Paramount Skydance and the state attorneys general are defending their proposed settlement in the face of skeptical questions from Sen. Cory Booker (D-N.J.), arguing that the judge overseeing the case should approve the agreement without the deeper review the senator has requested.
Booker, the top Democrat on the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, sent a letter to the court last week asking how the five-year settlement agreement was reached and whether its terms were adequate. He urged the judge to conduct an “independent public-interest review” before approving it.
Last Thursday, U.S. District Judge Araceli Martínez-Olguín told both sides to answer Booker’s questions before she ruled on whether to approve the proposed consent decree. She said at the time that she would issue a ruling “in due course.”
On Monday, Paramount and Warner Bros. Discovery filed a joint response in the U.S. District Court for the Northern District of California, Oakland Division. The states filed a separate response.
Both filings rejected Booker’s central request. The review he asked for is modeled on the Tunney Act, a federal law that governs antitrust settlements proposed by the U.S. Department of Justice, not settlements reached by states. “There is no legal basis for the Court to conduct an independent public interest review,” the companies wrote. The states asked the judge to decline Booker’s request and instead determine whether the decree is fair, reasonable, equitable and lawful.
The agreement came after 12 state attorneys general, including California Atty. Gen. Rob Bonta, sued in July to block Paramount’s merger with Warner Bros. Discovery, arguing the deal would violate U.S. antitrust law.
After two months of litigation, Paramount and the state attorneys general said last week that the two sides had reached a settlement agreement. The agreement sets requirements for theatrical film distribution and cable channel negotiations, and it creates a board to oversee the editorial independence of CNN and CBS News.
In their filing, the companies said the agreement was negotiated “at arm’s length” after “two months of hard-fought litigation.”
“Both sides bore real litigation risk, and the decree reflects each side’s assessment of that risk,” Paramount wrote in its court filing. “Twelve attorneys general, each accountable to their own electorate, judged this relief to be a fair compromise sufficient to resolve the claims they asserted in the complaint.”
Under the proposed decree, the combined company must release at least 30 films a year in theaters in the first two years and 32 films a year in the following three years. It would owe a $30 million penalty for each film it falls short, even if it later makes up the shortfall.
Booker questioned whether that penalty was large enough. The companies argued that they are already motivated to comply and do not need a financial penalty to do so. They noted that if Paramount anticipated losing more than $30 million on a film, “it would not greenlight it,” and that the decree does not change that calculation. Once a film is made, they said, shelving it would make little sense, because even a film that loses money in theaters adds value to the company’s streaming library.
If the combined company does not cure a shortfall within six months, it must divest its 49% stake in Miramax. The companies argued that the threat carries real weight, calling Miramax “a prized asset” whose library will help attract streaming subscribers. They noted that the studio’s “Scary Movie” grossed more than $230 million at the box office, one of Paramount’s top three box office hits, this year against a budget of roughly $30 million.
The states pushed back on assertions that the consent decree was too weak, saying it “reflects a reasonable compromise that addresses the competitive issues posed by the proposed merger in the markets alleged in the complaint.”
“The decree’s enforcement provisions have teeth,” the states wrote in their filing. “The decree meets the applicable standards and it should be entered.”
The states noted that the decree sets up two layers of oversight. A compliance monitor would handle internal training and file annual reports with the states and the court, and a separate monitoring trustee would oversee compliance. Employees, exhibitors, basic cable distributors and others could report concerns to the trustee or to the states, and the combined company would be barred from retaliating against them.
The attorneys general also defended the five-year duration of the agreement, saying it “reflects a balance between preserving present levels of competition, requiring additional years of oversight, and the potential alternative of Warner Bros. seeking to merge with a different competitor.”
Booker also questioned the editorial independence board, noting that the states’ lawsuit did not raise editorial independence. The states argued the board falls within the scope of their complaint, which alleged the merger could reduce the quality and range of news available to the public. Colorado and Washington did not join that section of the states’ brief because they are not signing on to that part of the decree.
The companies also addressed Booker’s note that at least one of the attorneys general had said publicly he was “deeply disappointed” the settlement did not force a sale of CNN and CBS News. A settlement that doesn’t include every outcome one party wanted is not unfair, the companies wrote.
The states also responded to briefs from the Block the Merger coalition, a group of press freedom and film organizations that has called the settlement weak and unenforceable.
Paramount Chief Executive David Ellison has said the deal would close within two weeks of the settlement, putting the closing in early October. Martínez-Olguín has not said when she will rule.
