Publishing giants Penguin Random House and Simon & Schuster argued in court Monday that a merger will benefit the publishing field, including booksellers and authors.
The joint filing rejected the Department of Justice's claim in its antitrust lawsuit that a merger of two of the industry's largest publishers would limit competition in the industry and decrease what authors are paid for their work.
"DOJ cannot show that the merger will likely reduce competition or diminish pay for book rights at any level of the market," the defense's legal team said in its response. "The merger will instead allow Penguin Random House to bring enhanced distribution capacity to a greater number of authors, including Simon & Schuster’s authors. The proposed merger is procompetitive in every way.”
DOJ FILES ANTITRUST LAWSUIT TO BLOCK MAJOR BOOK PUBLISHER MERGER
The DOJ, which filed the suit last month in federal court in Washington, D.C., argued the sale would harm authors and consumers. If the merger is successful, Penguin Random House, the largest publisher in the world, would acquire S&S for $2.18 billion.
“If the world’s largest book publisher is permitted to acquire one of its biggest rivals, it will have unprecedented control over this important industry,” Attorney General Merrick Garland said in a news release. “American authors and consumers will pay the price of this anticompetitive merger — lower advances for authors and ultimately fewer books and less variety for consumers.”
The defense argued the government is wrong that a publishing company has to be in the "Big Five" publishing houses, which include the defendants, to be competitive for book deals.
"In each of the past three years, three of the top ten highest-selling authors according to BookScan have been published by publishers other than the so-called 'Big Five,'" the response said.
Additionally, if the merger goes through, S&S would become an imprint of Penguin Random House. Under Penguin's rules, imprints are allowed to bid against each other for the rights to a book if at least one other publishing company is also bidding. If the imprints are the last two standing, the bids between imprints cannot exceed $1 million.
The defense team said Penguin Random House wants to help the authors with S&S and that the acquisition would give resources to the smaller company and its authors.
“Penguin Random House plans to reinvest its savings from the merger to grow title acquisitions and continue its support of brick-and-mortar booksellers," the team argued. "By giving Simon & Schuster authors access to Penguin Random House’s highly efficient supply chain, their books will be more discoverable, visible, and available — online, internationally, and down the street. Expanding Penguin Random House’s supply chain to include Simon & Schuster authors ultimately provides greater income for authors and more choices for readers.”
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Dan Petrocelli of O’Melveny & Myers, who is leading the defense, said the government's attempt to block the sale ignores the authors who would benefit from the merger.
"DOJ wants to block the merger on the misguided theory it will diminish compensation to the highest paid authors," Petrocelli said in a statement. "This is not only legally, factually, and economically wrong, but it also ignores the vast majority of authors who indisputably will benefit from the transaction. We are fully confident that this merger will only enhance competition across the entire spectrum of the publishing industry.”