The Justice Department has filed paperwork to stop the upcoming merger of Penguin Random House and Simon & Schuster. They allege that the combined company would be too large and contribute to lower wages for authors. However, the publishers shot back that this is government overreach and nothing in the lawsuit proves that this is an anti-trust situation.
Anti-trust is one of the few areas that there is not partisan fighting in Congress. Both sides are concerned about companies becoming too large and the implications for American people.
The lawsuit sets the stage for a big debate about anti-trust and how big is too big for a company to be. It will also test anti-trust laws in the United States.
Attorney General Merrick Garland released a statement about the case:
“If the world’s largest book publisher is permitted to acquire one of its biggest rivals, it will have unprecedented control over this important industry. American authors and consumers will pay the price of this anticompetitive merger – lower advances for authors and ultimately fewer books and less variety for consumers.”
Penguin Random House and Simon & Schuster countered the statement saying that the Justice Department is missing the bigger picture. They claim there is plenty of competition for them and that writers will not miss out on opportunities because Amazon is a major player now. Here is their statement:
“The publishing industry is, and following this transaction will remain, a vibrant and highly competitive environment. PRH and S&S compete with many other publishers including large trade publishers, newer entrants like Amazon, and a range of mid-size and smaller publishers all capable of competing for future titles from established and emerging authors.”
However, the lawsuit includes passages that seem to contradict the publishers current stance. When putting together the proposal for the merger, there are passages that say the United States is and "oligopoly" and the combination of the two companies will help them retain their status as the biggest publisher in the world.
The publishers have retained Daniel Petrocelli of O’Melveny & Myers as their lawyer. He defended AT&T and Warner Brothers when the Justice Department sued to stop that merger. Ultimately, he prevailed in that case and executives at both companies are hoping that lightening will strike twice.
Petrocelli previewed the defense tactic he plans to use. Building off of the statement released by the publishers, he argued that there is strong competition for both consumers and writers. He also went on to claim that the merger will help promote even more growth and competition.
The lawsuit, filed in U.S. District Court In District of Columbia, comes days after the Author Guild sent a request to the Justice Department to stop the merger from happening. Here is the statement they released:
“The deal would bring well more than half of key U.S. book markets under the control of a single corporation, which poses a variety of potential threats to freedom of speech and democracy in the United States. The takeover falls clearly within the standard of illegality set by the Clayton Act and should be summarily rejected.”
Passed in 1914, The Clayton Act prevents companies from acting like monopolies and form colluding with one another.
As of press time, the Author Guild has not released a statement about the lawsuit.