California to decide soon whether to seek to block Paramount deal

By Jody Godoy and Nathan Frandino

June 5 (Reuters) – California Attorney General Rob Bonta will soon decide whether to sue to block Paramount’s $110 billion acquisition of Warner Bros., he told Reuters in an interview, adding that he generally believes any corporate pledge to address antitrust concerns is best when backed by potential divestitures.

Bonta’s office has been reviewing the deal for possible violations of US antitrust law, while movie theater owners, Hollywood actors and others have expressed “concerns that it would decrease competition across the industry, leading to lower wages, higher prices and fewer choices for consumers and content buyers.”

Antitrust authorities in Europe will decide in early July whether to approve the deal, while the U.S. Justice Department is likely to reach a decision soon, according to a source familiar with the matter. The deal could close once those revisions are approved, putting pressure on Bonta’s office, which is seen as the most likely enforcement agency to challenge the deal.

“There’s not much time left before we have to act if that’s what we decide to do,” Bonta said in an interview in Oakland, California.

The combination of two major American film studios has caused anxiety in Hollywood over the possibility of fewer productions. Bonta said his office has heard from many industry workers and that their concerns have raised “even more red flags.”

Antitrust authorities can challenge mergers that would significantly harm competition, including competition among employers for skilled labor.

“We believe we have a central role in being able to protect Hollywood jobs with respect to the proposed Paramount-Warner Brothers merger,” Bonta said.

A Paramount spokesperson said the company has “every financial incentive” to expand production after the merger in order to increase subscriptions to the streaming service. Paramount CEO David Ellison has promised that the combined company will release 30 films a year in theaters. The company views theatrical releases as key to marketing its streaming offerings, it recently said in court papers.

Asked whether Paramount should be required to spin off any part of its business to protect competition, Bonta said behavioral remedies, when companies agree to take particular actions, are not always appropriate.

“Can they be part of a solution? Maybe. Should they be supported, if applied at all, by a structural remedy consequence if they are not adequate? I would say yes. That’s the way I think about it,” he said.

Paramount Chief Legal Officer Makan Delrahim said in a statement that the company “is always prepared to remedy legitimate and articulate violations of antitrust laws” but that he believes the deal presents none.

STATES UNITE TO TACKLE ANTITRUST

The California Department of Justice has the largest antitrust division in the country, with just under 50 people. And the state will add eight more attorneys this year along with eight support staff members, Bonta said. California Gov. Gavin Newsom has proposed adding $14.3 million to Bonta’s budget for antitrust work.

Several other states are talking to California about a joint challenge to the agreement, two people familiar with the matter said.

However, there was no indication that the states had reached an agreement on their approach. The potential costs involved if California hires outside counsel could be a factor for states, the sources said.

“The full range of options are on the table and available and fully resourced, no matter what we decide,” Bonta said when asked if the state was prepared to take action on its own.

California has worked with both Democratic- and Republican-led states on major antitrust cases in the past, including a recent victory against Live Nation.

Working together is more important now that the Trump administration is “picking winners and losers based on who their friends are,” Bonta said.

But antitrust cases often cost tens of millions of dollars, raising questions about how many major lawsuits states can bring without their federal partners.

“We’ll find a way, or we’ll come back and ask for more money, we’ll all bring in enough resources, we’ll hire outside advisors, whatever it takes,” Bonta said. “I think the people of our states and the people of this country want that, and I know they deserve it.”

(Reporting by Jody Godoy in New York, Nathan Frandino in Oakland and Dawn Chmielewski in Los Angeles; Editing by Christopher Cushing)