DD says Paramount Skydance’s merger with Warner Bros. Discovery will not harm competition, consumers

(CN) – An investigation by the US Department of Justice into Paramount’s proposed acquisition of Warner Bros. Skydance. Discovery has determined that the major Hollywood media merger is not likely to harm competition in the industry or be harmful to consumers.

The agency said Friday it closed its investigation into the deal, with regulators in its antitrust division concluding that the merger’s impact “will be to increase competition throughout the media and entertainment ecosystem, with benefits for American consumers and workers.”

David Ellison’s Paramount Skydance reached a deal to acquire Warner Bros. Discovery in late February. Paramount’s victory came after months of negotiations and a rival offering from Netflix that ultimately failed. Paramount was acquired from Skydance last year.

The companies claim the merger will be good for growth in the industry and give consumers access to more content, especially if the HBO Max and Paramount+ libraries are combined. But critics have decried what further consolidation could mean in an industry already checked only by a few key players.

Among the potential market impacts of the merger, regulators weighed whether the deal would hurt competition in video streaming. They concluded that the merger is likely to increase competition by giving customers a “stronger competitive alternative” to larger video streaming alternatives.

The agency also determined that YouTube, TikTok and other social media portals that also offer streaming video content “do not appear to be competitive substitutes here under well-established antitrust legal precedents, although they compete extensively for consumer attention.”

Regulators also concluded that the merger is not likely to harm competition for so-called linear television, citing strong competition for live programming.

On the Hollywood competition issue, regulators found that the combination of the two major movie studio operators is not likely to harm competition in the studio’s development, production or distribution of films for theatrical release.

“Instead, the evidence points to extensive competition within the industry, which has generated greater production and diversity of film offerings and is likely to continue unabated,” the regulators concluded.

Thousands of actors, directors, writers and other industry professionals have spoken out “undoubted opposition” on the Paramount deal, arguing that further consolidation will lead to job losses and fewer choices for filmmakers and moviegoers. Many lawmakers have similarly sounded the alarm.

Ellison, the chief executive of Paramount Skydance, has vowed to keep Paramount and Warner Bros. as independent movie studio operations and pledged to release a combined 30 movies a year in theaters. Paramount has acknowledged that the merger will also lead to significant cuts due to duplication.

While the Trump administration’s Justice Department has now confirmed it will not challenge Paramount’s $81 billion acquisition of Warner, the mega-merger is still being reviewed by other regulators both in the US and abroad.

California Attorney General Rob Bonta has been particularly vocal about the transaction, and he said his state is investigating it.

Beyond the US, European regulators are also scrutinizing the deal. The European Commission has listed July 7 as a deadline for its review. And the UK’s Competition and Markets Authority is aiming to make an initial decision on its investigation by early August.

Paramount and Warner previously said they hoped to close their deal sometime in the third quarter of this year. And that clock is ticking. Paramount pledged to give shareholders some compensation if the acquisition doesn’t close by Sept. 30 — in the form of a “flat fee” of 25 cents per share for each quarter after that date. It has also agreed to a $7 billion regulatory termination fee.

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By ALEX VEIGA AP Business Writer