In its long awaited post-trial briefs, lawyers for Penguin Random House argue that the U.S. Department of Justice has failed to prove its case for blocking the publishers’ acquisition of rival Big Five publisher Simon & Schuster.
Encapsulating months of fact finding and three weeks of live testimony delivered during last month’s high profile August trial, PRH attorneys reiterate their claim that the government manufactured a fatally flawed case against the nearly $2.2 billion merger that focused on harm to a handful of mega-bestselling authors—and then ultimately failed to prove it.
“By the time of trial, the government was focused only on books that yielded advances of $250,000 or more—the top two percent of all books, representing only about 1,000 authors,” PRH lawyers argue, adding that at trial, the DOJ focused its case even more narrowly on the advances of “franchise” authors.
“These are not the authors being paid advances of $250,000, or $500,000, or even $1,000,000. These authors sign multi-million dollar deals. They are the elite of the elite. As such, they are the least in need of protection by the antitrust laws, because their well-deserved compensation reflects a simple market reality: they write the books publishers will always compete hardest to acquire…Yet protecting these authors is what this case has come to. The government at trial could not identify any other way to plausibly define or describe the market its case addresses.”
In its 163-page post-trial "finding of fact" brief, and in a separate 47-page brief objecting to the DOJ's findings, PRH lawyers point out that the government did not allege any harm would flow to consumers from the merger. And in terms of the harm to authors at large the government, “paid no heed to whether the merger would improve the sales, distribution, and visibility of books written by the many thousands of other authors who receive less than $250,000 for their hard work and creative efforts.” Thus, based on the speculative harm only to a small, invented, and ill-defined market, PRH attorneys say the DOJ’s case fails as a matter of law.
“The law requires the government to draw the narrowest market that can be drawn to distinguish the products that require antitrust protection from those that do not. The $250,000 advance threshold cannot be reconciled with that rule. It is an arbitrary price line with no practical, competitive, or legal significance,” the brief states, noting that a merger can be blocked only if the government proves that it will “likely cause substantial and imminent harm” to competition in “a relevant, well-defined” market. “The government.” PRH lawyers insist, “has not made that showing.”
The briefs are likely the final act in the DOJ's effort to block PRH's controversial acquisition of S&S before Judge Florence Y. Pan issues her ruling, expected later this fall.
In seeking to block the merger, government attorneys insisted that allowing PRH, the world's largest English-language trade publisher, to acquire Simon & Schuster would "further entrench the largest publishing giant in the United States (and the world) and give the merged company control of nearly half of the market to acquire anticipated top-selling books from authors,” adding that if allowed to proceed, “the proposed transaction would eliminate competition between two of the last remaining major publishers” likely resulting in "authors being paid less for their efforts and fewer authors being able to earn a living from writing.”
At press time, PW has not yet read the DOJ's post-trial brief.
Editors Note: This is a breaking story. We will update with the DOJ's brief as soon as possible, and will more fully break down both sides lengthy post-trial briefs in the coming days.
PW's extensive coverage of the merger and the the three-week trial can be found here.