Career antitrust lawyers were leaning toward recommending a lawsuit when senior DOJ officials closed the investigation and cleared the $110 billion deal
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The Justice Department closed its investigation into Paramount $PARA Skydance's $110 billion acquisition of Warner Bros. Discovery before career staff investigators who had spent eight months scrutinizing the deal had a chance to raise formal objections, according to The Wall Street Journal.
A team of career lawyers had been leaning toward recommending a lawsuit on the grounds that combining two major movie studios would be anticompetitive, The Journal reports. Closing the investigation without a final recommendation from the team is a standard part of the deal-review process that was skipped. Staffers learned Friday the department had already made its decision.
Senior DOJ officials believed that Paramount CEO David Ellison addressed many of the staff's concerns during a two-hour interview last month, The Journal reports. One of the central concerns raised by investigators was whether a debt-burdened merged entity would realistically be able to sustain a pledge to put 30 films into theaters each year. DOJ leadership dismissed debt as insufficient grounds for a legal challenge, and the investigative team never formally communicated to those above them that it favored pursuing a lawsuit.
The DOJ's antitrust division issued a lengthy public statement saying the transaction would likely benefit competition across streaming, linear television, and theatrical film distribution. Career staffers, who were excluded from drafting the statement, suspected it was crafted strategically to raise the legal bar for any state attorneys general hoping to mount their own challenge in court, according to The Journal.
Paramount is not the only matter where rank-and-file antitrust attorneys have found themselves cut out of key decisions during the Trump administration — a pattern that also emerged when the DOJ moved to settle its Live Nation monopoly case in March while litigation was still underway.
A multistate coalition led by California has been moving toward legal action against the merger, with attorneys general from around a dozen states involved in the effort. California Attorney General Rob Bonta said Friday that the deal "is not a done deal and remains under investigation" by the California DOJ, according to The Wrap.
The deal also faces antitrust reviews from the European Commission and the U.K.'s Competition and Markets Authority. By July 7, the EC must determine whether to approve the transaction outright or escalate it to a more intensive Phase 2 review. Paramount executives have told employees to prepare to close the transaction as soon as the end of July.
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