EU clears Paramounts 110 billion Warner Bros Discovery deal with conditions on film distribution
The European Union has approved Paramount's $110 billion acquisition of Warner Bros Discovery, but with conditions aimed at addressing competition concerns.
The European Commission, the EU's competition enforcer, announced on Wednesday that Paramount Skydance's offer to end its film distribution joint venture with Universal Pictures within 13 months of closing the deal addressed its concerns. The company will not engage in any film distribution deal with Universal in Europe for 10 years and will not transfer the distribution of Warner’s films in theaters to its own distributor.
"The commitments 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," the Commission said in a statement.
The deal faces significant challenges in the US. A US court ordered Paramount Skydance to pause the deal last week, following a lawsuit by a California-led coalition of states arguing that the merger would harm competition. The delay could cost Paramount Skydance financially, with Paramount CEO David Ellison potentially owing Warner Bros. shareholders a "ticking fee" of about $7 million a day for each day the merger is delayed past September 30.
The acquisition, announced in February, has already received approval from the US Department of Justice. However, it is also the target of a lawsuit by the Writers Guild of America, which argues that the merger would jeopardize writers’ livelihoods and threaten the health of US entertainment. Additionally, Britain may intervene due to potential impacts on news, children’s television, and streaming services.
Paramount Skydance's general counsel, Makan Delrahim, stated that the EU approval is a significant milestone and that the merger would strengthen competition by creating a rival to dominant tech platforms.
The European Commission identified potential competition issues in the distribution of films in countries where Paramount collaborates with Universal through the United International Pictures joint venture. Without corrective measures, the Commission warned that the merger could worsen conditions for cinema operators and ultimately consumers.
Paramount has agreed to sell its stake in United International Pictures within 13 months of the deal's closure and has committed to not entering into any film distribution agreements with Universal in Europe for a decade. Additionally, the company has pledged not to transfer the distribution of Warner Bros. or Paramount films in a manner that would strengthen joint distribution with Universal or Disney films.
The deal's future remains uncertain as it navigates legal challenges in the US and potential regulatory scrutiny in Britain.
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