WASHINGTON (Reuters) -Penguin Random House, the world's largest book publisher, and smaller U.S. rival Simon & Schuster have scrapped a $2.2 billion deal to merge, Penguin owner Bertelsmann announced on Monday.
Bertelsmann, a German media group which owns Penguin, initially said it would appeal a U.S. judge's decision that said its purchase of Simon & Schuster would be illegal because it would hit authors' pay.
But Bertelsmann said in a statement that it "will advance the growth of its global book publishing business without the previously planned merger of Penguin Random House and Simon & Schuster."
Reuters reported on Sunday that the German company was unable to convince Paramount Global, Simon & Schuster's owner, to extend their deal agreement and appeal the judge's decision.
The U.S. Justice Department "is pleased that Penguin Random House and Simon & Schuster have opted not to appeal," Assistant Attorney General Jonathan Kanter said in a statement.
Judge Florence Pan of the U.S. District Court for the District of Columbia ruled on Oct. 31 that the Justice Department had shown the deal could substantially lessen competition "in the market for the U.S. publishing rights to anticipated top-selling books."
With the deal's dissolution, Penguin will pay a $200 million termination fee to Paramount.
Paramount said on Monday that Simon & Schuster was a "non-core asset" to Paramount. "It is not video-based and therefore does not fit strategically within Paramount's broader portfolio," the company said in a filing on the deal's termination.
Unlike most merger fights, which focus on what consumers pay, the Biden administration argued the deal should be stopped because it would lead to less competition for blockbuster books and lower advances for authors who earn $250,000 or more.
Penguin writers include cookbook author Ina Garten and novelists Zadie Smith and Danielle Steele, while Simon & Schuster publishes Stephen King, Jennifer Weiner and Hillary Rodham Clinton, among others.
The U.S. Justice Department filed a lawsuit aimed at stopping the deal in November 2021.
In hearings held in August, the government argued that the largest five publishers control 90% of the market, and a combined Penguin and Simon & Schuster would control nearly half of the market for publishing rights to blockbuster books, while its nearest competitors would be less than half its size.
The top five publishers are Penguin Random House, HarperCollins, Macmillan, Simon & Schuster and Hachette, with Walt Disney Co and Amazon.com Inc also in the market. HarperCollins is owned by News Corp.
(Reporting by Diane Bartz and Klaus Lauer; Editing by Tomasz Janowski, Rosalba O'Brien and Muralikumar Anantharaman)