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Government calls final witness in antitrust trial over Penguin Random House-Simon & Schuster merger

“The way that Penguin was integrated into Random House should not be the model, in my view, of how a Penguin Random House acquisition of Simon & Schuster should be handled if we want to maintain a robust marketplace for authors,” longtime literary agent Christy Fletcher said Wednesday.

(CN) — Taking the stand as the government’s final witness in its antitrust case aiming to block Penguin Random House from acquiring Simon & Schuster, a longtime literary agent said Wednesday that she is concerned the $2.175 billion merger could lead to less pay for authors.

Testifying on the seventh day of the federal antitrust trial in Washington, D.C., Christy Fletcher, founder of Fletcher and Co., said she is worried the deal could lead to downward pressure on book advances for authors.

“With fewer bidders,” she said, “it’s hard to drive the advances up.”

The 20-year literary veteran was asked about a thread of her tweets related to the merger from 2020, including a tweet about Random House’s acquisition of Penguin in 2013.

“The way that Penguin was integrated into Random House should not be the model, in my view, of how a Penguin Random House acquisition of Simon & Schuster should be handled if we want to maintain a robust marketplace for authors,” she said.

Recalling post-merger bids within Penguin Random House, Fletcher said there were times when, “unless there was a third-party bidder, essentially, an auction could no longer proceed… if it was only imprints within Penguin Random House.”

And while Fletcher said she does not know if she experienced a downward advance scenario after the Penguin-Random House merger, she was worried the current proposal could create “downward pressure” on author advances if the acquisition of Simon & Schuster is rolled out the same way.

“My concern was that if Simon & Schuster was incorporated as a division of Penguin Random House in same way… the bidding process would be treated similarly, meaning they would not compete against each other unless there was a third-party bidder in the mix,” she said.

 “It’s the primary concern.”

Fletcher’s comments come after Macmillan Publishing CEO Don Weisberg testified earlier this week that his “guess” is that the merger will lead to less competition, which “will bring the advance levels down.”

And bestselling author Stephen King took the stand voluntarily for the government last week, arguing that the promise of his own publisher Simon & Schuster to allow its agents to keep bidding under the merger, “is a little bit ridiculous if you really think about it."

“You might as well say you’re going to have a husband-and-wife bidding against each other for the same house,” King said.

According to the Department of Justice, the deal would turn Penguin Random House into a “monopsony” — a situation in which there is only one buyer in a given market — in violation of federal antitrust laws. 

With Penguin Random House as the top publisher in the U.S. and Simon & Schuster ranking fourth, U.S. Attorney General Merrick Garland warned in 2020 that, “American authors and consumers will pay the price of this anticompetitive merger — lower advances for authors and ultimately fewer books and less variety for consumers.” 

Meanwhile, Simon & Schuster CEO Jonathan Karp and Penguin Random House CEO Markus Dohle defended the merger when called to testify last week.

U.S. District Judge Florence Pan, an Obama appointee, also heard testimony on Wednesday from the defense’s first witness, Jennifer Rudolph Walsh, executive Vice President of the William Morris Agency's Worldwide Literary Department.

And when Gallery Books Vice President Jennifer Bergstrom was called to testify, defense counsel asked her about an “allegation” in the case that if the merger goes through, publishers “like yourself” will be able to identify anticipated top book sellers and target them to reduce book advances.

“I struggle to identify what those top sellers are,” she said. “And even if I could, no agent or author would want to work with me if they knew I couldn’t compete – so it would hurt my business.”

The bench trial is expected to resume on Thursday with video testimony from Jonathan Presser, vice president of W.W. Norton & Company.

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Categories / Business, Consumers, Courts, Government

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