US approval of Paramount/Warner Bros. deal surprised DOJ lawyers, report says - Ars Technica
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When the US Department of Justice approved Paramount Skydance’s proposed acquisition of Warner Bros. Discovery on Friday, a DOJ press release said “a rigorous eight-month investigation led by the [Antitrust] Division’s career staff” showed that the $111 billion deal would not harm competition or American consumers.
But according to The Wall Street Journal, the DOJ career lawyers who led that investigation “were leaning toward recommending a lawsuit challenging it on the grounds that the combination of the two movie studios would be anticompetitive and violate antitrust law.” DOJ senior leaders closed the investigation “before career staffers who were concerned about the acquisition had an opportunity to object, according to people familiar with the matter,” the WSJ reported.
Commenting on the report that the decision to allow the deal surprised staff investigators, Sen. Elizabeth Warren (D-Mass.) wrote that “the American people need to know if this merger was approved as a political favor. This reeks of corruption.”
Staff investigators hadn’t yet made a final recommendation to DOJ leaders but were questioning “how the combined company could meet its commitment to make 30 theatrical releases a year, given its increased debt load,” the WSJ wrote. Even if DOJ staff investigators had submitted a formal recommendation to challenge the lawsuit in federal court, leadership could have rejected the recommendation and approved the deal anyway.
Senior DOJ leaders “believed Paramount’s debt wasn’t a reason to challenge the merger,” the WSJ wrote. Federal Communications Commission Chairman Brendan Carr previously expressed support for the deal even though it needs an FCC waiver because it involves large equity stakes from the sovereign wealth funds of Saudi Arabia, the United Arab Emirates, and Qatar.
Ellison wins over Trump admin
US Associate Attorney General Stanley Woodward Jr. questioned the WSJ article’s sources in a post directed at Journal reporter Sadie Gurman. “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? Please let your anonymous sources know that my door is always open,” he wrote.
The WSJ’s anonymous sources indicated that a meeting with David Ellison helped convince DOJ leaders to approve the deal. “The Justice Department’s senior leaders believed that Paramount Chief Executive Officer David Ellison, son of Trump ally Larry Ellison, persuasively addressed many of the staff’s questions about the deal during a two-hour interview last month, according to people familiar with their thinking,” the article said.
We contacted the DOJ today and will update this article if it provides a response.
Warner Bros. previously had a merger agreement with Netflix and criticized the Paramount offer as “illusory” because it required an “extraordinary amount of debt financing.” Paramount continued its attempt at a hostile takeover and eventually won a bidding war. David Ellison reportedly told Trump administration officials that he would make big changes at the Warner-owned CNN, one of President Trump’s least favorite news sources.
The DOJ’s antitrust division used to be led by Trump nominee Gail Slater, who pushed for tougher enforcement. Last year, Slater issued an unusual statement criticizing a T-Mobile/US Cellular deal that was approved by the DOJ. Slater resigned from her post as assistant attorney general in February amid reports that she was forced to leave because of disputes with key Trump officials.
Slater’s replacement, Acting Assistant Attorney General Omeed Assefi, insisted in an interview with Reuters in March that the Paramount/Warner deal will not be fast-tracked for approval because of political factors. “The idea that somehow enforcement has been politicized is ludicrous,” he said.
DOJ says merger will boost competition
The DOJ announcement of its approval said the deal is likely to increase competition in the streaming video market “by offering consumers a more robust competitive alternative” to the larger offerings. The deal would combine Paramount+ with HBO Max.
The DOJ also said the merger is unlikely to harm competition in the market for development, production, and distribution of theatrical films. “Instead, the evidence shows extensive competition within the industry, which has generated greater output and diversity of film offerings, and is likely to continue...