00:00What's the legal justification of this antitrust suit and what are the merits of this case?
00:04So what they're alleging here, the 12 states that suit, is that in three markets, three different markets,
00:10two related to movies and one related to the package of basic cable assets that this combined company would have,
00:16that the combined shares get to close to 30 percent or exceed 30 percent,
00:21but also there are concentration numbers that come out of those markets that exceed the thresholds
00:27that are in the merger guidelines the Department of Justice uses and would suggest that this deal could cause harm.
00:33So it's pretty straightforward.
00:35They're looking at top selling movies, they're looking at widely released movies,
00:39and they're looking at the licensing of basic cable channels.
00:42Is there precedent where states have come out against federal regulators and states have actually won?
00:47More recently there is, yes.
00:49I mean, look, the states have always been able to enforce federal antitrust laws as well as their own state
00:54laws.
00:54And they have, in some cases in the past, gone their own way independent of the FTC or the DOJ.
01:00They are doing this more and more during this administration, and they said they would.
01:04When Trump was reelected, the state said, look, if the DOJ and FTC get lax on antitrust enforcement,
01:10particularly in the merger area, we're going to step up and we're going to exert our independent right
01:15to go ahead and try to challenge some of these matters.
01:17So Paramount's response, which Tim read, saying, and it's a lengthier response, you guys can find it, it's out there,
01:24but saying the lawsuit reflects a fundamentally flawed application of the antitrust laws
01:28and is wrong on both the facts and the law.
01:30Is Paramount right?
01:31Well, look, this is...
01:33Or is that just a response?
01:34I think it's just a response, and it's a very broad statement.
01:37You know, it gets down to the nitty-gritty.
01:39These matters are fact-based, they're very detailed,
01:42and it's about how the relevant markets are defined.
01:45The states have defined the relevant markets one way.
01:48I'm sure Paramount would say that's all wrong.
01:50Those are not the proper way to look at the way we compete.
01:53That's what they mean when they say they're wrong on the facts and the law.
01:56And that's going to be a main argument in this case.
01:58Are these markets defined properly or not?
02:00And if they are, are these shares correct or not?
02:03And do they depict a deal that could cause harm?
02:06I have to say that even in the markets the states have defined, which are narrow,
02:10which they had to do in order to push the shares up,
02:13the shares are very close to being borderline.
02:15They barely exceed those thresholds that suggest harm from a deal.
02:19So this is a close case.
02:21What, I mean, what are the probable outcomes here,
02:24or at least like a timeline for outcomes?
02:26So what the states are going to have to do still is file for a preliminary injunction,
02:30because right now the companies can't close their deal.
02:33They're waiting for UK, and they're waiting for the European Commission to decide.
02:37But once those two regulators come through,
02:39and I think they probably will clear the deal eventually,
02:41they have no legal impediment to closing.
02:44And once they've closed and they've integrated,
02:46it's highly unlikely that these states can convince a judge to unscramble the eggs
02:50and force them to unwind.
02:51So as we get closer to a UK decision, which may be later this year,
02:55they're going to have to get a preliminary injunction.
02:57Help me with what FCC Chair Brendan Carr said.
03:01California Attorney Journal said that they would not sue if Paramount agreed to spin off CNN.
03:05It's hard to conceive a competition antitrust theory that takes you all the way up to the point
03:09where owning or not owning CNN as part of that broader group is a legitimate line
03:13that antitrust or competition law would draw.
03:16Well, I'll say a couple things.
03:18First, the California State Attorney General, Rob Bonta,
03:21to my knowledge just a few days ago, made a statement that he hadn't said anything like that.
03:26Now, if he has, and I have missed it, you know, that's fair.
03:29But what he had said is that that isn't something, I don't know why people are presuming we want CNN
03:34to be divested.
03:35But on the other hand, one of the markets they've alleged,
03:38which is the licensing of basic cable channels to distributors,
03:41you know, there are retransmission fees that are paid by Comcast and DirecTV and companies like that,
03:46that are paid for these packages of cable channels,
03:49will go up by virtue of owning this giant package of cable channels.
03:53CNN is in that package.
03:55And if the answer is the remedy there is to divest some cable channels,
03:59CNN could be one of them.
04:00So it doesn't lack merit.
04:02Last question.
04:03Is this a case that you think is going to go back and forth for a while?
04:05They're going to be settled?
04:06And is this deal going to ultimately get through?
04:08Right now, we had showed earlier,
04:10shares of both Warner Brothers and Paramount were higher today.
04:13Well, I think that this is going to go back and forth for a while.
04:16I think the UK is going to hold things up for some months and give the states some cushion here
04:20to try to get a preliminary injunction.
04:22It puts Paramount in a tough position because they have a ticking fee that kicks in on October 1st,
04:27$0.25 per shareholder per quarter for Warner Brothers.
04:30And they're not going to like that.
04:31So I suspect if a preliminary injunction kicks in,
04:34there may be some settlement viable down the road
04:37because I would suspect Paramount's probably playing hardball right now
04:41because they think this is a weak case.
04:43God, it's so much fun.
04:44I mean, I can't wait until we say this streaming series comes out on just like...
04:48It's a little too meta.
04:49It's a little too meta.
04:50My next life, I want to come back, is Jen Reed.
04:52I'm just going to put it.
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