Justice Dept. Sues Penguin Random House Over Simon & Schuster Deal

In September, Markus Dohle, Penguin Random House’s chief executive, held a virtual meeting with literary agents in an effort to address these concerns, with books by Barack and Michelle Obama — some of the most enormous blockbusters of recent years — visible behind him. He said that imprints at Penguin Random House and Simon & Schuster would still be able to bid against one another if they became part of the same company. In its statement on Tuesday, Penguin Random House said this would hold true “up to an advance level well in excess of $1 million.”

Some in publishing consider these internal bidding rules to be cold comfort given the scale Penguin Random House has already achieved and how much more of the market it would gain if the two companies combine.

“It’s basically closing the barn door after the horse has bolted,” said Ayesha Pande, founder of the Ayesha Pande Literary agency.

Penguin Random House has said that it and Simon & Schuster together would account for less than 20 percent of the United States’ general-interest publishing revenue. That data is drawn from the Association of American Publishers, a trade association, which looks at the complete book market in the United States. NPD BookScan, which tracks printed books sold through most U.S. retailers, said that the market share of the two publishers was significantly higher, at about 27 percent of books that sold in the first nine months of this year.

Both companies also have substantial distribution businesses, and Penguin Random House has by far the most sophisticated printing, warehouse and shipping operations, which has helped it weather the supply-chain crisis better than some of its rivals. Penguin Random House said that bringing the two companies together would be a boost to authors because its distribution services would be available to what are now Simon & Schuster books, “making it easier to discover new titles and less likely that books will be out of stock, particularly at local retailers.”

Together, they publish roughly half of the new best-selling printed books in recent years. In 2019, Penguin Random House and Simon & Schuster had a combined 49.3 percent of hardcover best sellers, according to an analysis done by Publishers Weekly.

Antitrust prosecutors said that private statements from executives at the two companies undercut their own arguments for the deal. The companies have hinted that they saw the merger as a way to combat the power of Amazon, according to the lawsuit, but a Penguin Random House executive said that he had “never, never bought into that argument” and that a goal of the deal was for the combined companies to be a great “partner” to the online retail giant.

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