US Justice Department clears Paramount’s acquisition of Warner Bros

By Dawn Chmielewski and Jody Godoy, Reuters

• Deal was expected to be cleared by Justice Department
• California, other states preparing to sue to block the deal
• Paramount has said acquiring Warner Bros poses no antitrust problem

Paramount Skydance Corp’s planned US$110 billion acquisition of Warner Bros Discovery has been cleared by the US Justice Department’s Antitrust Division.

The department said it spent eight months evaluating how the NZ$188b transaction would affect streaming video services, traditional television and the film industry, weighing input from across the entertainment industry. It found the deal was unlikely to harm competition or consumers.

“The extensive investigatory record reviewed by the division suggests that the impact of the transaction will be to increase competition across the media and entertainment ecosystem, with benefits for American consumers and workers,” the Justice Department said in a statement.

Paramount CEO David Ellison’s father, billionaire Oracle co-founder Larry Ellison, has cultivated ties with President Donald Trump, and the company has hired former Trump officials.

Assistant Attorney General Omeed Assefi had said that politics would “absolutely not” drive the department’s review of the transaction.

Paramount issued a statement thanking the department for its review, which it said would allow the company to better compete in an industry defined by an intense scramble for audiences, talent, technology and investment.

“We remain focused on completing the transaction as soon as possible and delivering its benefits to consumers, creators and the entertainment industry as a whole,” Paramount said.

The Federal Communications Commission has not yet approved a petition seeking approval for foreign interests, including Gulf sovereign wealth funds, to own up to 100 percent of the debt in the proposed deal.

Democratic senators raised concerns about Middle Eastern sovereign wealth funds and Chinese companies taking part. They noted that it involved sovereign wealth funds from Saudi Arabia, Qatar and Abu Dhabi investing in a company that would control CBS stations, as well as major cable news operations including CNN. They also cited media reports that China’s Tencent may take part.

The family of Paramount CEO David Ellison will continue to control voting shares. Paramount said in a filing before the announcement that the “new foreign investors, which will receive only non-voting equity, will not have any ability to influence the company’s editorial decision-making”.

The department said it reviewed more than two million documents obtained from 80 sources in evaluating the deal’s impact on various segments of the entertainment industry. It concluded that a combined Paramount+ and HBO Max would create a stronger alternative to larger streaming services and increase competition to the benefit of consumers.

The deal was unlikely to harm the traditional television business, where there was vigorous competition for live sports, news and political commentary, the department found.

Competition in the theatrical business was similarly more robust, it said, as Paramount and Warner Bros competed not only with traditional Hollywood rivals but with smaller independent studios such as A24 and newcomers such as Apple and Netflix, which had signalled continued interest in theatrical releases. Since the deal was announced, theatrical production had increased, it found.

The department dismissed comparisons to the US$71 billion merger of Walt Disney and Twenty-First Century Fox, which closed in 2019, a year before the Covid-19 outbreak triggered dramatic changes in audience consumption patterns. Disney had substantially increased its spending on content in the years since, the department found.

However, several in Hollywood - including actors, directors, writers and producers - have expressed concern that the merger would result in fewer jobs and less diversity of storytelling.

California, New York and other US states are preparing a lawsuit to block the deal, sources familiar with the matter told Reuters last week.

California Attorney General Rob Bonta posted on X that the proposed merger of Warner Bros and Paramount “remains under investigation by my office”.

- Reuters