Tuesday, August 2, 2022

Penguin Random House and Simon & Schuster Antitrust Case Goes to Court

Opening arguments were held yesterday. 

The attorney for Penguin Random House, Daniel Petrocelli, is a freakin' firecracker.

At the New York Times, "The trial to decide whether the publishing giant may buy Simon & Schuster is a test of the Biden administration’s push to expand antitrust enforcement."

And at Vanity Fair, "The Antitrust Showdown to Determine Simon & Schuster's Fate Is About to Begin":

Jonathan Karp is rallying the troops at S&S as its suitor, Penguin Random House, heads to trial Monday against Biden’s Justice Department. The witness list is a who’s who of publishing bosses, power agents, and authors—including Stephen King—with a $2 billion deal on the line.

On Monday, as lawyers for Penguin Random House and the Department of Justice were sharpening their sabres ahead of the antitrust duel of the summer, CEO Jonathan Karp fired off an email to his approximately 1,500 employees at Simon & Schuster, the nearly century-old publishing house that Karp has lorded over for the past two years. The fate of Simon & Schuster—whose catalog stretches from the classics of Fitzgerald and Hemingway, to the mass-market gold mines of Stephen King and Mary Higgins Clark, to the recent political blockbusters of Bob Woodward and Mary Trump—has hung in the balance since the publisher was put on the block in March 2020 by its parent company, now called Paramount Global, which arose from the tortured recombination of Viacom and CBS, whose focus on mounting an offensive in the streaming wars leaves little room to manage a comparatively antiquated book-publishing business.

Almost nine months after the sale was announced, Bertelsmann’s PRH bested Rupert Murdoch’s HarperCollins with a $2.18 billion bid for S&S, a proposed mash-up that would turn the Big Five publishers into the Big Four. However, the Champagne toasts turned out to be premature: Last November, Joe Biden’s merger-averse DOJ sued to block the deal, citing concerns that it would give the world’s largest book publisher “unprecedented control” over the industry, resulting in “lower advances for authors and ultimately fewer books and less variety for consumers,” a string of claims that PRH characterizes as ludicrous. S&S has been in limbo ever since—a discontinued operation as far as Paramount Global’s earnings releases are concerned, and yet still bereft of its suitor’s embrace.

Which brings us back to Karp’s memo, a sort of pep talk to counteract the lingering uncertainty. “As I’ve told you before, I am hopeful that Simon & Schuster will become part of Penguin Random House,” wrote Karp, a 58-year-old former reporter and theater buff who rose up to become one of the most powerful and highly regarded figures in the publishing industry. “I spent 16 years at Random House, and I know their culture is a lot like ours—wholeheartedly devoted to books and deeply committed to its employees and authors. Penguin Random House’s parent company, Bertelsmann, has been in the book business since 1835 and shares Penguin Random House’s profound commitment to improve public readership. I strongly believe that Penguin Random House will be an excellent steward of Simon & Schuster’s legacy, and that we, and our authors, will benefit greatly from becoming a part of this superb publishing company.”

The fate of S&S will soon be decided one way or another, with PRH and the DOJ gearing up to face off in court. The bench trial is set to begin Monday, adjudicated by Judge Florence Pan at the U.S. District Court in Washington, D.C. Three weeks have been allocated for the trial, which is slated to run from August 1 to August 19. The attorneys will then have until September 7 to submit any additional briefings to the court, and Pan is expected to rule sometime in November. The witness list is stacked with A-listers from the publishing world, including executives from S&S and PRH, as well as top literary agents and authors. Karp and Penguin Random House CEO Markus Dohle are both due to be called, as are King (for the government), Hachette Book Group CEO Michael Pietsch (ditto), and power agents Andrew Wylie (whose client roster includes Vanity Fair), Gail Ross, Joy Harris, and Elyse Cheney. (Those agents and a few others are notably being called by the defense.) The array of potential witnesses includes PRH honcho Andy Ward and the Pulitzer Prize–winning journalist and best-selling author Charles Duhigg. “During the trial, our ability to comment on the testimony and proceedings will be limited,” Karp told his staff. “We will keep you informed of further developments when we have news that we can share.”

PRH buying S&S is a small deal in the grand scheme of things, but the merger is being closely watched insofar as it reflects the Biden administration’s push to stem corporate consolidation. It also has obvious implications for the already much-consolidated publishing space, where there’s skepticism about creating another behemoth in an industry that has been upended by Amazon. As one big shot editor told me when the lawsuit was first announced, “I don’t know anyone who would think this is a great thing to happen.” Both sides filed their pretrial briefs last Friday...

Keep reading.