Antitrust lawsuit puts book publishing industry in the dock

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The Justice Department’s effort to block the merger of Penguin Random House and Simon & Schuster isn’t just a showcase of the Biden administration’s tougher approach to corporate consolidation, it’s a rare time for the publishing industry itself to be placed in the dock.

In the first week of a scheduled two- to three-week trial in the U.S. District Court in Washington, senior publishing executives from Penguin Random House, Simon & Schuster and elsewhere, along with agents and authors such as Stephen King, have shared opinions, relived disappointments and leaked financial figures that they would otherwise have preferred to discuss privately or confide in reporters in the background.

The government is trying to demonstrate that the merger will lead to less competition for best-selling authors, a drop in their advances and a reduction in the number of books. The Department of Justice argues that major publishers, which also include Hachette, HarperCollins Publishers and Macmillan, already dominate the market for popular books and writers and have effectively made it nearly impossible for any small publisher to break through.

Penguin Random House and others argue that the market is dynamic and unpredictable, with competitors ranging from university presses to Amazon.com capable of producing bestsellers.

Like any other autonomous community, book industry professionals speak in a kind of shorthand and follow customs that are instinctive to them and sometimes unclear to outsiders. For U.S. District Court Judge Florence Y. Pan and attorneys on either side, the lawsuit has been in part a translation project.

It was also an opportunity to hear some of the industry leaders under oath.

William Morrow Group president and publisher Liate Stehlik said she made only a limited effort to acquire fiction from Dean Koontz, who published with Amazon.com, because sales were down.

Award-winning author Andrew Solomon has explained that he chose to publish his famous “The Noonday Demon” with Scribner, an imprint of Simon & Schuster, in part because Scribner has the kind of sales and marketing resources lacking in small enterprises.

Penguin Books president and publisher Brian Tart agreed with the judge’s suggestion that profit and loss assessments for possible book acquisitions are “really wrong” and do not reflect true costs. Tart also testified that he quit bidding on Marie Kondo’s “Life-Changing Magic of Tidying Up” because he “didn’t know what to make of it.”

Simon & Schuster CEO Jonathan Karp said that while publishers appreciate all the books they acquire, books obtained at an excessive advance – money guaranteed to the author, regardless of how the book sells – require special attention.

“If you really like the book, you have to jump through hoops,” he said.

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