DOJ Sues to Block Penguin Random House, Simon & Schuster Merger, Calls It Anticompetitive

The Department of Justice thinks a proposed deal for Bertelsmann's Penguin Random House to buy fellow heavyweight publisher Simon & Schuster will unfairly skew the publishing market and is suing to block it.

At the core of the concern is pay for authors. The DOJ is arguing in its suit that wages would be negatively influenced if such a larger merger was allowed. The Authors Guild, a writers' organization, has said it opposes the acquisition because there would be less competition for authors' manuscripts. Penguin Random House argued the opposite.

Many of the world's publishing companies have already undergone some form of consolidation. The Penguin Group and Random House merged in 2013 to form the current publishing behemoth. Adding Simon & Schuster would further bolster the company's grip on publications and accompanying pay. It would also bring together three legacy publishing houses. Simon & Schuster launched in 1924, Random House was founded in 1927, and Penguin Books began in 1935.

"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. 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," said Attorney General Merrick Garland in a statement, according to the Associated Press.

For more reporting from the Associated Press, see below.

Stephen King Books
FILE -- Author Stephen King at a book event in Austin, Texas. If a large proposed merger between Penguin Random House and Simon & Schuster goes through, King will be among authors with a new publisher. Rick Kern/Getty Images

The DOJ says the $2.2 billion book publishing deal would have reshaped the industry.

If German media giant Bertelsmann's Penguin Random House, already the largest American publisher, bought New York-based Simon & Schuster, it would acquire authors like Stephen King, Hillary Clinton and John Irving, and film company ViacomCBS.

The DOJ filed an antitrust suit in the U.S. District Court for the District of Columbia Tuesday in the first major antitrust action by the Biden administration, saying the deal would let Penguin Random House "exert outsized influence over which books are published in the United States and how much authors are paid for their work."

The purchase of Simon & Schuster would reduce the so-called Big Five, which dominate American publishing and include HarperCollins, Hachette Book Group and Macmillan, to four.

The deal raised concerned from writers and from rival publishers. Rupert Murdoch's News Corp, which owns HarperCollins and had reportedly also been interested in buying Simon & Schuster, slammed the deal. Its CEO Robert Thomson said last fall that Bertelsmann was "buying market dominance as a book behemoth."

In a statement, the publishers said they would fight the lawsuit and blocking the deal would harm authors. "DOJ's lawsuit is wrong on the facts, the law, and public policy," said Daniel Petrocelli, a lawyer for Penguin Random House. "Importantly, DOJ has not found, nor does it allege, that the combination will reduce competition in the sale of books."

The companies say that their publishing imprints will continue to compete against one another for books after the deal closes, and that Penguin Random House is not planning to reduce the number of books acquired or the amounts paid for the book deals.

Penguin Random House's proposed acquisition of Simon & Schuster follows decades of consolidation in the publishing industry. Acquisitions have intensified in recent years as publishers seek a stronger bargaining position with the country's biggest bookseller,

"Today's decision by the DOJ was unexpected given that so many other major mergers and acquisitions in the publishing industry have gone through recently and over the last few decades with nary a raised eyebrow from DOJ," said Mary Rasenberger, CEO of the Authors Guild, in a statement Tuesday.