US judge restricts $2.2 billion merger of Penguin Random House

A US judge has ordered against the planned merger of Penguin Random House with its rival, Simon & Schuster. The merger was planned to proceed for the amount of $2.2 billion. Florence Pan, the judge at the US district court for the District of Columbia, restricted the proceedings of this deal in a published order. According to the published order, Florence Pan stated that the deal will effectively harm the competition in the market. The order stated that if the deal is completed, it will substantially affect the US publishing rights for the best-selling books in the country.  Whenever a market experiences a merger or acquisition between the top players, it is always crucial to see how the events will affect the market. When two top competitors form a  merger or when one competitor acquires the other, the consumers and customers suffer the most. In the case of a market that includes a royalty-based business model, such as entertainment, art, music, and other similar industries, the creators also suffer from getting paid. In such markets, if there is no competitor for the dominating player in the market, the creators have to adjust their expectations regarding royalties and other compensation, as they will have to agree to the terms and conditions of the dominating player.  Florence Pan cited a similar issue in her judicial order that the merger between two rivals in the US book market, Penguin Random House and Simon & Schuster, will affect the royalties of the authors. Generally, merger disputes occur while keeping customers in mind. But this merger dispute aims to offer US authors reasonable compensation for their work. While addressing the situation, the court used the examples of best-selling authors and the amount they were paid for their work. As Penguin Random House and Simon & Schuster are competitors to each other, they had a bidding war for getting the best-selling authors on board, thus offering a higher payment to these authors. The court also addressed that the current market is being run mostly by the top five publishers, which collectively have a market share of almost 90%. Along with this, almost half of the market is captured by Penguin Random House and Simon & Schuster. This puts the other competitors at much lower ranks, almost at half the market share of these two market players.  While arguing against the judge's decision to block the deal, the representatives of Penguin Random House and Simon & Schuster said that both the companies rarely got in between a bidding war, which affected the competition in any way. Both companies also claimed that the merger would benefit the authors at first, by offering a much wider reach in the market. A merger of the two companies will provide them with a bigger capital to work with, thus allowing them to offer publishing platforms to many new and aspiring authors. The justice department stated that the merger between these two companies would have changed the scenario of the US book market by deciding which books are getting published and how much the authors are getting paid. Hence, this case is being seen as a win for the Biden administration towards antitrust enforcement.