Matt Stoller to Hollywood: Time for a ‘Knife-Fight’ Over Paramount-WBD
‘Not fighting has consequences,’ the antitrust expert says — and the industry has weeks to prove it to state attorneys general
Death by poison or death by firing squad is still death. But even after the news that Paramount had won the bidding for Warner Bros. Discovery, as Netflix bowed out, it’s not too late to fight — as California Attorney General Rob Bonta intends to do:
“This is a big political issue. People are fucking pissed in this country, and it’s happening in every industry,” antitrust expert and BIG newsletter writer Matt Stoller told me moments after the merger news broke last night. “I don’t know if we can win. Maybe we can’t win in this particular fight, but America is worth saving. And if we just give up, it all goes away, and we will just live in a deeply impoverished society.”
Historically, giving up the fight has stark consequences in the war: The Disney-Fox merger and even the Warner Bros. Discovery merger sailed through without much handwringing from the industry, putting us in this current situation.
“If those had been blocked, this wouldn’t be happening,” Stoller told me. “Even if you lose, you’re in a better position if you fight.”
So, it’s time to fight. Watch our conversation above for context and ammunition about what can be done — including how Bonta and other state attorneys general can rally to make a move to block the merger before it sails through — and read on for an edited transcript of our chat.
Richard Rushfield: Now what?
Matt Stoller: The deal can be challenged by a variety of authorities. Normally, a deal takes about 12 to 18 months to close. So there’s a bunch of logistical stuff that happens, and then the regulators or the enforcers will have time to investigate, and then they can bring a challenge or not, or they can say, look, sell off these lines of business, but you can buy the bulk of it. And that’s usually with a consent decree of some sort. In this case, Paramount has a very savvy and cynical lawyer named Makan Delrahim. He used to work for the Trump administration. He’s the guy who actually got rid of, ironically, the Paramount Decrees. He has put forward this very aggressive strategy. Normally, the reason it takes 12 to 18 months is that the government asks for a lot of information, and there’s a long negotiation over how much the company wants to provide. You don’t necessarily want to give the government everything they’re asking for. There’s a lot of dirty laundry that you might expose in that case.
Well, here, Makan Delrahim probably just gave them everything they wanted immediately and just said, “We’re going to move this really quickly,” because I think he might assume that if there’s dirty laundry, it doesn’t really matter because these are his friends. This is all cronyism. If they find something illegal, they won’t care because the Ellisons, who are financing this, are close to the Trump administration. This is the speculation.
Are they going through the motions as you would in a kind of normal regulatory process? Are they pretending?
There’s another set of enforcers who can act, not under the control of the Trump administration. These are state enforcers. So every state has an attorney general, and they have jurisdiction in their particular state. Usually, states will band together and challenge. The reason Makan Delrahim is doing a rush job, pushing this really hard to get it closed quickly, is that he wants to avoid states coming after him, since plenty of states are controlled by Democrats. If he can get this closed — and I think what I’m hearing is that he can probably close it by early April — before the state AG brings a challenge, then that means they get to take over all of these assets and start running them. They can fire people, they can intermingle the assets, they can choose new lines of business and they can move people around. All of the bonuses get paid out; they can do layoffs, et cetera, et cetera.
In that situation, even if there is a challenge, you have to unwind something that’s already operating — and maybe it’ll take a few years, and by then all the assets are already intermingled. So it doesn’t really matter that much, or it’s very limited what you can get out of that situation. It’s kind of like unscrambling eggs. If the state AGs get a complaint in before they close, then what will happen is a judge will say, “Hold off, don’t close. You’ve got to operate these entities separately until the trial is over.” And it can be up to 15 months before that trial takes place. So, during that period, these are separate companies that are still running. Then the trial happens, and a judge will decide whether to allow the merger.
The last thing I’ll say is that the reason this is unusual for the states to bring a challenge without the federal government is that the federal government just has a lot more bodies to throw at the problem. They have a lot of antitrust lawyers. They know how to challenge these kinds of cases. They’ve been doing an investigation. They have a lot of sort of unique information. States don’t have that level of capacity. California’s a big state. They have a bunch of antitrust lawyers. New York, same thing. When they get to Texas, when they get together, they can sort of put together a meaningful set of bodies. They don’t have the expertise, and they haven’t been doing the investigating. So this is really a logistical question. Can they actually put together a case by early April or late March? I know they’re interested. They’ve said they’re interested. They desperately want to put together a case. The question is, can they? And that’s sort of the fundamental question.
