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Simon & Schuster CEO defends merger with Penguin Random House

"The idea that any publisher can make a book a bestseller is false," said Jonathan Karp, CEO of Simon & Schuster.

WASHINGTON (CN) — A “substantial bonus” for the CEO of Simon & Schuster hinges on the sale of the major publisher, but he insisted Wednesday that it has no impact on his support for the company’s proposed merger with the nation’s top publisher, Penguin Random House. 

Testifying against the government’s attempt to block the $2.175 billion dollar deal, Jonathan Karp said the bonus is a “standard provision” of the CEO contract he inked in November 2020, about nine months after Simon & Schuster went up for sale in March. 

“It’s not something I asked for,” Karp said. “And it’s not impacting my testimony.” 

Prosecutors brought up a March 2020 email, in which Karp told an unnamed bestselling author he is “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.” 

Karp, who got his start in the publishing industry in 1989 as an editorial assistant at then-Random House, downplayed the comment as “taken out of context,” insisting he was “responding humorously” to an ironic remark. 

Asked what he knew about Justice Department antitrust laws when he made the comment in March 2020, Karp said he was “almost entirely ignorant.” 

Prosecutors then grilled him about a different email to bestselling author John Irving, in which Karp said he was “delighted” that Simon & Schuster would be sold to Penguin Random House. 

Asked if he meant what he said in that email, Karp said, “I still mean it.” 

And when questioned if he thought, at the time, that the transaction would harm authors in any way, the CEO replied: “definitely not.” 

At one point during Karp’s testimony, U.S. District Judge Florence Pan quizzed him about the impact the merger would have on book advances, which is a focus in the Justice Department’s case. 

With Penguin Random House as the top publisher in the U.S. and Simon & Schuster ranking fourth, U.S. Attorney General Merrick Garland warned 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.” 

The Obama-appointee asked Karp about well-established authors’ leverage with publishing companies in comparison to up-and-coming authors. 

“A lot of the success depends on events that are out of your control,” he said. “The idea that any publisher can make a book a bestseller is false.” 

But the judge pointed out that the company is telling clients they can “better their chances” of having a bestseller if they sign a book deal with Simon & Schuster because it can “create buzz” through its distribution networks. 

Karp, however, said that “a lot of the time — it’s like taking credit for the weather.” 

“You can’t really make those assurances,” he said, adding that he believes it comes down to a “personal connection or a spark or a shared sensibility” between the editor and the publisher. 

The Simon & Schuster CEO's testimony began Tuesday and wrapped up on Wednesday, the third day of what is expected to be a three-week trial.  

The judge also heard parts of video testimony on Wednesday from Michael Jacobs, CEO of ABRAMS book publishing company, and Liate Stehlik, president of The Morrow Group, which is part of HarpersCollins Publishers. Both declined to give an opinion on the deal. 

On Tuesday, bestselling author Stephen King voluntarily testified for the government, arguing that the merger would be "bad for competition."

The trial is expected to resume on Thursday with testimony from Markus Dohle, CEO of Penguin Random House. 

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Categories / Business, Consumers, Courts

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