Can Makan Delrahim Close the $111 Billion Warner Bros. Deal?

The timing was almost too obvious. Netflix CEO Ted Sarandos had just traveled to Washington, D.C., to attend meetings at the White House, presumably to assess the regulatory hurdles the company would face in acquiring Warner Bros. He was faced with a decision to bet on the company. Paramount had increased its offer, dethroning Netflix in the race for the legendary studio. Sarandos had a few days to decide whether to counter. Instead, just hours after he was photographed leaving the White House, he dropped out of the bidding war. Paramount had won.

Now all eyes are on two people: Makan Delrahim, a savvy legal operator who knows the ins and outs of Washington deals and is the architect of Paramount’s proposed merger, and Rob Bonta, California’s top prosecutor, who will likely lead efforts by state attorneys general to block the deal. Expect a legal showdown that will shape the Hollywood landscape for years to come.

On Thursday, as speculation swirled that the government would approve the deal for its preferred bidder, Bonta planted his flag on the merger. “Paramount/Warner Bros. is not a done deal,” he said in a statement. “These two Hollywood titans have failed to pass regulatory scrutiny – the California Department of Justice has opened an investigation and we intend to be rigorous in our review.”

Bonta said he was in talks with other attorneys general about the acquisition. Yet they start behind the eight ball. Paramount sought approval for the deal last year and has already submitted the necessary information to the Justice Department, an atypical maneuver intended to put the federal government and states in a bind. Under normal circumstances, meeting this regulatory requirement can take more than a year, but Paramount achieved this in a matter of months. It’s now a race against time. Paramount will likely seek to close the deal as soon as it gains approval from foreign regulators.

Legal action can be taken once the merger is complete, but the rules of the game will then be different. In this scenario, Paramount would have begun to integrate Warner Bros. in its operations. Historically, courts have been more inclined to stop an agreement rather than unwind it.

Bottom line: Time is a big factor right now, and it’s largely on Paramount’s side. To purchase it, California could seek a temporary court order preventing Paramount from closing. Everything is on the table, from the types of arguments made to the relief sought, according to a person familiar with the situation. “It’s all well and good that they overtook the federal government, but they didn’t overtake California,” the state government insider says. “They can’t short-circuit our investigation or our concerns here.”

Timing aside, state attorneys general, particularly Bonta, appear confident they can advance a compelling narrative that the merger violates antitrust laws. A claim under the Sherman Act, which blocks deals that strengthen an existing monopoly, is almost certainly irrelevant, but the argument that the merger violates the Clayton Act, which blocks deals that would create a monopoly, might be almost as strong, if not stronger in some areas. The story they can tell: The acquisition will shrink the playing field from five major studios to four and bring together two major newsrooms. And unlike the Netflix deal, there are horizontal issues since Paramount and Warner Bros. compete in the areas of cable television, news and sports.

One little-discussed possibility is to center the case on possible monopsony, a dynamic in which a buyer with outsized market power can purchase labor and goods at prices below market value. Hollywood talent has been sounding the alarm on this issue for years. “Media consolidation has made it exponentially more difficult to sell a television or film project,” wrote Leonard Dick, a writer on Lost And Hometo the Federal Trade Commission in 2023. “If I’m partnered with, say, 20th Television (Disney-owned) and the Disney-owned streamers/networks don’t want to order it, there’s a slim chance no other networks/streamers will buy it because they want to own their own shows. »

Dan Gregor, writer on how I Met Your Motherechoed these concerns, telling the FTC that it had “no leverage to negotiate now.”

In an article on He asked people for their opinions on the merger.

“We’re looking at the situation from all angles, including horizontal consolidation and certainly vertical impacts,” said the person familiar with Bonta’s thinking, who noted that the deal’s impact on labor is a “significant concern.”

Theatrical releases can also be taken into account in this matter. Disney’s acquisition of 20th Century Fox could be instructive. After the merger, the studio’s output increased from 14 films in 2017 and 2018 to a total of 19 between 2023 and 2025. Paramount CEO David Ellison has committed to releasing at least 30 films per year. Can he keep this promise? Perhaps in the short term, but it is difficult to calculate this commitment in the longer term.

One consideration for Paramount will be which court will oversee the potential challenge to the merger. The Middle District of California, where the lawsuit will likely be filed, has its share of conservative judges, but not to the same degree as, say, the Northern District of Texas, where the president filed his lawsuit. 60 minutes trial. Political considerations will take second place in this matter, but it is almost impossible to ignore them. If it’s a draw, that could be the tiebreaker.

“A five-for-four merger in the cardboard market would be viewed differently than in this context, with these companies controlling most of the major media outlets,” says Rebecca Allensworth, an antitrust professor at Vanderbilt Law School.

Professor J. Chrisopher Hamilton of Syracuse University, who has worked as a business executive and attorney for Paramount Global, Disney and Warner Bros. Discovery, highlights the “extent of narrative control” that the merger will bring. “We’re talking about HBO Max, Paramount Plus, Turner Classic Movies and a vast universe of cable networks that shape the way tens of millions of Americans consume not only news, but culture, history and storytelling itself,” he says. “When you control the news division and the entertainment business simultaneously, under the same ideological constraints, you not only control what people are told, you control what they imagine, what they aspire to, and what they believe to be normal.”

Another obstacle is consumers. Earlier this month, they filed a lawsuit aimed at blocking Netflix’s bid to acquire Warner Bros. and could do the same against Paramount. They are not as well-resourced as the federal government or state attorneys general and are widely seen as doomed to failure, but there has been some success on this front. In 2021, a federal appeals court upheld a ruling requiring a company in the door manufacturing industry to divest certain assets.

For Delrahim, his thinking might focus not so much on whether the deal will go through, but rather on what Paramount will have to concede. Antitrust authorities under President Donald Trump have resumed accepting deals to ease concerns about mergers. If the Justice Department takes legal action, it could allow it to shape the ideology of content the company creates.

Abroad, don’t expect European regulators to aggressively challenge the deal, either. Historically, their focus has largely been on local solutions aimed at forcing companies to sell certain cable/TV assets in certain territories where there is not much competition. The European Commission approved the purchase of 21st Century Fox in 2019 after Disney agreed to divest from several European factual TV channels, including History and Lifetime, because they overlapped with Fox’s National Geographic channels. And in what could be a closer analogue to the Paramount-Warner Bros. deal, Amazon’s 2022 purchase of MGM has been given the green light with no strings attached. Overall concerns about streaming consolidation and theatrical releases were left aside in both of these cases.

Regardless of legal considerations, Ellison will have to deal with the practical realities of nearly $100 billion in debt. It projects $6 billion in cost savings, but that figure could quickly grow to several times that amount, as Sarandos has announced.