Just after Paramount received judicial restraining order on its merger with Warner Bros. Discovery in US federal court, it got some positive news on the European side. According to Deadline, the merger has been approved by the European Commission. The European Commission handles antitrust cases for the European Union. Reportedly, Paramount will make compromises related to its international distribution deal with Universal Pictures.
CEO of Paramount Skydance, David Ellison, still faces legal challenges in the UK in addition to its current lawsuit in the US.
Paramount released a statement on passing the roadblock, calling its EU approval “a major milestone in completing the transaction in line with the publicly stated timeline” and believe that the EU’s assessment “directly refute key assumptions that underpin the State AGs’ complaint seeking to block the transaction,” per Deadline.
Paramount is aiming to close the deal in September of this year. If it is unable to close by September 30th, it will owe a substantial amount to shareholders.
The merger is currently in limbo as a lawsuit filed by a coalition of 12 states led by California caused a 14-day stoppage. The lawsuit alleges that the merger will violate monopoly percentages in three core markets, including wide-release films, blockbuster films, and cable network licensing. The states are now preparing to file a preliminary injunction, which would stop the merger from proceeding until legal proceedings are finished. Currently, the decision for the injunction is set to be made on August 3rd in the Northern District of California. In a separate lawsuit, the WGA is also seeking to block the deal.
In their ruling, the European Commission did not find that the deal significantly hampered competition in the EU. Notably, they counted studios and distributors outside the big five, including A24, Amazon MGM, and major European players. The US court case only considers that the big five studios will now become the big four. Other smaller players are not included.
According to Deadline, the commission has stated its findings show, “enough alternative competitors remain to exert sufficient competitive pressure on the merged entity in the EEA.” That includes pay TV channels for kids, where it found that “streaming platforms offering children’s content will continue to act as a competitive constraint on the merged entity’s TV channels.”
Paramount responded: “The European Commission rightly considered streaming platforms as competing directly with linear TV. These conclusions further undermine the market definition relied upon by the state AGs in their complaint,” per Deadline.
As previously stated, the approval does come with concessions. The commission did find issues in the distribution market. “There will be high concentration and increased transparency in the EEA countries where Paramount has a structural partnership with Universal, due to the addition of Warner’s film portfolio,” the commission’s report read, according to Deadline.
It continued, “The partnership focuses on the distribution of Paramount’s and Universal’s films to cinema operators through their joint venture, United International Pictures (‘UIP’). The transaction would have meant Warner’s films were also distributed via UIP and, without the commitments, it would have led to worse rental and distribution terms for cinema operators, ultimately disadvantaging consumers,” via Deadline. Paramount is expected to exit its deal with United International Pictures within 13 months of closing.
Additionally, the commission stated “for a period of ten years, Paramount will not, directly or indirectly: enter into any agreement or understanding with Universal to jointly co-distribute films in the EEA; shift the distribution of Warner’s films from Warner’s existing distributor to the theatrical distributor used by Paramount, where that distributor also distributes Universal’s or Disney’s films in all UIP countries in the EEA (Bulgaria, Croatia, Czechia, Cyprus, Denmark, Estonia, Finland, Greece, Hungary, Iceland, Latvia, Lithuania, Norway, Poland, Portugal, Romania, Slovakia, Slovenia and Sweden); and in the UIP countries in the EEA where Paramount and Universal do not share the same distributor, shift the distribution of Paramount’s films from Paramount’s existing distributor to the theatrical distributor used by Warner, where that distributor also distributes Universal’s or Disney’s films,” per Deadline.
In the Commission’s eyes, these stipulations “fully address the competition concerns identified by the Commission by ensuring that the films of the merged entity will not be distributed jointly with those of Universal or Disney,” via Deadline. The merger and future business of Paramount in
Europe will be overseen by an independent board of advisors