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Wednesday, December 1, 2021

U.S. regulator sues to prevent the merger of Penguin Random House, Simon and Schuster

U.S. regulators have sued to prevent the merger of Penguin Random House and Simon and Schuster, which will create a large publisher in the U.S. book market. This is one of the most important antitrust measures of the Biden administration to date.

Bertelsmann, which owns Penguin Random House, acquired Simon & Schuster from ViacomCBS for US$2.2 billion in November last year, greatly surpassing Rupert Murdoch’s News Corp. The transaction aims to merge EL James and Stephen King. Some of the most popular writers in the world are George Orwell and F Scott Fitzgerald.

The Ministry of Justice claims that the merger of the two companies will control more than two-thirds of the publishing rights market, squeeze prepayments, and cause “significant harm to the authors and end consumers of expected best-sellers,” according to a report. The lawsuit was filed in Washington Federal Court on Tuesday.

The U.S. Department of Justice complained that a senior executive of Penguin Random House told a colleague: “I don’t want to be a great writer for Simon Schuster.”

Bertelsmann previously dismissed the Murdoch Group’s concerns that the proposed cooperation would create an anti-competitive “book behemoth.” “We are very confident that this transaction will be liquidated… otherwise we would not make this decision,” Bertelsmann CEO Thomas Rabe told the Financial Times last year.

The publisher said in a joint statement on Tuesday: “Blocking the transaction will harm the author that the US Department of Justice claims to protect. We will fight this lawsuit with all our strength and look forward to public housing becoming the steward of this legendary publishing house in the next few years.”

According to the US Department of Justice’s complaint, when Simon & Schuster announced its sale in March 2020, its current CEO Jonathan Karp wrote to the best-selling author: “I’m pretty sure the Department of Justice will not allow Penguin Random House Acquire us, but only if we still have the Ministry of Justice.”

Although the two companies have publicly stated that this transaction will create the necessary balance for Amazon and that Amazon has disrupted the publishing business, the CEO of Penguin Random House privately admitted that he “never and never accepted this argument. “And a “target” complaint after the merger stated that it will become a “special partner” of the technology giant.

The lawsuit came after Joe Biden signed a comprehensive order in July aimed at curbing the power of large corporations by eliminating anti-competitive practices.

The order includes 72 independent measures covering all industries from technology and transportation to healthcare and banking. Biden also called for strengthening the enforcement of existing US antitrust laws, which may trigger more stringent reviews of mergers and acquisitions.

The US authorities sued this year to prevent another major merger. Aon and Willis Towers Watson abandoned a $30 billion partnership in July that will create the world’s largest insurance broker.They also have Ask The court prevented American Airlines and JetBlue from reaching an agreement to merge operations in New York and Boston.

A person involved in the sale of Simon & Schuster stated that Bertelsmann agreed to pay fees when exiting the transaction and accepted the “hell or high water” clause, which effectively locked the transaction unless it was blocked by regulators.

Penguin Random House has been looking forward to obtaining regulatory approval by the end of this year. The company hired attorney Daniel Petrocelli, who defended AT&T and Time Warner when the US Department of Justice tried to prevent their $80 billion merger.

Additional reporting by Kiran Stacey in Washington

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