Closing Arguments Heard AT Three-Week Antitrust Publishing Merger Trial

A federal judge heard closing arguments Friday in a case that will determine whether the top U.S. publisher, Penguin Random House, can purchase the fourth largest publisher, Simon & Schuster.

Over the course of the three-week antitrust trial, the Department of Justice narrowed its case on authors’ paid book advances of $250,000 or above, a data-based proposed anticipated bestseller market that it says may be harmed if the $2.175 billion dollar deal goes through.

But defense attorneys insist the $250,000 cutoff is problematic because it is solely based on the idea that one less publisher may “trigger” competition harm in the already ailing publishing industry, which is led by just five companies, known as “The Big Five.”

As defense attorney Daniel Petrocelli tells it, the government’s proposed market does not fit the Justice Department’s horizontal merger guidelines and it fails to consider “brown shoe” industry evaluation factors, such as publishers poaching from other publishers, which speaks to its arbitrariness.

Prosecutors grilled the global CEO of Penguin Random House, Markus Dohle, during the trial and he conceded there are “enough” books in the $250,000 tier of book advances that “would make a difference” in U.S. market share for Penguin Random House, and the merger would “cement” the company’s position as the nation’s dominant publisher. 

But Petrocelli told the judge in closings that government is “really relying” on the correlation between author advances and predicted book sales, but there is nothing “qualitatively” different between a $100 advance and a $100,000 advance.

 “General correlation does nothing in and of itself to prove the government’s proposed market,” he said.

The only reason we are here, he said, is because “the government created artificial concentration to create artificial harm.”

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