The Hollywood group Paramount is temporarily suspending the planned purchase of its competitor Warner Brothers after competition lawsuits from twelve US states and the screenwriters’ union. The takeover, worth more than $100 billion, will only move forward after a decision on the lawsuits or by June 1, 2027 at the latest.
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This emerges from court documents. The legal dispute is also relevant because critics of US President Donald Trump’s administration fear that the Warner Brothers news channel CNN could lose editorial independence under the Paramount umbrella.
A judge had initially suspended the planned deal until mid-August in order to decide on the demand of the democratically governed states and the screenwriters for an injunction against the completion of the takeover. In doing so, she signaled that she is taking competition concerns seriously. Because the takeover has now been suspended, the demands for an interim injunction are invalid for the time being. The separate lawsuits filed by the states and the screenwriters have since been consolidated into one lawsuit.
Paramount has to pay from October
The delay could be quite expensive for Paramount. To convince Warner shareholders, Paramount promised them additional payments for each quarter after September 30 of this year until the acquisition was completed. This is likely to cost the company around $650 million per quarter.
The irony: Paramount advertised to Warner that the deal between the two companies would be much less problematic in terms of competition law than a takeover by the streaming giant Netflix, which was ultimately eliminated. Warner and Paramount set a deadline of June 4 next year to complete the deal. In the event that the takeover falls through, Paramount promised Warner a contractual penalty of seven billion dollars.
Trump supporters beat out Netflix
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Paramount is backed by the family of software billionaire Larry Ellison, who is known as a Trump supporter. Warner originally decided to sell its streaming and studio business to Netflix last year. But Paramount didn’t give up and made a higher bid for the entire Warner Bros. Discovery company, including television networks such as CNN. The deal is now worth around 111 billion dollars (currently 98 billion euros).
Trump critics point out that the Paramount broadcaster CBS adopted a friendlier tone towards the US government after the Ellisons took over. Trump had said several times that it was particularly important to him that the station also change hands in a Warner deal. Critics of his policies also have their say on CNN – and the president’s claims are often fact-checked.
States see competition problem
The states leave the CNN case out of the lawsuit and argue, among other things, that the merger will distort competition for popular films and thereby put cinemas under pressure. From the judge’s perspective, they could at least demonstrate that Paramount and Warner together had a significant market share in the business.
A decisive factor for the success of the states, including California with the most important industry location Hollywood, will be whether they can assert a special market definition in court. They primarily look at the competition for expected box office hits that gross more than $100 million. They argue that these are particularly important for film theaters to ensure their existence. Accordingly, greater market power of a single player in this area would be anti-competitive and harmful for cinemas – and ultimately also for viewers. Paramount says this market segmentation does not correspond to reality.
Green light from Washington and Brussels
The US government approved the billion-dollar deal without any conditions. The Justice Department concluded that the merger would not harm competition or US consumers – this applies to both the TV and streaming business and film production. The EU Commission approved the takeover on the condition that Paramount withdraws from the joint distribution of films to cinemas in Europe with Universal Pictures.
(nen)
