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Simon & Schuster Sale to Penguin Challenged by U.S. Over Antitrust

The U.S. Justice Department has filed suit to block ViacomCBS's proposed sale of publisher Simon & Schuster to Penguin Random House.

The U.S. Justice Department has filed an antitrust lawsuit, seeking to block a publishing blockbuster: ViacomCBS's  (VIA) - Get Via Renewables, Inc. Class A Report  (VIAB) - Get Viacom Inc. Class B Report proposed sale of Simon & Schuster to the parent of Penguin Random House.

In November 2020 New York-based ViacomCBS said the German media giant Bertelsmann would acquire Simon & Schuster for roughly $2.18 billion. 

The Justice Department's suit, filed in U.S. District Court for the District of Columbia in Washington, argues that the proposed deal would enable Penguin Random House, the world’s largest book publisher, "exert outsized influence over which books are published in the U.S.”

According to the DoJ complaint, the merger would enable the two companies to jointly control more than two-thirds of the publishing-rights market and thus not have to compete to offer larger advances to authors.

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“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,” Attorney General Merrick B. Garland said in a statement. Five publishers control the industry, Garland said.

The two publishers vowed to fight the lawsuit in court. They said in a joint statement cited by The Wall Street Journal: “The publishing industry is, and following this transaction will remain, a vibrant and highly competitive environment.” They said they compete with trade publishers, Amazon  (AMZN) - Get Amazon.com, Inc. Report and others.

The publishing industry has consolidated. In May, News Corp.  (NWSA) - Get News Corporation Class A Report acquired Houghton Mifflin Harcourt for $349 million cash.

The lawsuit comes on the heels of a July order by President Joe Biden designed to promote competition in the economy and urging regulators to challenge anticompetitive practices.

ViacomCBS shares on Tuesday closed 0.3% higher at $37.37.