The U.S. Department of Justice’s Antitrust Division has cleared Paramount and Warner Bros. Discovery’s $110 billion merger.
In a statement on Friday, the DOJ said that the transaction is “not likely to result in harm to competition or American consumers” based on the evidence received over the course of an eight-month investigation.
It noted that it received over two million documents from over 80 parties, “substantial productions” of data, as well as extensive documents, data and advocacy from third parties across the media and entertainment ecosystem. State attorneys general also participated in the investigation, which allowed them to share information with the DOJ and vice versa, and to attend related depositions.
“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 DOJ said.
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The DOJ’s investigation focused on the merger’s impact to streaming video on demand, linear television and “studio development, production, or distribution of films for theatrical release.” It also reviewed concerns about the potential negative impacts to jobs in Hollywood and comparisons to the Disney/Fox transaction. Its findings are as follows:
- The combined firm is likely to increase streaming competition by offering consumers a “more robust competitive alternative to the larger SVOD offerings,” noting they have a “clear path to injecting additional competitive pressures across the media ecosystem to innovate and provide value to creators and consumers.”
- Non-SVOD video alternatives such as YouTube, Tik-Tok, or other social media products “do not appear to be competitive substitutes” under antitrust legal precedents, despite competing broadly for consumer attention.
- The merger is “not likely to harm competition in studio development, production, or distribution of films for theatrical release,” citing evidence of “extensive competition within the industry, which has generated greater output and diversity of film offerings, and is likely to continue unabated.”
- Competition for theatrical production and distribution has increased, noting that smaller studios have “turned to innovative content development and distribution strategies to challenge traditional assumptions regarding the conditions necessary for successful theatrical release.”
- The expressed labor concerns tied to the merger “do not raise actionable antitrust concerns.” It said that “substantial evidence does not suggest a likelihood of a reduction in output” because the “demand for creative workers and labor is correlated with the Parties’ incentives to maintain or expand output.”
- When comparing the merger to the Disney/Fox transaction, the DOJ said that Disney’s incentives with respect to total output of theatrical content “do not clearly align with a pure-play media business like Paramount,” noting that the former has been “focused historically on developing core franchise IP to monetize across a diversified business.”
- Disney “substantially increased its total spending on content production in the aggregate across its theatrical and streaming platforms” in the years that followed the Fox deal.
- The merger is “not likely to harm competition” for linear television given the “robust competitive landscape for live programming,” noting that streamers compete aggressively for live programming and put pressure on legacy linear and broadcast networks to secure it at higher costs. It also said that the merger “presents no competitive overlap” in the broadcast television segment.
- Paramount and Warner Bros. Discovery no longer licensing content to third parties “appears unlikely given the Parties’ historical practices of broadly licensing content.”
The regulator’s approval of the deal comes after the agency’s Hart-Scott-Rodino review period expired in February and CEO David Ellison met with DOJ officials in May to discuss the transaction. It also follows the deal securing shareholder approval in April.
A Paramount spokesperson told TheWrap it is grateful for the DOJ’s “thorough review,” 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,” the spokesperson continued. “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.”
Politico was the first to report the DOJ’s clearance of the deal.
Despite the DOJ’s approval, regulatory hurdles surrounding the Paramount-WBD merger remain.
The European Commission and the United Kingdom’s Competition and Markets Authority have formally launched reviews of the deal. Ellison previously met with U.K. Secretary of Culture, Media and Sport Lisa Nandy and other European regulators in January. The EC and the U.S. Federal Communications Commission are also reviewing the foreign investment in the deal, with those investors set to account for 49.5% equity of the combined company.
The EC has set an initial deadline of July 7 to decide whether to clear or order a Phase 2 investigation of the merger and a July 14 deadline on its foreign investment review. The CMA will decide on whether to launch a Phase 2 investigation by Aug. 7.
In addition to federal and international regulators, a group of U.S. state attorneys general led by California’s Rob Bonta are also reviewing the deal and preparing to take legal action to block the deal as soon as this month.
Bonta previously told TheWrap that “red flags are everywhere when you have a merger of this type” and that the states are prepared to “act timely,” but declined to provide a specific timeline for when a decision could be made.
Paramount previously disclosed that it was cooperating with the state AGs after receiving subpoenas, or civil investigative demands, from various states that focus on the investigation by the Department of Justice and the competitive effects of the merger. It does not disclose which or how many state AGs sent subpoenas.
A spokesperson for Bonta said that the merger remains under active investigation by the California DOJ and declined to provide any additional update.
In addition to the DOJ, Paramount has secured regulatory approval from the Australian Competition and Consumer Commission, subject to a 14-calendar day waiting period that expires June 23.
The New Zealand Commerce Commission also informed Paramount that it “does not intend to consider the Merger further,” adding that the “relevant clearance regime is voluntary, and the NZCC does not give informal clearances to parties.”
Additionally, the deal has received clearances from competition authorities in Saudi Arabia, Ukraine, Serbia and North Macedonia and foreign direct investment authorities in Germany, Slovenia, Belgium, Czechia, Italy, France and Romania.
The Paramount-WBD merger is on track to close by the end of the third quarter. In the event the transaction does not close by Sept. 30, WBD shareholders will receive a 25 cent per share “ticking fee” for each quarter until closing. In the event that the deal does not close at all due to regulatory matters, Paramount will pay WBD a $7 billion termination fee.
