the trial as the proceedings lifted the curtain on the inner workings of the publishing industry. As Kathleen Schmidt wrote on Twitter, "The worst aspect of the DOJvPRH trial was allowing publishing vets to testify who could not explain how the biz works. To read testimony that essentially inferred that no one knows what'll sell/marketing isn't valuable/it's all guess work is an embarrassment."
Testimony from publishing executives indicated they had no idea how much money most authors make, how many copies some books sell, how to predict successful titles and confusingly, asserted that all books are marketed the same by publishers, regardless of advance size. Writer Kaz Windness tweeted, "If anything, this merger trial has revealed how out of touch publishing big wigs are with the reality of the average author or illustrator. We have always had to work other jobs. We totally pay for our own book marketing. 100K would be a life-changing advance."
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This trial is also significant because it marks one of the Biden's administration's first antitrust actions. The merger of the two huge publishers would have augmented the existing oligopoly in the publishing industry. Importantly, the Justice Department focused not on consumer harm but on the possible financial harm to authors should the deal have gone through.
By "focusing on the impact a monopoly might have on workers … zeroing in on the potential harm to authors, the Justice Department signaled that it's taking a broader view of the possible impact of consolidation," according to The New York Times, who describes the trial as "a test case for the government's new, more aggressive approach to curbing consolidation."
The response from writers has been cautiously optimistic. As author James Hill Tate wrote on Twitter, "A blocked publishing merger is a small, good thing in a time like this."
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