Penguin Random House, Simon & Schuster file GM response


Penguin Random House and Simon & Schuster are not abandoning their merger plans without a fight. The publishers on Monday filed a joint response opposing the US Department of Justice’s lawsuit to block the merger of the two giant publishing houses.

The scathing response doesn’t cut Atty. General Merrick Garland’s DOJ has not been released.

The government “poorly defines the market, distorts its participants and miscalculates market shares” and “also ignores the most fundamental dynamics of the book rights market”, allege the publishers in their counter-argument to the federal lawsuit. It also cannot prove that consumers will be harmed, the file says.

The antitrust lawsuit was filed against the publishing houses and their owners, ViacomCBS and Bertelsmann, on November 2, nearly a year after the planned merger was announced. Penguin and Random House merged in 2013, with the Obama administration DOJ granting an “unconditional” clearance less than four months after the companies announced their intentions.

There are now only five major dominant publishers in the industry. The merger would reduce that number to four, with additional competition from smaller, often niche publishing houses. Following the announcement of the proposed merger at the end of 2020, authors and publishers have discussed its possible negative effects on author remuneration and diversity in the publishing industry.

The Penguin and S&S case challenges the DOJ’s position that only the “Big Five” regularly compete for the rights to books, as well as its claim that a reduction to four major publishers would lower bids and downsides. top of the line.

“The DOJ is mistaken in asserting that the ‘Big Five’ are the only participants in the alleged market for ‘best-selling books’,” said the lawsuit. “For example, in each of the past three years, three of BookScan’s top ten best-selling authors have been published by publishers other than the ‘Big Five’.

“Like the books themselves, book rights transactions are personal and individualized, especially in high-priced transactions,” argue the publishers, adding that these transactions are controlled by author agents, who are considered like “sophisticated recurring”.[s]”in the industry. Agents decide who can bid, how bids will work and what rights will be offered, indicate the record, and invite bidders based on their own subjective criteria.

“Penguin Random House has no ability to influence overall advances or offsets: a Penguin Random House imprint is not invited to bid for every book, and even when one or more Penguin Random House imprints bid, they lose a lot more auctions than they win, ”the file said. “The same goes for Simon & Schuster. Post-merger market dynamics will be the same, and Penguin Random House’s influence on post-merger pricing will be just as non-existent as it is today.

Dan Petrocelli of O’Melveny, senior counsel for Penguin Random House and Bertelsmann, called the proposed merger “pro-competitive in all respects” and said it would benefit authors, booksellers and readers.

“The DOJ wants to block the merger on the basis of a flawed theory that it will lower the remuneration of the highest paid writers,” Petrocelli said in a statement Monday. “This is not only legally, factually and economically bad, but it also ignores the vast majority of writers who will undoubtedly benefit from the transaction. We are fully convinced that this merger will only improve competition across the industry. of the edition. “

The Justice Department alleged in its antitrust lawsuit that the merger would give Penguin Random House “disproportionate influence over who and what is published, and how much authors are paid for their work.”

“If completed,” the DOJ said in its complaint, “this merger would likely cause substantial harm to the authors of the best-selling books and, ultimately, to consumers. Penguin Random House is said to control nearly half of the market for the acquisition of publishing rights for top-selling books. Penguin Random House’s next biggest competitor would be less than half his size. After the merger, the two largest publishers would collectively control more than two-thirds of this market, leaving hundreds of authors with fewer alternatives and less influence.

The Authors’ Guild – the oldest and largest professional organization of writers in the United States – has spoken out in support of the DOJ.

“The proposed merger would allow the merged company and the few remaining competitors to pay less and extract more authors who often work for years in their craft before producing a book,” the guild said in a statement. only days after the filing of the federal complaint. .

“By reducing the remuneration of authors, the merger would make it more difficult for authors to make a living writing books, which in turn would lead to a reduction in the quantity and variety of books – which subsequently harms consumers. “

Over the past year, major authors publishing under the Penguin Random House imprints have included former President Obama and rocker Bruce Springsteen, actor Will Smith, politician Stacey Abrams, Prince Harry and Meghan, Duchess of Sussex.

During the same period, Simon & Schuster and its publishing houses signed deals or published books from former Vice President Mike Pence, former Secretary of State Hillary Clinton, Assistant to Clinton Huma Abedin and Washington Post reporter Bob Woodward.

The case moves forward Tuesday with a scheduling hearing before Judge Florence Y. Pan in the United States District Court for the District of Columbia. The trial will likely begin on August 1 of next year.

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