The United Kingdom’s Competition and Markets Authority has launched a formal Phase 1 investigation into the $110 billion Paramount-Warner Bros. Discovery merger.
Per a notice posted on its website on Tuesday, the CMA’s investigation will begin on Wednesday. It will decide whether to refer the merger to a Phase 2 investigation by Aug. 7.
The move comes after the CMA launched a public comment period for interested parties to express their views on the impact the merger could have on competition in the UK, which concluded on April 27.
Under a Phase 1 review, the CMA would have 40 working days to decide whether the merger needs a more in-depth review. If it finds concerns with the merger, it will give the merging businesses five days to propose remedies to address its concerns.
The CMA would then have up to 5 more working days to consider the remedies. If none are offered or it does not accept them, the merger would be referred to a Phase 2 review. If if decides to accept remedies provisionally, it would publicly consult on them and consider any responses, with a deadline of 50 working days to make a decision.
If the review moves to Phase 2, an independent “inquiry group,” which consists of 3 to 5 people with a range of business, finance, economic and legal experience, would lead the investigation and makes the final decision within 24 weeks. In special circumstances, a Phase 2 investigation can be extended by up to eight additional weeks.
The inquiry group would then either clear the merger, consider remedies such as asset divestitures or a legal commitment from the merging businesses to behave in a certain way, or block the merger.
The update comes as the deal, which has already been approved by shareholders, is on track to close by the end of the third quarter, though Paramount is internally hoping to close the merger as early as July.
David Ellison met with U.S. Department of Justice officials in May to discuss the transaction. The DOJ’s Hart-Scott-Rodino review period expired in February, though the regulator can still get involved at anytime in the process. Paramount has also asked the FCC to approve its foreign investment in the deal, with those investors set to account for 49.5% of the equity of the combined company.
Additionally, Ellison met with U.K. Secretary of Culture, Media and Sport Lisa Nandy and other European regulators in January as he looks to get the Warner Bros. deal cleared by regulators. The European Commission has launched its own review of the transaction, with an initial deadline set for July 7.
In addition to federal and international regulators, a group of state attorneys general are preparing to file a lawsuit to block the deal as soon as this month, two individuals familiar with the matter previously told TheWrap.
California Attorney General Rob Bonta, who is investigating the deal, 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.
In May, Paramount said it was cooperating with various state AGs who sent them subpoenas, or civil investigative demands, focusing on the DOJ investigation and the competitive effects of the merger. At the time, it did not disclose which or how many state AGs sent subpoenas.
“Opposing this deal means opposing expanded consumer choice, new opportunities for creators and workers, and greater competition throughout the creative ecosystem—the opposite of what antitrust law is meant to achieve. It also means giving entrenched incumbents like Netflix an advantage they do not deserve,” a Paramount spokesperson told TheWrap on Friday. “We will continue to fight against any attempt to derail a deal that plainly benefits consumers, creators, and the industry as a whole.”
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.
