Exclusive-US sends subpoenas in Warner-Paramount antitrust review as probe picks up steam
Written by: Jody Godoy and Dawn Chmielewski
March 27 (Reuters) – The U.S. Department of Justice has issued a subpoena for its investigation into Paramount Skydance’s acquisition of Warner Bros. Discovery, three sources familiar with the matter told Reuters.
Investigations show the DOJ is moving forward with its investigation into the $110 billion acquisition that would combine two major studios with the companies’ streaming services and news operations. Hollywood and Wall Street are heavily interested in the high-risk deal, which would bring together some of the entertainment industry’s most enduring franchises but deal a blow to the movie and television business.
The DOJ is seeking information on how the deal would affect studio output, content rights and competition among streaming services, the sources said. The DOJ also asked how the acquisition might affect movie theaters, two of the sources said.
Subpoenas are an investigative measure and do not determine any consequences. If the Justice Department finds antitrust issues, it could file a lawsuit to block the deal or reach an agreement to resolve the concerns.
Acting Deputy Attorney General Omeed Assefi, who runs the Justice Department’s antitrust division, said in an interview with Reuters last week that Paramount “certainly will not get a quick approval” due to political factors.
Chief Legal Officer Makan Delrahim told an antitrust conference in Washington on Wednesday that Paramount expects authorities in many locations to review the deal.
Representatives for the DOJ, Paramount and Warner Bros. did not immediately respond to requests for comment.
The European Commission is actively engaging with third parties on the deal, two sources said. Canada has also contacted at least one company about the deal, one of the sources said. The California Attorney General’s Office is also willing to talk to third parties, two other sources said.
Paramount fought aggressively to win the deal from Netflix, betting on a quick closing of the deal and promising to pay Warner Bros. shareholders a quarterly “transition fee” of 25 percent per share starting in October if the deal didn’t close.
LABOR AND THEATER CONCERNS IN THE USA
One concern in the US is whether the merger could limit the number of buyers for movies and TV series.
Paramount sees $6 billion in cost “synergy” in the deal, which is usually code for mass layoffs. Paramount said it expects the majority of those savings to come from modernizing technology and real estate and other “enterprise-wide efficiencies.”
The Justice Department asked independent production companies about the impact of the proposed deal on competition, according to one industry veteran who asked to remain anonymous because of the sensitivity of the issue.
The Teamsters union expressed concern that the proposed merger “poses a direct threat” to jobs and called on the Department of Justice to block the deal unless enforceable safeguards are put in place to protect employment and output.
Such assurances have been negotiated before. After a failed attempt to block the merger between T-Mobile and Sprint, California signed an agreement that the combined company would maintain its California headcount for three years.
The organization that represents theater owners also issued a statement in late February saying studio mergers have historically led to fewer movies being produced.
“At this point there is no reason to believe the outcome would be any different,” said Cinema United President Michael O’Leary. “We continue to urge regulators to heed the lessons of the past.”
(Reporting by Jody Godoy in New York and Dawn Chmielewski in Los Angeles; Editing by Chris Sanders and Matthew Lewis)
