EU Commission approves Paramount-Warner acquisition subject to conditions

The European Commission has approved the acquisition of Warner Bros. Discovery by Paramount Global, with conditions aimed at preserving competition. The deal, valued at $110 billion, marks a major step forward in the largest leveraged buyout in financial history. The approval came on Tuesday, allowing Paramount Skydance (PSKY) to proceed with its purchase of Warner Bros. Discovery (WBD) within the European Economic Area (EEA). However, the U.S. federal court in Northern California temporarily blocked the transaction on Monday, citing ongoing legal challenges from multiple states. Several U.S. states have filed lawsuits against the merger, arguing that it would significantly reduce competition in the film and television content market. These states claim that the consolidation could harm cinemas, cable providers, and consumers by limiting access to diverse programming. The lawsuit, titled California et al v Paramount Skydance, is pending before the U.S. District Court for the Northern District of California under case number 4:26-CV-07116. While the U.S. courts have raised concerns, the European Commission has found that the merger does not pose a threat to competition in all areas. It identified specific risks related to the distribution of theatrical films. Paramount operates a joint venture with NBCUniversal called United International Pictures (UIP), which distributes films from both companies in 19 EEA countries. If UIP were to also distribute WBD’s film library, it would result in excessive concentration of market power, according to the Commission. To mitigate these concerns, PSKY has committed to exiting WBD’s portfolio from UIP within 13 months after the completion of the acquisition. Additionally, for the next decade, Paramount and Universal must refrain from coordinating their distribution activities in the EEA. During this period, Paramount’s distributor in the EEA will be restricted from offering films exclusively from any one of three studios, Disney, Universal, or WBD. In other market segments, the Commission found no competitive issues. It reviewed the impact of the merger on four key areas: film production, licensing of other audiovisual content (including TV productions), wholesale distribution of program channels (TV networks), and retail distribution of audiovisual services (streaming platforms). In each of these areas, the Commission concluded that there is sufficient competition among existing players. Regarding film studios, the Commission noted that adequate competition exists both in the U.S. and Europe. For audiovisual content, it stated that there is enough diversity in offerings to counterbalance potential market dominance. Even in children’s pay television, while there is considerable overlap between PSKY and WBD, streaming platforms provide ample alternative content to offset any possible market power imbalance. The decision underscores the regulatory scrutiny surrounding large-scale media mergers, particularly in light of growing concerns over market concentration and consumer choice. While the U.S. legal battle continues, the European Commission’s approval allows the deal to move forward in the region, subject to the agreed conditions. The outcome of the U.S. litigation will determine whether the merger can ultimately be finalized across all jurisdictions.