The Justice Department has sued to block the merger. The trial opens Monday in federal court in Washington.
The government contends the merger would hurt authors and, ultimately, readers, if German media titan Bertelsmann is allowed to buy Simon & Schuster 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.
An appearance at some point by King, whose works are published by Simon & Schuster, will be a highly unusual for an antitrust trial and will draw wide attention.
The publishers are fighting the lawsuit. They counter that the merger would strengthen competition among publishers to find and sell the hottest books. It would benefit readers, booksellers and authors, they say.
A look at the case:
The two New York-based publishers each have impressive stables of blockbuster authors who've sold multiple millions of copies and have scored multimillion-dollar deals. Within Penguin Random House's constellation are Barack and Michelle Obama, whose package deal for their memoirs totaled an estimated $65 million, Bill Clinton (he received $15 million for his memoir), Toni Morrison, John Grisham and Dan Brown.
Simon & Schuster counts Hillary Clinton (she received $8 million for hers), Bob Woodward and Walter Isaacson.
And King. His post-apocalyptic novel "The Stand," published in 1978, swirled around a deadly pandemic of weaponized influenza.
Bruce Springsteen split the difference: His "Renegades: Born in the USA," with Barack Obama, was published by Penguin Random House; his memoir, by Simon & Schuster.
THROWING THE BOOKS AT THEM
The Justice Department contends in its suit that as things now stand, No. 1 Penguin Random House and No. 4 Simon & Schuster (by total sales) compete fiercely to acquire the rights to publish the anticipated hottest-selling books. If they are allowed to merge, the combined company would control nearly 50% of the market for those books, it says, hurting competition by reducing advances paid to authors and diminishing output, creativity and diversity.
The Big Five _ the other three are Hachette, HarperCollins and Macmillan _ dominate U.S. publishing. They make up 90% of the market for anticipated top-selling books, the government's court filing says. "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,'' it says.
The Justice Department case reaches beyond the traditional antitrust concern of concentration raising prices for consumers, pointing to the impact on consumers' choices and viewing authors as workers as well as sellers of products in the global marketplace of ideas. The notion is that fewer buyers (publishers) competing over the same talent pool reduces sellers' (authors) bargaining power.
The case "potentially creates a precedent that could be used in the labor area," says Rebecca Allensworth, an antitrust expert who is a law professor at Vanderbilt University.
BIDEN'S COMPETITION CRUSADE
The Biden administration is staking out new ground on business concentration and competition, and the government's case against the publishers' mergers can be viewed as an important step.
President Joe Biden has made competition a pillar of his economic policy, denouncing what he calls the outsized market power of an array of industries and stressing the importance of robust competition to the economy, workers, consumers and small businesses. He has called on federal regulators, notably the Justice Department and the Federal Trade Commission, to give greater scrutiny to big business combinations.
Biden issued an executive order a year ago targeting what he labeled anticompetitive practices in tech, health care, agriculture and numerous other parts of the economy, laying down 72 actions and recommendations for federal agencies. Targets range from hearing aid prices to airline baggage fees.
Another trial on competition starting Monday in federal court: The Justice Department is suing to block UnitedHealth Group, which runs the biggest U.S. health insurer, from acquiring health-tech company Change Healthcare. The government contends the $13 billion deal would hurt competition and put too much health care claim information in the hands of one company.
PUBLISHERS MAKE THEIR CASE
Hold on, Penguin Random House and Simon & Schuster say as they prepare to enter trial: The merger would actually strengthen competition among publishers to find and sell the hottest books, by enabling the combined company to offer greater compensation to authors.
It would benefit readers, booksellers and authors, the publishers say, by creating a more efficient company that would bring lower prices for books. The government has failed to show harm to consumers as readers because the merger wouldn't push up prices, the companies contend.
"The U.S. publishing industry is robust and highly competitive,'' they say in their filing. "More readers are reading books than ever before, and the number grows every year. Publishers compete vigorously to reach those readers, and the only way they can compete effectively is to find, acquire and publish the books readers most want to read. ... The merger at issue in this case will encourage even more competition and growth in the U.S. publishing industry.''
The companies reject the government's central focus on the market for anticipated best-selling books _ defined as those acquired for advances to authors of at least $250,000. They represent only a tiny sliver, about 2%, of all books published by commercial companies, according to the companies' filing.