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  • Writer's pictureDavid Baker

1 + 1 = All the marbles

Why a federal antitrust case may mean more than the sum of its arguments

In a battle that may have implications for American business far beyond the outcome of the case itself, the U.S. government and publishing titan Penguin Random House exchanged opening salvos in a federal antitrust trial yesterday as the U.S. seeks to block the biggest U.S. book publisher from absorbing rival Simon & Schuster.

The Justice Department has filed suit to block the $2.2 billion merger, which would reduce the Big Five U.S. publishers to four and the case is widely viewed as a key test of the Biden administration’s antitrust policy.

The government’s star witness, bestselling author Stephen King, is expected to testify at today's session of the weekslong trial in U.S. District Court in Washington, D.C. King's works are published by Simon & Schuster.

At Monday's opening session, opposing attorneys for the two sides presented their cases before U.S. District Judge Florence Pan. Justice Department attorneys called the merger “presumptively wrong” because it would shrink competition and, inevitably, the vital public discourse that books help engender. Penguin Random House countered that the new company would “enhance” competition because the combined company could turn out books more efficiently.

The government contends that it would hurt authors 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 U.S. media and entertainment company Paramount Global. It says the deal would thwart competition and give Penguin Random House gigantic influence over which books are published in the U.S., likely reducing how much authors are paid and giving consumers fewer books to choose from.

The publishers counter that the merger would strengthen competition among publishers to find and sell the hottest books, by enabling the combined company to offer bigger advance payments and marketing support to authors. It would benefit readers, booksellers and authors, they say.

For more on the implications the case may have on other proposed mergers and acquisitions, check out Neal Freyman's take here (writing for The Morning Brew).

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