Paramount, state AGs defend settlement over Warner merger

The parties must respond to a letter from Senator Cory Booker calling for an independent review by Monday.(CN) — A federal judge on Thursday questioned the settlement between state attorneys general and Skydance-owned Paramount over the $110 billion merger of the media giant and Warner Bros. Discovery.“There’s a lot of interest. You know this, you’ve known this,” said U.S. District Judge Araceli Martínez-Olguín. Held on Zoom, the hearing had 650 viewers in attendance.The Joe Biden appointee said she wanted to make sure Monday’s settlement, which was on Monday, was “not the result of collusion but done at somewhat arm’s length.”Paula Blizzard with the California Attorney General’s Office told the court the settlement was the result of substantial negotiations between all 12 states involved in the lawsuit and Paramount, and that the states believe it was procedurally fair.“We absolutely recognize this merger has engendered a large amount of controversy and commentary and feelings and concerns on a whole host of issues,” Blizzard said. “A lot of these are outside of antitrust — they reflect the country’s very broad political and philosophical divides, concerns about the state of the news media, people’s relationship to big companies and consolidation.”Blizzard said the states listened to the voices but focused on the antitrust legal issues. Martínez-Olguín asked how those issues were addressed by the settlement.The settlement is proposed to last for five years, and the states explained they were cautious about permanently blocking the merger, as Warner would likely find another company to merge with and end up back in court.“Sometimes, we say ‘Here are some remedies that address some harms we see, but not completely block the merger,’” Blizzard said. “We believe we have five years of remedy that will remove the competitive harms we see.”Some of those remedies include requiring the merged companies to continue to separately negotiate with their basic cable channels and honor previously established collective bargaining agreements. The merged companies are also required to spend at least $300 million more each year in domestic production and produce 30 movies for the first two years of the deal, then 32 movies annually for the next three years.If the merged companies fail to meet their movie quotas, they must divest ownership in Miramax Studios. If they fail to meet their cable commitments, they must divest ownership of certain basic cable channels, including VH1, Comedy Central, Smithsonian, BET and others.“The divestiture of Miramax is supposed to be something Paramount does not want,” Blizzard said. “It is a deterrent provision.”“It’s an important studio for us; we do not want to divest it,” said Joshua Holian, attorney with Latham & Watkins representing Paramount.Martínez-Olguín declined to rule from the bench, instead asking the parties to consider a letter from Senator Cory Booker and respond to it by Monday afternoon. The New Jersey Democrat urged the court to subject the settlement to an independent public interest review before entering it.“The decree does not address the core of the case — that the merger is anticompetitive and will eliminate jobs,” Booker wrote.The news of the agreement on Monday followed reports that Paramount CEO David Ellison threatened to move the company’s headquarters out of California if the states did not drop their challenge to the merger. California explained the settlement was not influenced by that.“Our antitrust case does not live or die whether or not we’re threatened or blackmailed,” Blizzard said.Paramount denied that it had in any way attempted to blackmail California, characterizing the potential move as a business consideration.Martínez-Olguín said she would return a decision in due time.Paramount reached a deal to acquire Warner in late February, with both companies contending the merger would benefit consumers and encourage growth in the industry.A coalition of states led by California filed suit against the companies on July 13, nine days before the merger was originally set to be finalized. The states argued the $110 billion purchase of Warner by Paramount violated the Clayton Antitrust Act as it would create a powerhouse that would control about a third of theatrical motion pictures and almost a third of basic cable programming.On July 14, the Writers Guild of America also sued the companies over the merger’s anticompetitive effects on film industry employees.The Writers Guild of America similarly announced Monday that it had settled with Paramount, with an agreement on a five-year block on writer layoffs at CBS News Broadcast and a $17.5 million contribution from Paramount to the guild’s health fund. The union said it still believed the agreement would cause damage to the industry, but noted it would cost millions of dollars to continue the case alone without government backing.Martínez-Olguín is also presiding over that case and has to rule on the proposed order.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads