U.S. asks judge to block book publisher merger as trial closes

© Reuters. The crest of the United States Department of Justice (DOJ) is seen at their headquarters in Washington, D.C., U.S. REUTERS/Andrew Kelly

By David Shepardson

WASHINGTON (Reuters) - The U.S. Justice Department on Friday urged a U.S. judge to block a $2.2 billion merger of two of the "Big Five" book publishers, saying "competition matters" and said the industry should not be treated differently from others.

The Justice Department last year sued to stop Penguin Random House, the world's largest book publisher and owned by German media group Bertelsmann SE & Co KGaA, from buying rival Simon & Schuster from Paramount Global.

U.S. District Judge Florence Pan is expected to issue a written decision in the coming months after both sides file post-trial briefs.

The largest five publishers control 90% of the market, and the combined company would control about half of it, the government said.

"This is not about a love of books," Justice Department lawyer John Read said in court. "There is no dispute that Penguin will be more dominant than it already is" if the merger succeeds.

Read said it is extremely difficult for small rivals to make inroads when the largest five publishers hold 90% of the market. "Even Amazon (NASDAQ:AMZN) has not succeeded," Read said of the online retailer which has scaled back publishing ambitions.

The government argued that the deal would lead to lower advances for authors who earn $250,000 or more, rather than citing the typical reasoning that consumers would pay more.

Penguin Random House Lawyer Daniel Petrocelli said the merger would have "enormous benefits" for readers and authors alike.

Best-selling author Stephen King, who testified during the three-week trial, took issue with pledges that the companies have made to allow Simon & Schuster imprints, basically different brands of books, to continue to bid against Penguin Random House independently for books.

"You might as well say you're going to have a husband and wife bidding against each other for the same house. It's kind of ridiculous," King said in court.

Petrocelli said in closing arguments that competition among imprints was "good for business" and "increases their chances of winning the book."

The government argued that diminished compensation would lead to fewer authors staying in the business and fewer stories being told. The publishers adamantly rejected the idea that the largest booksellers would be able to reduce advances if the merger is approved.