As previously reported in The Insider, Penguin Random House (PRH) has been working towards buying its rival, Simon & Schuster (S&S), since November 2020. However, that $2.1 billion-dollar-deal has been complicated by the Biden administration, which has taken PRH’s parent company, Bertelsmann, to court on antitrust grounds. The trial began Monday, August 1. The case the Department of Justice (DOJ) has built against the deal is that the merger is bad for consumers, who will pay more for books, and it’s also bad for authors, who will have fewer bidders when shopping their projects. The DOJ has made it clear that this deal is especially bad for authors whose advances usually draw $250,000 or more. While cases about anti-competitive behavior typically focus on how monopolies negatively affect consumers, this is an unusual case where the detriments of monopolistic practices to workers—in this case, authors—are on display.  

Despite the wide-reaching implications of the trial for both the book world and the wider business world, the proceedings are expected to be rather staid. A notable shake-up is that author Stephen King, a longtime S&S author, has testified as an expert witness on behalf of the U.S. government. King said on the stand, “I came because I think that consolidation is bad for competition. It becomes tougher and tougher for writers to find money to live on.” Trade book publishing has undergone radical changes since about 2006, when the Paris-based Hachette Livre acquired Time Warner Book Group, now known as Grand Central Publishing, and formed Hachette Book Group in the United States. It became one of the “Big Six” titans of New York publishing, along with Macmillan, Penguin, Random House, HarperCollins, and Simon & Schuster. In 2013, Penguin and Random House merged, creating the “Big Five.” Their common enemy in this stretch remained Amazon, which used books as loss leaders to attract customers to its wider online marketplace and demanded deep discounts from publishers in return for the volume of sales its e-commerce platform and convenient shipping options could drive. Tensions boiled over in 2014, when Amazon sued the Big Five and Apple for colluding to “keep e-book prices artificially high,” as Publisher’s Weekly described it. Amazon won.  

Now, lawyers for Bertelsmann in the case against the U.S. government are arguing that antitrust concerns regarding PRH’s purchase of S&S are unfounded, because players like Amazon remain beyond the realm of what would become the “Big Four.” Another expert witness on behalf of the government—Michael Pietsch, the CEO of Hachette Book Group—disagreed. The first to take the stand on August 1, Pietsch explained that Amazon Publishing is not a major competitor in the bidding wars for books and Amazon’s self-publishing arm does not compete for writers in the upper echelon of book publishing the way the New York houses do. In cross-examination Pietsch, as reported by Publisher’s Weekly, elaborated on why he thinks this merger is bad for publishing: “[Pietsch] was never concerned with a merger taking the Big Five down to a Big Four, but with the creation of one ‘super dominant publisher’ that is ‘so far out of scale’ with the rest of the business, a view shared by many industry insiders. The problem isn’t so much that S&S is being acquired, Pietsch suggested, the problem is that Penguin Random House, already the largest Big Five publisher, was acquiring it.” 

One of PRH’s motivations to buy S&S is to gain the impressive roster of writers its rival has cultivated; biographers published by Simon & Schuster include Doris Kearns Goodwin, Jonathan Eig, and Walter Isaacson. The trial is expected to run through August 19. Read more here.