Paramount/WBD merger conditions give the public "virtually nothing," judge is told - Ars Technica

Free speech and media advocacy groups urged a judge to block a California settlement with Paramount Skydance that would let the company finalize its $111 billion merger with Warner Bros. Discovery.

Twelve states led by California sued to block the deal in July and were able to delay it when US District Judge Araceli Martínez-Olguín ruled that Paramount combining with Warner Bros. would likely reduce competition substantially and violate antitrust laws. Despite that initial victory, California Attorney General Rob Bonta announced a settlement with Paramount earlier this week and the other states involved in the lawsuit signed on to the deal.

Martínez-Olguín must decide whether to approve the settlement. A coalition of free speech and media advocacy groups told the judge in a filing yesterday that the deal will give residents of the states that sued Paramount “virtually nothing.” The filing was submitted by the Committee for the First Amendment, Free Press, Freedom of the Press Foundation, Future Film Coalition, and International Documentary Association.

Bonta “publicly criticized the very behavioral remedies that the parties now ask the Court to approve,” the filing said. That’s a reference to Bonta saying that proposed merger conditions such as Paramount’s pledge to release 30 movies a year are “typically not enforceable in the way that we like,” and “not particularly good at solving the problem.”

The groups said the lawsuit filed by states two months ago alleged that “the tie-up would ‘extinguish competition’ between the two and raise prices, reduce output, lower quality, and lessen choice… But whatever the reasons for the States’ about-face, neither time nor circumstance changes the fact that this merger lessens competition.”

The League of United Latin American Citizens raised similar concerns in its own court filing. The states alleged that the “merger would permanently eliminate competition between Defendants over the films and television programming Americans can watch,” but the settlement “leaves that loss of independent decision-making largely intact,” the filing said.

“The proposed consent decree requires no divestiture as a condition of closing. Instead, it relies on conduct commitments that leave important pleaded harms unaddressed even when the combined company fully complies,” the Latin American group said.

Judge has some questions

At a hearing yesterday in US District Court for the Northern District of California, Martínez-Olguín told lawyers that “the court isn’t a rubber stamp of your agreement… I have some questions,” Variety reported. Martínez-Olguín reportedly said she wants to ensure “that this is not something that was the result of collusion, but instead was more of an arm’s length process.”

Martínez-Olguín asked the parties to submit replies to a letter sent by Sen. Cory Booker (D-N.J.), who said the companies should be required to explain “how each provision remedies each harm alleged in the complaint.” Booker wrote that “the Court should measure the proposed remedies against the relief the States originally sought: an injunction blocking the merger altogether,” and argued that the settlement doesn’t address the lawsuit’s core claims that the merger is anticompetitive and will eliminate jobs.

Judges evaluating settlements generally look at whether a deal resolves the lawsuit’s complaint and whether it was tainted by collusion or corruption. Even if a judge personally does not like a settlement, the judge may still approve it if it meets the minimum legal standards for fairness and reasonableness.

The free speech and media groups’ filing said the deal with Paramount should be rejected “because it is both procedurally and substantively unfair to third parties and the public.” The filing responded to each major provision in the proposed settlement that was submitted for the court’s approval. The film distribution guarantees “appear to lock in fewer films post-closing than the parties are committing to produce in 2027 on their own,” the groups said.

The commitment to release 30 films is lower “than what the companies have together forecasted to investors for 2027 as independent companies,” the filing said. Warner Bros. projected it would release 19 films while Paramount forecast 15 or more, the filing said.