CMA launches merger investigation into PRH and S&S deal

CMA launches merger investigation into PRH and S&S deal

The UK's Competition & Markets Authority (CMA) has launched a merger investigation into Penguin Random House owner Bertelsmann's acquisition of Simon & Schuster.

Last November, Bertelsmann announced it had struck a $2.2bn deal to buy the publisher from ViacomCBS. The merger would see Simon & Schuster continue to be managed as a separate publishing unit under the Penguin Random House umbrella.

In an announcement on 22nd March, the CMA said it would examine whether the deal fell under the merger provisions of the Enterprise Act 2002 and whether it “may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services”.

The CMA is inviting comments on the deal from any interested party by 7th April. It will then announce its decision on whether to refer the merger for a further investigation by 19th May.

A spokesperson for PRH UK said: “We announced last November that Penguin Random House is purchasing Simon & Schuster from ViacomCBS. The announcement stated that regulatory filings would be made. We have notified the acquisition of Simon & Schuster to the UK Competition and Markets Authority as is normal in such circumstances and we are working with the CMA in its review.”

The CMA formally starts investigations once it receives a complete merger notice and believes it has sufficient information to do so. It can be notified voluntarily or call the merger in under its own powers. The competition watchdog can investigate any merger where the company being acquired has a UK turnover over £70m or the companies have a 25% share of the same goods or services.

Bertelsmann said in a statement it still expected the deal to close in 2021, pending regulatory approvals.

Concern has been particularly raised over the deal in the US, with writers' groups including the Authors Guild calling for the Department of Justice to block it. They warned the move would bring "well more than half of key US book markets under the control of a single corporation, which poses a variety of potential threats to freedom of speech and democracy in the United States”.

News Corp c.e.o. Robert Thomson, who was also interested in acquiring S&S, previously warned the deal would be a "serious antitrust issue" for the industry and create “a book behemoth”.

However, Bertelsmann has insisted the deal does not pose competitive concerns, citing figures from the Association of American Publishers that the combined share of PRH and S&S in the US would be below 20%.

Markus Dohle, chief executive of Penguin Random House, told The Bookseller last year he was confident the deal would go through, insisting: "We are much smaller than people think we are."

In 2019, S&S in the UK was the ninth biggest publisher in BookScan sales, at around £27m. In the UK, based on 2019 numbers, that would take the two firms' combined BookScan sales to £374m.

A planned merger between Cengage and McGraw Hill fell through last year following opposition from the Department of Justice in the US and the UK's CMA.