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All the talk about blocking Paramount’s massive $111 billion deal for Warner Bros. It was mainly about how the deal would affect competition and remove the buyer from the market. The combined company will be the country’s largest theatrical distributor. The merger will also likely push the studio into the top three streaming platforms in terms of subscribers.
But it’s the news side of the equation that also plays a role when it comes to the efforts of at least 10 states to stop David Ellison’s Hollywood advance in court. The argument goes something like this: Paramount’s editorial independence has been severely compromised by Donald Trump, whose White House holds the keys to regulatory approval of the deal, and the studio is committed to reshaping the news landscape to his liking.
In fact, consumers who object to the merger have claimed that it will further erode investigative accuracy and viewpoint diversity in the national television news market (read: more conservative-leaning programming). They returned to CBS News, producer 60 minutesAnd CNN, America’s first and longest-running 24-hour news network, was placed under the ownership of a single owner eager to meet the needs of management.
In addition, Paramount invoked First Amendment protections, arguing that it would be unconstitutional to block the merger based on speculation about how editorial control would be exercised. It’s not an entirely new argument, but it renews debate about whether antitrust laws, which have traditionally focused on economic competition and consumer prices, should take into account more abstract harms, and in this case whether news promotes a wide enough range of ideologies.
“It would significantly expand the reach of antitrust laws and trample on companies’ First Amendment freedoms for courts to consider a Clayton Act challenge to whether the merger sufficiently preserves certain viewpoints and treat alleged changes in viewpoint, editorial judgment, or political perspective as clear antitrust harm,” Jeffrey Kessler, Paramount’s lead attorney, wrote in an effort to dismiss the case filed on June 3.
The argument was raised in response to a consumer lawsuit filed last April challenging Paramount’s proposed acquisition of Warner Bros. Discovery, the opening legal attack on a merger that will reshape Hollywood. They are seeking a preliminary injunction, claiming the deal would significantly reduce competition in streaming, theatrical distribution and news.
Meanwhile, a coalition of states led by California is preparing a lawsuit to block the deal, which is expected to be filed within a month. New York, Colorado, Oregon, Nevada, Washington, Connecticut and Tennessee are among several states in talks to join, a source familiar with the situation said. Hollywood Reporter.
Consumers and state attorneys general are among several groups, which also include the Justice Department, the Federal Communications Commission and the European Union, that could pose an obstacle to completing the merger. If states sue, they will likely argue that the national television news market is relevant to the case. Expect Paramount’s editorial independence to be activated. “We’re looking at what’s going on with CBS now,” says an insider. “This will further impact CNN.”
Paramount is seeking to close the merger in July, thanks to a series of smart legal moves shepherded by its chief legal officer, Makan Delrahim. That includes filing paperwork with the Justice Department to bless the deal in December, even as Netflix appeared to be leading the bidding war. This puts state prosecutors thinking about filing a lawsuit around the clock.
They can file a lawsuit after the deal is completed, but courts have historically been more open to blocking a merger than breaking it up. There are also the practical realities of separating the two companies once you start combining employees and operations. In a lawsuit from DirecTV challenging Nexstar’s bid to acquire Tegna, the TV giant took the position that it could not fully comply with a court order halting the deal due to “actions already performed at closing and irreversible legal obligations.”
For state attorneys general, a preliminary injunction would be priority No. 1. The case against a merger across streaming and theatrical distribution is clear and straightforward: Such a tie-up would eliminate the top five studios in both regions. Controversy over the national television news market? Less than that.
By Paramount’s reasoning, this case does not belong in the world of antitrust. The studio warns that blocking the merger on the grounds of potential interference with newsroom decision-making could allow courts to begin regulating editorial outcomes in violation of the First Amendment. It’s a kind of clever legal maneuver, reframing the TV news monopoly claim as “abstract political injury.”
The Supreme Court largely rejected the idea that a news monopoly justified government intervention to force diversity of viewpoints in 1970. Miami Herald Against Tonello. This case not only raised antitrust allegations but also involved an alleged media monopoly. Florida House candidate Pat Tornillo sued the newspaper under the state’s right-to-reply law after it refused to give him space to respond to his opponent’s endorsement. Miami Herald He asserted that the law violates the First Amendment. The justices eventually agreed, striking down the Florida law in what became crucial case law in disputes over government efforts to control newspaper editorial independence.
Depending on who you ask, you will get a different answer to the question of whether antitrust laws should be interpreted to take into account a value such as diversity of viewpoints. The consumer welfare standard—the idea that antitrust policy is built to protect economic competition in the form of lower prices, increased production, and increased innovation—has dominated the thinking of the courts for decades. It still is. But the intellectual movement sometimes called “New Brandeisism” pushed for a comprehensive reimagining of antitrust laws. Among its basic assumptions is the necessity of interpreting antitrust policy to take into account the process of corporate consolidation that leads to the gatekeeping of ideas.
The Justice Department under Trump has mostly backed away from that philosophy, but now argues that antitrust laws should be taken into account when big news organizations conspire to block competing viewpoints — a position that conflicts with the position Paramount took in its defense of the merger.
“Individual liberty — and consumer welfare — benefit greatly from competition for views in news markets and can suffer when that competition is reduced,” a Justice Department lawyer wrote in a case in which the government was not a party but intervened to advise the court on the legal issue. “News consumers want and demand diverse viewpoints. Therefore, Americans vitally depend on competition among viewpoints in the marketplace of ideas to limit abuses of market power and ensure the free flow of information in our democracy.”
Paramount could test its merger defense as early as next month when consumers’ bid for a preliminary injunction is considered. Don’t be surprised when you hear doubts from the court.
This story appeared in the June 10 issue of The Hollywood Reporter. Click here to subscribe.
