US Department of Justice approves Paramount-WBD merger

The US Department of Justice’s (DoJ) antitrust division has given the greenlight to Paramount’s $111bn acquisition of Warner Bros Discovery (WBD) after ruling the proposed transaction ”is not likely to harm competition or American consumers”.

Announcing the decision on Friday, the DoJ said, “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 […] These investigative efforts all led to the same conclusion: the film and television industry is highly dynamic, and the proposed transaction is not likely to harm competition or American consumers.”

In a separate statement Paramount said, “We are grateful for the Department of Justice’s thorough review of this transaction, as well as the work of the other agencies that have completed their reviews and provided clearance to date. This deal is pro-competitive, resulting in a stronger company better positioned to compete against dominant technology platforms in an industry increasingly defined by intense competition for audiences, talent, technology, and investment.”

DoJ division conducted “rigorous” eight-month investigation 

The DoJ’s antitrust division noted that it conducted a “rigorous” eight-month investigation and reviewed more than two million documents that began when Netflix had a proposed deal on the table to acquire Warner Bros’ studios and streaming businesses, before the WBD board accepted Paramount’s $111bn offer in February.

Noting that the review “benefited from the comparative perspectives and contrasting visions presented in these competing proposals”, the DoJ said Warner Bros was “familiar to the division” after the AOL-Time Warner deal in 2001, the AT&T-Time Warner merger in 2018, and the Warner Bros-Discovery transaction in 2022.

In terms of development, production and distribution of theatrical releases the division ruled that “extensive competition” within the industry was “likely to continue unabated” as activity increased. The example was given of non-legacy companies like Lionsgate and A24 making films “with significant budgets above $100m” such as Hunger Games prequels and the upcoming Elden Ring video game adaptation. The division also name-checked Netflix’s Narnia film, although the point was somewhat specious as Netflix is not a reliable supplier of films to the theatrical market place.

The division shot down comparisons to Disney’s $71.3bn acquisition of the entertainment assets of 21st Century Fox in 2019 cited by critics as an example of the reduced theatrical film output of a combined company. It argued that the Disney transaction closed on the cusp of the pandemic which brought about “dramatic changes in studio output and audience content consumption patterns”, while Disney went on to increase its content spend across theatrical and streaming in ensuring years.

Paramount CEO David Ellison has pledged to release a combined 30 films a year from Paramount and Warner Bros with a minimum 45-day exclusive theatrical window. The division concluded: “[T]he substantial evidence does not suggest a likelihood of reduction in output. That is because the demand for creative workers and labour is correlated with the parties’ incentives to maintain or expand output. Thus, the expressed labor concerns do not raise actionable antitrust concerns.”

In terms of streaming, the division described HBO Max, Paramount+ and Discovery+ as “late entrants into SVoD” compared to market leader Netflix, Prime Video and Disney+ and said combining the Paramount-WBD streamers was “likely to increase competition by offering consumers a more robust competitive alternative to the larger SVOD offerings”. The division also said it believed Paramount would continue to license content to other streamers.

The DoJ also noted that with regard to linear television, an area that is in secular decline, the transaction would create “no competitive overlap” and cause no harm to competition “given the robust competitive landscape for live programming”.

Paramount leadership have indicated they expected the transaction to close by 30 September pricing WBD at $31 per share. Should it take longer to close, a “ticking fee” will kick in whereby Paramount must pay WBD an additional $0.25 per share each quarter until the merger is consummated. If the deal fails to close by March 2027, either party can walk away.

Opposition to merger and ongoing investigations 

However the merger is not yet a fait accompli. State attorneys-general led by California and New York are expected to file a lawsuit against the merger in the coming weeks. The UK’s competition regulator has launched its inquiry and will decide by August 7 whether or not to proceed with a deeper probe.

The European Commission will decide on 7 July whether it will allow the transaction to proceed with ‌or ⁠without remedies, or open a full-scale investigation. The body is additionally investigating the $24bn contributed to the transaction costs from Saudi Arabia’s Public Investment Fund, the L’Imad Abu Dhabi sovereign wealth fund, and Qatar Investment Authority’s QIA. Regulators in Australia and New Zealand, as well as other competition authorities around the world, have approved the deal.

Paramount CEO David Ellison (pictured) and his father and billionaire Oracle co-founder Larry Ellison are close to US president Donald Trump and the transaction has drawn criticism across Hollywood and earlier this year sparked an open letter that has been signed by more than 5,000 industry figures.

On Friday Democratic Senator Elizabeth Warren posted on X: “This is terrible news for every American who doesn’t want Trump-aligned billionaires to control what they watch and how much they pay. The Paramount-Warner Bros deal has reeked of corruption and influence-peddling. This fight isn’t over. State AGs must block this.”

This article originally appeared in our sister title ScreenDaily