Paramount Global’s attempt to sell publisher Simon & Schuster to the owner of Penguin Random House has been blocked, a Washington D.C. judge ordered on Monday. The companies replied that they’re evaluating options and are looking to request an appeal.
“Upon review of the extensive record and careful consideration of the parties’ arguments, the Court finds that the United States has shown that ‘the effect of [the proposed merger] may be substantially to lessen competition’ in the market for the U.S. publishing rights to anticipated top-selling books,” U.S. Circuit Court Judge Florence Y. Pan wrote in a two-page order.
In response to the order, a Penguin Random House rep called the move a “setback” and pledged to appeal. “We strongly disagree with today’s decision, which is an unfortunate setback for readers and authors, and we will immediately request an expedited appeal,” Penguin Random House wrote in a statement.
The publisher went on to take aim at the government’s contention that the merger would harm competition for literary work, saying, “As we demonstrated throughout the trial, the Department of Justice’s focus on advances to the world’s best-paid authors instead of consumers or the intense competitiveness in the publishing sector runs contrary to its mission to ensure fair competition. We believe this merger will be pro-competitive, and we will continue to work closely with Paramount and Simon & Schuster on next steps.”
The $2.175 billion deal was originally unveiled by ViacomCBS (before it renamed itself Paramount Global) in November 2020 as part of the Shari Redstone-controlled media conglomerate’s effort to sell off assets that weren’t core to its streaming strategy as it aimed to scale up its Paramount+ platform. That effort from Paramount CEO Bob Bakish resulted in sales of tech site CNET for $500 million as well as CBS’ New York BlackRock headquarters building for $760 million and CBS’ Studio City lot for $1.85 billion.
The proposed sale of Simon & Schuster to German media giant Bertelsmann, owner of the Markus Dohle-run Penguin Random House, would have created a book-selling behemoth. Bertelsmann and Paramount originally expected the deal to close in 2021, but the U.S. government filed a lawsuit in November of last year alleging that the deal “would give Penguin Random House outsized influence over who and what is published, and how much authors are paid for their work.”
In unveiling the deal two years ago, the Jonathan Karp-led Simon & Schuster touted a roster of top selling authors including Stephen King, Doris Kearns Goodwin and Jason Reynolds. However, King went on to testify in the case and oppose the deal.
Following the judge’s order blocking the merger, Simon & Schuster CEO Karp wrote a note to staff saying, “Although we are disappointed with this decision, I want to reassure all of you that, despite this news, our company continues to thrive. We are more successful and valuable today than we have ever been, thanks to the efforts of all of you on behalf of our many magnificent authors.”
In its bid to stop the deal, the Department of Justice argued in its complaint that, if combined, Penguin Random House and Simon & Schuster would have revenues “twice that of their nearest closest competitor,” and would far outpace “Big Five” publisher rivals like HarperCollins, Hachette Book Group and Macmillan. (Notably, in May of last year, the News Corp owned HarperCollins had been able to close an acquisition for the books division of Houghton Mifflin Harcourt, which includes the English language rights to J.R.R. Tolkien’s works, in a $349 million deal.)
The Justice Department’s antitrust division argued in its lawsuit that the proposed Simon & Schuster and Penguin Random House merger would not only harm consumers but also authors looking to sell their work. “If consummated, this merger would likely result in substantial harm to authors of anticipated top-selling books and ultimately, consumers,” read the Nov. 2021 complaint. “Penguin Random House would control close to half of the market for the acquisition of publishing rights to anticipated top-selling books.”
The government added that, “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.”
In reply to the Oct. 31 order, a Paramount Global rep stated that the company “is disappointed by the ruling in this case. We are reviewing the decision and discussing next steps with Bertelsmann and Penguin Random House, including seeking an expedited appeal.”