US begins court battle against publishing giant’s merger, marketing and advertising News, ET BrandEquity

    US begins court battle against merger of publishing giants
US begins court battle against merger of publishing giants

Government and publishing titan Penguin Random House exchanged opening salvo in a federal antitrust trial on Monday, as the US seeks to prevent the largest US book publisher from absorbing rival Simon & Schuster. The case comes as an important test of the Biden administration’s antitrust policy.

The Justice Department has sued to block a $2.2 billion merger that would reduce the number of Big Five US publishers to four.

Bestselling author Stephen King, the government’s star witness, is expected to testify in Tuesday’s session of the week-long trial in US District Court in Washington, D.C. expressed dissatisfaction with

In Monday’s inaugural session, lawyers for both sides presented their cases before U.S. District Judge Florence Paine.

Lawyers for the Justice Department alleged that the merger would reduce competition and, inevitably, the important public discourse that helped spark the books. Penguin Random House countered that the new company would increase competition because the combined company could lay out the books more efficiently.

The DOJ and publishers are considering a central part of the government’s case: whether the merger will reduce advances for the most popular authors receiving advances of $250,000 or more. Public prosecutor John Reid said “the competition is resulting in authors being paid more” and went on to explain how joining the two largest publishers would result in fewer bidders for high-profile books.

But Penguin Random House attorney Daniel Petroselli, who successfully represented Time Warner and AT&T in 2018 when the government attempted to block their merger, responded that the $250,000 benchmark was an artificial standard that did not reflect that’s how the industry works. The publisher argues that for a small percentage of book deals, the merger would have minimal impact on advances.

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“The government created an artificial market to create an artificial concentration to create artificial harm,” Petroselli said.

The government argues that it would hurt writers and ultimately readers if German media titan Bertelsmann, of which Penguin Random House is a division, is allowed to buy Simon & Schuster, the fourth-largest publisher, from American media and entertainment company Paramount Global. , It says the deal will thwart competition and give Penguin Random House a huge influence over the books it publishes in the US, not only on how much authors are paid, but consumers with fewer books to choose from.

Publishers contend that the merger would strengthen competition among publishers to find and sell the most popular books, allowing the combined company to provide larger upfront payments and marketing support to authors. He says this will benefit readers, booksellers and writers.

The merger of Penguin Random House and Simon & Schuster would be the largest publisher ever in the US and would reduce the so-called Big Five of one publication, which includes HarperCollins Publishing, Hachette Book Group and Macmillan.

Hatchet CEO Michael Pietsch was called by the government as the first witness. He expressed concern about the consequences for a “super-dominant” publisher that could control half the overall market, resulting in the new company closing impressions deemed redundant and increasing profits in terms of offering booksellers. can.

At the same time, Pietsch admitted that he expected his parent company, the French publisher Hachette Livre, to bid for Simon & Schuster and that Penguin would be welcome to acquire it if a deal with Random House was struck.

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“It is my belief that they (Hatchett Liver)” would be open to buying Simon & Schuster, he said.

Penguin Random House and Simon & Schuster already have two of the publication’s most influential lists of blockbuster authors. Penguin Random House includes Barack and Michelle Obama, whose package deals for their memoirs totaled an estimated $65 million; Bill Clinton, who received $15 million for his memoir; the late Nobel laureate Toni Morrison; John Grisham; and Dan Brown.

Simon & Schuster counts Hillary Clinton, who received $8 million for their memoir, Bob Woodward and Walter Isaacson. and the king.

Bruce Springsteen splits the difference: his “Renegades: Born in the USA”, with Barack Obama, was published by Penguin Random House; His Memoirs by Simon & Schuster.

The Justice Department argues that as things stand, No. 1 Penguin Random House and No. 4 Simon & Schuster compete fiercely for the rights to publish the anticipated best-selling books, by total sales. If they are allowed to merge, the combined company would control about 50% of the market for those books, it says, harming competition by reducing advances paid to authors and reducing production, creativity and diversity. is delivering.

The Big Five is a prominent presence in the American publication, which is always on top of agents’ minds when presenting proposed works. The government says they make up 90% of the market for estimated top-selling books.

The Biden administration is laying new ground on business concentration and competition, and the government’s case against merging publishers is a significant test.

President Joe Biden has made competition a pillar of his economic policy, which he calls the external market force of an array of industries, and stresses the importance of strong competition for the economy, workers, consumers and small businesses. Biden, a Democrat, has called on federal regulators, particularly the Justice Department and the Federal Trade Commission, to investigate larger business combinations more.

Facebook brokered three-year deals with publishers in 2019. At the time, the company was increasing its investment in news and hired journalists to help direct publisher traffic to their new tabs for news.