The People v. David Ellison

**Eriq Gardner** (0:02)
The game within the game that's being played here is that the states want to drag this on. They want delay because they know that delay means that David Ellison is going to have to start paying huge ticking fees to Warner Brothers shareholders.
Six months of delay could be equal to $1.2 billion worth of ticking fees.

**Peter Hamby** (0:25)
Welcome to The Powers That Be Daily, a Pucks podcast focused on the intersection of Wall Street, Washington, Silicon Valley, and Hollywood, and the players who run it all. I'm Peter Hamby. It's Tuesday, July 21st. Today, I'm joined by Eriq Gardner to break down the finer points of the antitrust lawsuit aimed at blocking the Paramount-Warner Brothers merger. As Eriq explains, both sides have compelling arguments, but the inside game is also fascinating, with Democratic Attorneys General trying to delay and draw this fight out in ways that could put financial and political pressure on David Ellison and the power attorneys at Paramount.
We'll discuss all that and much, much more on today's episode of The Powers That Be.
Happy Tuesday, everybody, and welcome to The Powers That Be. I'm joined today by my colleague Eriq Gardner-Puck's legal expert to help break down the antitrust lawsuit filed by 12 attorneys general, led by California's Rob Bonta, trying to block the Paramount-Warner Brothers merger. Eriq has been following all the nitty gritty legal details of this case, including the preliminary hearing last Friday before an Oakland federal judge. The attorneys general are asking for a temporary restraining order. By the way, by the time you hear this, the judge may or may not have issued that restraining order in the case. The attorneys general are basically arguing that they want to hit pause on this deal so the case can proceed. That's a caveat. Eriq joins me today. Eriq was listening, watching that hearing on Friday. Eriq, as you write, this is a fairly conventional anti-trust lawsuit as it's written. Not a conventional case. You don't typically see attorneys general stepping in after the federal government walked away and basically greenlit this merger. So there's a lot of unusual things. They're basically saying that this is a conventional anti-trust case. They're invoking the Clayton Act and saying this will harm consumers. Were you surprised that this is the tact they took in the first place?

**Eriq Gardner** (2:46)
I don't think I'm particularly surprised. I mean, there are some professionals involved in this case. I mean, some who had top positions formerly at the FTC. And so it's a very old school approach that define a market, show how this combined company is going to be taking more than a 30% share of that market. And then under precedence, that's presumptively illegal. And it kind of shifts the burden towards the defendants to show why the merger isn't anti-competitive. They also show competitive effects on what would happen if these two companies marry.
And so from that standpoint, you're seeing a case play out that's played out many times before, where the government comes in and says, you know, this is, it's going to cause too much harm in the market. And then the defendant comes back saying, you know, your definition of the market is all off. And here's why. And so, you know, from that standpoint, from the standpoint where Paramount and Warner Brothers say, you know, the government barely talks about streaming, is something that I didn't find surprising whatsoever, because that was where do things tend to play out.
Yeah.

**Peter Hamby** (4:10)
So, when you talk about consolidation, I learned this from your piece the other day. There was a 1963 Supreme Court case, basically about a bank merger in Philadelphia. It's called the Philadelphia National Bank Case. And it basically is the precedent for modern merger enforcement. And, you know, what it came down to is that these banks in Philadelphia cornered more than 30 percent of the market. Again, the bank market in Philadelphia in 1963
How is that relevant to this case? Is it that the cable channels that would be combined here would be owned by this conglomerate and they would make up more than 30 percent of cable channels? That doesn't feel like a particularly strong antitrust argument.

**Eriq Gardner** (4:58)
Yeah. So first of all, it's not just that Supreme Court. It's everything that happened afterwards. And in fact, you know, every few years, the Department of Justice and the FTC, they come out with what's called merger guidelines. And, you know, they say, you know, this is what you can do. This is what you can't do. And, you know, one of the presumptively illegal things is, you know, a merger that, that, you know, gets to more than 30 percent of a given market.