A group of career staffers inside the Justice Department who were concerned about the Paramount-Warner Bros. Discovery merger were left surprised by the regulator’s clearance of the $110 billion deal.
The Wall Street Journal reported that staff investigators who had spent eight months scrutinizing the deal were leaning towards recommending a lawsuit to challenge the merger on the grounds that combining two movie studios would be anti-competitive and violate antitrust law.
However, senior DOJ officials ultimately signed off on the deal before they could make a final recommendation, determining it was “not likely to result in harm to competition or American consumers.”
Sources familiar with the matter told WSJ that they believed Paramount CEO David Ellison persuasively addressed many of the staff’s questions about the deal during a two -hour interview last month. Those questions included how the combined company would meet a commitment to release 30 films in theaters per year given its increased debt load.
The senior leaders ultimately believed that the debt wasn’t a reason to challenge the merger and no one on the investigative team spoke up to leadership voicing support for filing a lawsuit, per the Journal.
Upon a request for comment, representatives for the DOJ directed TheWrap to Associate Attorney General Stanley E. Woodward, Jr.’s tweet Monday expressing incredulity at the WSJ reporting.
“A team of career lawyers never reached out to anyone in their leadership chain of command to express this, but instead reached out to you?” he wrote, retweeting the Journal’s journalist Sadie Gurman. “Please let your anonymous sources know that my door is always open.”
The regulator’s approval of the deal comes after the agency’s Hart-Scott-Rodino review period expired in February. It also follows the deal securing shareholder approval in April.
A Paramount spokesperson told TheWrap on Friday it was 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.”
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 merger 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. In an X post on Friday, Bonta said that the merger is “not a done deal and remains under investigation” by the California DOJ.
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.
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.