What’s the answer to that? Can one state, doing this in two weeks, put a hold on it?
Yes. I mean, a state can do it, but if you file a ChatGPT complaint with no evidence, the judge is just going to dismiss it. So you have to have some evidence, you have to have interviewed people, you have to have some documents. You have to have a reasonable case that this merger is unlawful. And structurally, there are guidelines about whether it is — the law itself is called the Clayton Act. That law says that combinations that “may substantially lessen competition or tend to create a monopoly are illegal.” Now, that sounds like this kind of merger. There is a similar merger, the Penguin and Simon & Schuster merger, that was blocked a couple of years ago on these grounds, so it’s possible to do it.
But it puzzles me why no one in Hollywood didn’t just hire a lawyer, put this evidence together, and give it to the state AGs. That is just baffling to me because it’s not that much money, and Hollywood has a lot of money. I’m not saying everybody in Hollywood is rich. I’m just saying, in aggregate, there’s a bunch of money there, and there are rich people, and they just didn’t do anything about it. And it just baffles me why people are so passive when you can actually knife-fight on this stuff. But maybe that’s happening. Maybe someone is doing that, and I don’t know about it.
What should they be doing right now, if you hear this?
Just organizing your community and saying, “We don’t want these mergers, this will reduce my bargaining leverage,” will not work. If somebody has an experience of pitching Paramount and pitching Warner and having them bid against each other for something, that’s useful evidence. An enforcer can say, “I think this merger is illegal. Here are three examples of people who sold screenplays or were actors or did this thing on a film, and there was a bidding war, and that bidding war would not happen today because now those two companies are one.” And that is a substantial lessening of competition. Those are exactly what they presented. That’s the kind of evidence they presented in the Penguin-Simon & Schuster case.
And so I would just say: If you had that experience, or know someone who has, send an email to your state Attorney General’s office — Rob Bonta’s office in California. But you don’t have to be in California to do this; you can just send it to him and say, “I have evidence that is relevant to this merger.”
Does anyone have standing to move on behalf of the consumers here, and what could this do to them?
So the class action suit against the Netflix acquisition of Warner was actually filed by consumers. I mean, it was the plaintiff’s lawyers who were bringing it, but it was on behalf of consumers.
And what about Congress? When I saw Ted Sarandos testifying at those hearings, the questioning he received did not give me much confidence that the members of Congress were sufficiently versed or ready to take on this really complicated issue. Do they have any role here, and are they capable of performing that?
You and I have slightly different views of that hearing. In congressional hearings, a member has five minutes, so that’s not a lot of time. The CEO knows the business and the member usually doesn’t. Occasionally, you’ll have a really, really well-prepped member, but that’s not common. The hearings are for judges and enforcers to indicate where Congress stands. Even if those members didn’t nail Ted Sarandos, most of the committee members said, “We don’t like this merger, or we don’t like this kind of consolidation.” And that was meaningful because the antitrust division’s budget is run by Congress. It’s basically the person who gives you your allowance telling you they like what you’re doing or not. And that’s the way that I hear these kinds of hearings. They’re not the ones who are going to a judge and saying, “Block this merger.” They have a different role.
If we get to a trial, would looking into the process vis-à-vis the Trump administration and currying favor with them come up?
These are very preliminary questions. We’re all assuming the Trump administration’s not going to challenge the merger. If they do, it’s different.
But one of the things that Paramount is going to say is, “Look, the federal government thought this was fine. Why are the states having such a problem with it? Every jurisdiction in the world thought this was fine. Our government thought it was fine…. the states are the only ones who didn’t, these California weirdos.” So in that context, it’s really important to discredit the federal government’s choices. And so you’d be able to say, “Hey, the Trump administration is doing this for bad reasons.” And I think that some of the comments that Trump has made do suggest that. If I were judging this, I’d be like, “Yeah, of course.” It’s common sense, but you do have to prove it.
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