States Are the New Front Line Against Illegal Mega-Mergers
The Trump administration is selling merger approval to the highest bidder.
This is Boondoggle, the newsletter about how corporations rip off our states, cities, and communities, and what we can do about it. If you’re not currently a subscriber, please click the green button below to sign up. Thanks!
To hear the press and pundit class tell it, the proposed merger between Paramount and Warner Brothers — which would reduce the number of major movie studios from five to four — is a done deal. The Trump administration will likely rubber stamp the merger, giving Trump ally David Ellison, Paramount’s CEO, control of valuable Warner Brothers’ media properties, including CNN, after the administration allegedly worked to eliminate Netflix as another potential bidder.
But not so fast.
The Department of Justice isn’t the only game in town when it comes to merger review and enforcement. State attorneys general not only have the option of enforcing federal antitrust law on behalf of their constituents, but can also sue to block the merger under their respective state antitrust laws (which nearly every state has).
Already, California Attorney General Rob Bonta has said he is examining the proposed merger and rallying other state AGs to potentially oppose it.
“Further consolidation in markets that are central to American economic life does not serve our economy, consumers, or competition well. In fact, consolidation of markets has led to increased unaffordability, a loss of good-paying job opportunities, and fewer choices for consumers,” said Bonta in a statement. “The proposed Warner Brothers transactions must receive a full and robust review, and California is taking a very close look. We are committed to fighting market consolidation that we find unlawful.”
This is good news, as the Trump administration’s Department of Justice has made clear that it is simply willing to sell merger approval to the highest bidder or, as in the case of Paramount-Warner Bros., approve mergers as favors to allies and insiders regardless of their effects on competition or the wider economy.
For example, the DoJ approved a merger between Hewlett Packard Enterprises and Juniper over the objections of antitrust staff, based on “boozy backroom meetings” with lobbyists. It cleared a merger between real estate brokers Compass and Anywhere after insider corporate lobbying, as well.
Even more concerning, DoJ, alongside the Federal Communications Commission, waived through a merger between Nexstar and Tegna, two owners of broadcast television stations. If they combine, they will own 256 stations across the country, blowing through an ownership cap Congress placed on the audience any one broadcaster is allowed to reach. (The FCC waived that ownership cap to allow the Nexstar-Tegna merger through, because laws are apparently only suggestions if the Trump administration wants something to happen.)
States, then, have become the first line of defense for blocking illegal mergers. And it’s clear that allowing Paramount and Warner Bros. to merge runs afoul of the antitrust laws.
Why? First, the merger would have serious downstream, negative effects on wages in the entertainment industry, as fewer bidders for new projects and for labor enables those that remain to pay lower prices. It’s also likely that the merged entity would engage in widespread layoffs, as occurred when Warner Media merged with Discovery. Paramount has already predicted $6-9 billion in “synergies” should the merger go through, which is consultant speak for mass firings.
The merger would also limit consumer choice and likely raise prices, as Warner Bros.’ HBO Max would no longer be a direct competitor with Paramount’s Paramount Plus. Streaming services are already consistently hiking prices above and beyond the rate of inflation, and a more consolidated industry will have even more pricing power. The combined Paramount-Warner Bros. will also control a dizzying array of sporting events, with rights to the NFL, NHL, MLB, NCAA, PGA, NASCAR, NCAA March Madness, College Football Playoffs, UFC, and tennis’ French Open.
The story is the same with Nexstar and Tegna. Nexstar’s “consolidation playbook” involves job cuts and broadcasting duplicative content across its stations in order to eliminate the need for more staff. The combined company would also use its leverage to maximize the fees it charges other broadcast platforms to show its content, raising prices for consumers.
So challenging these mergers, at a minimum, is what state enforcers should do. Indeed, eight states have already sued to block the Nexstar-Tegna merger.
But state legislators could also use this opportunity to bolster their state antitrust laws to ensure better merger enforcement going forward — or perhaps even apply those laws to these case, depending how long they last.
The reason for doing so is that state antitrust law suffers from many of the same shortcomings of the federal version: Thanks to half a century of influence from the so-called “Chicago School,” which posited that antitrust should only be concerned with consumer prices to the complete exclusion of any other effect of corporate consolidation, precedent and case law tend to allow mega-mergers thanks to the (often incorrect) theory that huge firms will lower prices. Antitrust cases are fought over economic models that attempt to predict which way prices will go in the future, rather than on any concrete, real-world harms in the here and now.
Instead of continuing to operate on those terms, states could update antitrust law, incorporating aspects of the 2023 merger guidelines released by the Biden administration’s Federal Trade Commission and Department of Justice, which stated that mergers should be presumptively illegal if they would further consolidate an already consolidated market.
Doing so would not only prevent increased concentration today — saving consumers money and workers their livelihoods — but would allow states to begin to address the levels of extreme consolidation that have occurred across the economy, because the federal government clearly has no interest in doing so.
SIMPLY STATED: Here are links to a few stories that caught my eye this week.
Pittsburgh public schools are closing for three days while the city hosts the NFL draft.
CVS is using a bunch of shady tactics in Tennessee in an attempt to defeat a bill that would break up pharmacy benefit managers; Democratic Rep. Aftyn Behn has called on the attorney general to investigate.
The speaker of the Kansas House is unilaterally blocking a bipartisan health care bill.
Thanks for reading this edition of Boondoggle. If you liked it, please take a moment to click the little heart under the headline or below. And forward it to friends, family, or neighbors using the green buttons. Every click and share really helps.
If you don’t subscribe already and you’d like to sign up, just click below.
Thanks again!
— Pat Garofalo
Thank you! I will send the link to my state's attorney general.
I hope you will write about the disgusting settlement the DOJ made with Live Nation as well. It's an insult to every American music- and entertainment-lover.