Nicholas Hill testifies for DOJ in its successful block of Penguin Random Houseؘ–Simon & Schuster merger
A federal court blocked Penguin Random House’s planned purchase of Simon & Schuster. Partner Nicholas Hill testified in the high-profile trial about the proposed $2.18 billion merger that the Los Angeles Times called “the biggest antitrust case to hit the publishing industry in recent memory.”[1]
In United States v. Bertelsmann SE, the Department of Justice (DOJ) sued to block the transaction on the grounds that the proposed merger “would further increase consolidation in this concentrated industry, make the biggest player even bigger, and likely increase coordination in an industry with a history of coordination among the major publishers.”[2] Penguin Random House and Simon & Schuster are among the largest publishing houses in the country. The merger would reduce the number of major publishing houses from five to four, and the merged company would control nearly 50% of the best-seller market, resulting in its having too much leverage over authors in negotiations for book rights so authors of anticipated best-sellers would be paid substantially less for their work.[3]
The DOJ engaged Dr. Hill to assist in analyzing how the proposed transaction would affect the publishing industry. Dr. Hill analyzed the merger and concluded that it would likely harm authors of anticipated top-selling books, resulting in lower author compensation and worse terms. Dr. Hill concluded further that factors such as entry and efficiencies were unlikely to mitigate the transaction’s anticompetitive effect. His testimony in the trial spanned several days.
In its ruling, the court concluded that Penguin Random House’s acquisition of Simon & Schuster “violates Section 7 of the Clayton Act because it is likely to substantially lessen competition in the market for the publishing rights to anticipated top-selling books. The Court therefore will enjoin the merger.”[4]
This matter won the GCR award for Enforcement Action of the Year.
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[1] Dorany Pineda and Freddy Brewster, “Stephen King Testified against Publishing’s Biggest Merger. What You Need to Know about the Antitrust Trial,” Los Angeles Times, August 2, 2022, https://www.latimes.com/entertainment-arts/books/story/2022-08-02/stephen-king-testified-against-publishings-biggest-merger-what-you-need-to-know-about-the-antitrust-trial.
[2] Complaint, United States v. Bertelsmann SE, No. 1:21-cv-02886 (D. D.C. November 2, 2021), https://www.justice.gov/atr/case-document/file/1445931/download.
[3] Complaint, United States v. Bertelsmann SE, No. 1:21-cv-02886 (D. D.C. November 2, 2021), https://www.justice.gov/atr/case-document/file/1445931/download, ¶ 9.
[4] Memorandum opinion, United States v. Bertelsmann SE & Co. KGaA, Penguin Random House, LLC, ViacomCBS, Inc., and Simon & Schuster, Inc., No. 21-cv-02886 (D.D.C. October 31, 2022), https://www.justice.gov/atr/case-document/file/1549941/download, 80.