Paramount-Warner Bros Discovery Deal: How Trump’s Influence Might Affect the EU Antitrust Process
In a major turn of events in Hollywood, Paramount has successfully acquired Warner Bros. Discovery (WBD) from Netflix, completing a boardroom battle that has captivated the entertainment industry. This acquisition comes after Paramount made a cash offer of $31 per share, culminating in a deal valued at $111 billion.
The contest for WBD has unfolded publicly over an extended period. Following the conclusion of the bidding war, Netflix will receive a $2.8 billion termination fee from Paramount. If finalized, this merger will merge two dominant movie studios and extend their production capabilities alongside cable, news networks, and sports worldwide.
Lawmakers and regulators across the Atlantic have been closely monitoring the bidding process. Interest partly stems from former President Donald Trump’s relationship with the EU and his ongoing commentary regarding the Paramount acquisition. Trump’s son-in-law, Jared Kushner, had supported the initial bid before withdrawing. Observers note that the state of US-EU trade relations may significantly influence European regulatory scrutiny of the deal.
Recent reports indicate that the European Commission has begun pre-notification inquiries concerning both Paramount’s and Netflix’s competing offers for WBD, even before a decision was reached. According to François Godard, a media and telecoms analyst at Enders Analysis, the $71 billion Disney-Fox deal from recent years serves as a relevant reference point for Hollywood mergers examined by EU regulators.
Godard expressed skepticism that the deal would collapse due to European opposition, though he expects a more rigorous investigation than would typically occur in the United States. If Netflix had succeeded in acquiring WBD, regulatory challenges would likely have involved concerns from European cinema owners. However, with the merger of two traditional studios, the focus may shift more toward distribution concentration.
An anonymous antitrust expert remarked that the competition issues posed by this merger are less complex compared to those that would have emerged from a Netflix acquisition, which could make regulatory remedies easier to manage. Given that companies with a combined revenue exceeding €5 billion ($5.8 billion) or European sales above €250 million must notify EU authorities, it is anticipated that the European Commission will examine this takeover closely.
Cristina Caffarra, a competition economist with experience advising major corporations, noted that while it is improbable for EU regulators to block the deal, they could still impact the timeline for approval. If the investigation extends into a Phase II review, it could provide U.S. regulators with additional time to respond. Such a review would entail a comprehensive analysis of how the merger affects competition, which can involve extensive data collection and time-consuming procedures.
Moreover, if additional scrutiny arises from U.S. regulators or a prolonged probe in Europe occurs, WBD shareholders might benefit significantly. A ticking fee of $0.25 per quarter, payable to WBD shareholders, will start accruing after September 30, 2026, until the planned acquisition is completed. This fee structure represents a change from an earlier proposal that would have initiated payments after the end of 2026, amounting to an estimated $650 million for each quarter beyond that date.
Godard interpreted this adjustment as a sign of Paramount’s confidence in securing swift regulatory approval. However, the interplay between U.S. trade policies and the Paramount-WBD deal could complicate matters. Trump’s unpredictable relationship with Europe may influence how regulators approach the merger.
Trump’s stance on trade has shifted, as demonstrated by his decision to maintain EU tariff rates at 10% rather than increase them to 15%. While this consistency may facilitate the merger’s approval, any deterioration in US-EU relations could lead to heightened scrutiny from European regulators.
An industry analyst speculated that David Ellison, Paramount’s CEO, may increase his efforts in Europe, especially amid potential regulatory challenges. Ellison has already reached out to European leaders and engaged in communication with the creative community through advertisements globally.
Additional aspects of the merger, such as its financial backing by Middle Eastern sovereign wealth funds and its implications for sports and news coverage, are expected to draw regulatory interest. Netflix co-CEO Ted Sarandos recently expressed concerns about the involvement of these funds in the deal.
On the sports front, the merger could significantly consolidate sports programming, creating a formidable entity capable of competing with existing networks like Sky Sports. The Premier League’s shift towards direct consumer options could further heighten the stakes for regulatory review.
As this monumental deal progresses, various regulatory factors will come under scrutiny in the weeks ahead. Observers will be alert to developments in the regulatory landscape and the potential impact of political comments from key figures.
In the realm of regulation, swift and smooth progress remains a priority for David Ellison and his team, as the outcomes of regulatory reviews could significantly determine the merger’s trajectory.
