WASHINGTON (CN) — A federal judge threw out testimony on Wednesday from Penguin Random House’s senior vice president after the government pointed out that the data he referenced, while testifying about his company's $2.175 billion dollar bid to buy Simon & Schuster, was not properly verified.
Granting the government’s motion to exclude Manuel Sansigre’s Tuesday testimony on “efficiencies” data, U.S. District Judge Florence Pan said using a data model from November 2020 for a federal antitrust trial nearly two years later is problematic.
It is impossible to know “what the post-pandemic world” will be like, she said, and while many of the projected efficiencies in the November 2020 data model may be independently verifiable — none were, which violates the Justice Department’s horizonal merger guidelines.
The data at issue, she noted, also contains rejected efficiencies that can never be verified, as well as data inputs that have not been updated.
According to defense court filings, the data suggested the merger will increase efficiencies, thereby permitting the newly merged company to pay authors more — which it claims will have a domino effect on pushing other publishers to increase author pay as well.
The claim runs counter to U.S. Attorney General Merrick Garland’s assertion 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.”
While the Obama-appointed judge believed Penguin Random House’s internal data verification process to be “rigorous,” she found the justification for using the nearly two-year-old data to be “unpersuasive.”
“It cannot substitute for independent verification,” she said.
And it’s not up to the court to fix, she said, because it does not have the capability, time or resources to complete the necessary data check.
Because Sansigre's testimony is not based on sufficient facts and data as required by expert witness testimony Rule 702, the judge ruled it must be excluded.
Wednesday's ruling came on the 12th day of the federal antitrust trial, during which the judge also heard testimony from defense expert witness Edward Snyder, a professor of economics and management at Yale.
While on the witness stand, Snyder dodged questions from prosecutors about whether competition for manuscripts is better with more than one bidder.
“This is a question out of the 1960s,” he said. “It’s simply a numbers game.”
Without knowing how many agents are involved and what the relative constraint is, Snyder said he cannot answer.
“You have to not ask this general question,” he told the prosecutor. “You have to put it in this industry context.”
And when probed to give a general answer as to whether it is better to have more bidders in any bidding situation, the professor did not budge.
“I can’t answer that question without the specific bidding conditions,” he said.
Snyder’s testimony comes two days after Madeleine McIntosh, the U.S. CEO for Penguin Random House, testified that she does not have the data to answer the judge’s question about the allegation that Penguin Random House’s trade book market share would be triple that of HarperCollins if Christian book sales were removed from the calculation.
According to the Justice Department, the Simon & Schuster acquisition 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.
During the first week of trial, bestselling author Stephen King took the stand voluntarily for the government, arguing that the merger would be “bad for competition.”
Last week, Macmillan Publishing CEO Don Weisberg testified that his “guess” is that the merger will lead to less competition, which “will bring the advance levels down.” Longtime literary agent Christy Fletcher voiced similar worries on the stand.
The bench trial is slated to resume Thursday with testimony from Snyder. Closing arguments are expected to begin on Friday.
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