Judge blocks Penguin Random House and Simon & Schuster merger

A federal judge blocked plans by one of the world’s largest book publishers, Penguin Random House, to acquire one of its rivals Monday, agreeing with the U.S. government that the proposed $2.175 billion merger with Simon & Schuster would “lessen competition” in the industry.

The case against the plans was brought by the Department of Justice, which argued in its deposition last year that the acquisition would give Penguin Random House “outsized influence over who and what is published, and how much authors are paid for their work,” thereby hurting authors and readers alike.

“The Court finds that the United States has shown that ‘the effect of [the proposed merger] may be substantially to lessen competition’ in the market for the U.S. publishing rights to anticipated top-selling books,” Judge Florence Y. Pan ruled Monday at the U.S. District Court for the District of Columbia.

German media group Bertelsmann, which owns Penguin Random House, said in a statement that it planned to appeal against the decision, with CEO Thomas Rabe saying that both the court ruling and the Department of Justice’s position were “based on incorrect basic assumptions.”

“A merger would be good for competition,” he said in a statement published on the company’s website Tuesday. “We remain convinced that Bertelsmann and Penguin Random House would be the best creative home for Simon & Schuster - with a wide variety of publishers that could operate independently under one umbrella.”

The merger has been a key case in the publishing world as it would reduce the United States’ socalled “Big Five” publishers to four.