Judge blocks Penguin Random House from merging with rival publisher Simon & Schuster

A federal judge on Monday blocked mega-publisher Penguin Random House from acquiring rival Simon & Schuster, a major win for the Department of Justice’s (DOJ) antitrust division.

Judge Florence Pan, who heard the case in the U.S. District Court for the District of Columbia, said the DOJ had shown the proposed merger might have the effect of substantially lessening competition in the publishing industry for top-selling books.

Pan also issued a memo to support her ruling that was filed under seal, and she directed the parties to jointly propose redactions of confidential information before the document’s release.

Penguin Random House is expected to appeal the decision, but the ruling marks a significant victory for the Biden administration DOJ’s more aggressive opposition to corporate consolidation after it took the publishers to trial in August.

Attorney General Merrick Garland announced the suit in November, and the government has argued that the proposed merger would thwart competition and give the newly emboldened company too much influence over which books are published in the U.S. and how much authors are paid.

The deal would combine the nation’s first- and fourth-largest publishers, with the other “Big Five” that dominate the industry being HarperCollins Publishers, Hachette Book Group and Macmillan.

“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,” Garland said at the time. “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.”

Under the proposed merger, Paramount Global would sell Simon & Schuster to Penguin Random House, which is owned by German-based media conglomerate Bertelsmann.

“We do not share the court’s assessment any more than we previously shared the Department of Justice’s position,” said Bertelsmann CEO Thomas Rabe, who indicated the company is appealing the decision. “Both are based on incorrect basic assumptions, including an inaccurate definition of the market. A merger would be good for competition.”

“Paramount is disappointed by the ruling in this case,” the company said in a statement. “We are reviewing the decision and discussing next steps with Bertelsmann and Penguin Random House, including seeking an expedited appeal.”

Simon & Schuster CEO Jonathan Karp similarly wrote to employees that he was disappointed with the judge’s ruling.

“We will provide you with updates as soon as we have news that we are able to share,” he wrote. “Meanwhile, we should and will remain, as we always have and no matter the circumstance, single-mindedly focused on our shared purpose of being a world-class publisher.”

Penguin Random House said in a statement called the decision “an unfortunate setback for readers and authors.”

“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,” Penguin Random House said.

Updated at 9:31 a.m. Tuesday.