Paramount‘s acquisition of Warner Bros. cleared a major hurdle on Friday afternoon. The Antitrust Division of the U.S. Department of Justice has released a statement saying that it has completed its review of the deal and will not challenge the merger.
“The legacy of these transactions illustrates the challenges that arise when the commercial rationale for a deal lacks clear alignment with competitive incentives of the acquiring firm or the competitive evolution of the marketplace. In technology-driven industries, the disruptors of the recent past may quickly become the entrenched monopolists of the present day,” the statement read. “It is with this historical experience and present enforcement sensitivity to the contestability of dynamic markets that the Division conducted a thorough investigation of the proposed transaction to assess whether the proposed transaction presented any harm to competition.”
The statement goes on to say that not only did the investigation conclude that the merger, which would see two of Hollywood’s largest legacy studios combine, would not form a monopoly — it also predicts that the outcome will be an improvement over current conditions.
“The extensive investigatory record reviewed by the Division suggests that the impact of the transaction will be to increase competition across the media and entertainment ecosystem, with benefits for American consumers and workers,” the statement read.
The lengthy statement cites a review of three major categories — streaming, linear television, and theatrical films — for potential anticompetitive behavior if the deal closes. In all three categories, the department concluded that there is nothing to worry about.
On the streaming side, the statement explained that consumers will benefit from the stronger alternative to Netflix that will presumably be formed by the combining of HBO Max and Paramount+.
“Following Netflix’s pioneering role in the emergence of SVOD almost twenty years ago, large tech firms like Amazon, and later legacy media firms like Disney, entered and built SVOD platforms to compete for and meet shifting consumer preferences for scripted content and digital distribution. By comparison, the Parties are historically late entrants into SVOD with less customers subscribing to Paramount+ and Warner Bros.’ HBO Max and discovery+ offerings, compared to those of the three largest streamers today,” the statement reads. “The evidence reviewed and carefully analyzed by the Division indicates that, post-merger, competition in SVOD is not likely to be harmed. To the contrary, the combined firm is likely to increase competition by offering consumers a more robust competitive alternative to the larger SVOD offerings.”
The statement goes on to cite alternatives like YouTube and TikTok as other offerings that consumers can turn to that Paramount would not control after the merger.
On the film side, the report cites the recent success of independent films at the box office as evidence that the market for films is competitive and not controlled by legacy studios.
“Recent box office successes since the announcement of the transaction show that a studio’s legacy does not determine whether it can succeed at developing, producing, or distributing in the domestic box office today: including, for example, Amazon MGM (‘Project Hail Mary’), A24 (‘Backrooms’), Lionsgate (‘Michael’), Blumhouse (‘Obsession’),” the statement read. “These disruptive industry developments suggest a potential inflection point in the evolving competitive landscape for theatrical production and distribution, supporting the Parties’ incentive to continue to generate and distribute content.”
While the deal is not officially closed, a regulatory battle was seen as one of the last major obstacles after Paramount shareholders approved the deal in April.
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