By Diane Bartz and David Shepardson
WASHINGTON (Reuters) -The U.S. Justice Department asked a federal judge on Monday to block a $2.2 billion merger of two of the “Big Five” book publishers, Penguin Random House and Simon & Schuster, in a trial that is expected to feature testimony from horror writer Stephen King.
“It’s real money for real people,” said Justice Department attorney John Read.
Also on Monday, in the same federal courthouse in Washington, the Justice Department argued before a different judge that UnitedHealth Group’s $8 billion deal to buy Change Healthcare should be stopped.
In the publisher merger trial, the government is focused not on what consumers pay for books but on advances paid to the most successful authors, especially those given $250,000 or more.
“The evidence will show that the proposed merger would likely result in authors of anticipated top-selling books receiving smaller advances, meaning authors who labor for years over their manuscripts will be paid less for their efforts,” the government said in a pretrial brief.
The government also intends to show that there was concern among the merging parties that the deal is not legal. It previously disclosed an email sent by Simon & Schuster CEO Jonathan Karp who wrote: “I’m pretty sure the Department of Justice wouldn’t allow Penguin Random House to buy us, but that’s assuming we still have a Department of Justice.”
King, author of “The Shining,” “Carrie” and other blockbusters, will testify for the government, along with publishing executives and authors’ agents.
Hachette Book Group Chief Executive Officer Michael Pietsch is set to testify on Monday, while King is expected to testify on Tuesday.
Penguin Random House, the largest book publisher in the United States, said it planned to buy rival Simon & Schuster in November 2020. Penguin Random House is owned by German media conglomerate Bertelsmann. Simon & Schuster is owned by ViacomCBS, now Paramount Global. The Justice Department filed its lawsuit in November 2021.
The defense, led by lawyer Daniel Petrocelli who defeated the Trump administration’s 2018 bid to stop AT&T Inc from buying Time Warner, argued that the market for books, and for publishers to win top-selling authors, is competitive and that the merger will make it even more so.
The government is asking the court to block the merger “for under a 100 books a year,” Petrocelli said in opening arguments, rejecting the idea that the largest booksellers will be able to reduce advances.
The publishers will argue that the evidence shows that in bidding for potential bestsellers Penguin Random House and Simon & Schuster “are rarely the top two bidders.”
The top five publishers are Penguin Random House, HarperCollins, Macmillan, Simon & Schuster and Hachette, with Walt Disney Co and Amazon.com Inc also in the market. HarperCollins is owned by News Corp.
Judge Florence Pan of the U.S. District Court for the District of Columbia will decide if the deal may go forward. The trial is expected to last two to three weeks.
(Reporting by Diane Bartz and by David Shepardson in Washington; Editing by Matthew Lewis and Mark Porter)
