By Jody Godoy and Dawn Chmielewski
March 27 (Reuters) – The U.S. Department of Justice has sent subpoenas in its investigation of Paramount Skydance’s acquisition of Warner Bros Discovery, three sources familiar with the matter told Reuters.
The inquiries show the DOJ moving ahead with its probe into the $110 billion acquisition that would combine the two major studios, along with the companies’ streaming services and news operations. Hollywood and Wall Street are intensely interested in the high-stakes deal, which would bring together some of the entertainment industry’s most enduring franchises but deal a blow to film and television jobs.
The DOJ is seeking information on how the deal would affect studio output, content rights and competition among streaming services, the sources said. The DOJ is also asking how the acquisition could affect movie theaters, two of the sources said.
Subpoenas are an investigative measure and do not dictate any outcome. If the DOJ finds competition problems, it can sue to block the deal or negotiate a settlement to resolve concerns.
Acting Assistant Attorney General Omeed Assefi, who leads the DOJ’s antitrust division, told Reuters in an interview last week that Paramount will “absolutely not” have a fast track to approval because of political factors.
Paramount has been expecting authorities in many places to review the deal, Chief Legal Officer Makan Delrahim said at an antitrust conference in Washington on Wednesday.
Representatives of the DOJ, Paramount and Warner Bros did not immediately respond to requests for comment.
The European Commission is actively engaging with third parties on the deal, two sources said. Canada has also reached out to at least one company about the deal, one of the sources said. The California Attorney General’s office has also been eager to speak with third parties, the other two sources said.
Paramount fought aggressively to wrest the deal from Netflix and has bet on closing the deal quickly, promising to pay Warner Bros shareholders a 25-cent-per-share quarterly “ticking fee” starting in October if the deal has not closed.
LABOR, THEATER CONCERNS IN THE U.S.
One concern in the U.S. is whether the merger would limit the number of buyers for films and shows.
Paramount sees $6 billion in cost “synergies” in the deal, which is often code for massive layoffs. Paramount has said it expects the majority of those savings to come from streamlining technology and real estate, and other “corporate-wide efficiencies.”
The DOJ has reached out to independent production companies asking about the proposed deal’s impact on competition, according to one industry veteran who requested anonymity because of the sensitivity of the issue.
The Teamsters union has expressed concern that the proposed merger “poses a direct threat” to employment, and urged the DOJ to block the deal unless enforceable safeguards are put in place to protect jobs and output.
Such safeguards have been negotiated before. After its unsuccessful attempt to block the merger between T-Mobile and Sprint, California secured an agreement that the merged company would maintain its California headcount for three years.
The organization representing theater owners also issued a statement in late February, noting that studio consolidation has historically led to the production of fewer movies.
“At this juncture, there is no reason to believe the outcome here will be any different,” said Cinema United President Michael O’Leary. “We continue to urge regulators to heed the lessons of the past.”
(Reporting by Jody Godoy in New York and Dawn Chmielewski in Los Angeles; Editing by Chris Sanders and Matthew Lewis)