Paramount Settles Suit & EPA Repeals Climate Controls

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1:31This is Bloomberg Law with June Grosso from Bloomberg Radio. This settlement is not a vote of support for this merger. It is not a blessing of the broader merger. Broadly speaking, we believe further consolidation in markets that are central to American economic life doesn't serve the American economy, consumers, or competition well. The settlement of the antitrust lawsuit brought by 12 states may not be a vote of support for Paramount's historic$110 billion acquisition of Warner Brothers, but it was a vote to remove the final obstacle to the deal. Attorneys general from 12 states and the Writers Guild had sued to block the deal, arguing that it would give Paramount an undue share of the movie and cable TV industries.

2:29The settlement announced by California Attorney General Rob Bonta doesn't do anything to change that dominance. It just calls for some new commitments from the company without any divestitures. The block, the merger coalition, which represents more than 40 organizations that oppose the tie-up, slammed the settlement calling it a sweetheart deal. Quote, we are disappointed and angry that the interests of average Americans have been trampled to benefit oligarch billionaires. The blockbuster deal will vastly reshape Hollywood, with Paramount now controlling two of its biggest studios, two major subscription streaming services, and dozens of TV channels ranging from CBS to HBO.

3:18Joining me is Bloomberg Intelligence Senior Litigation Analyst Jennifer Rhee. Jen, what is Paramount giving up to get this settlement?

3:28Jennifer Rie:Very little. Really, at the end of the day, I think this is a win for Paramount and a surprising settlement because we all expected something structural, a structural aspect. And that's where I see it as a win for Paramount because there's nothing structural in it. By that, I mean, June, that they have to sell something rather than just making a bunch of promises about how they're going to behave once they're merged. Now, there are some divestiture commitments in here, but only if the merged company is in breach of certain terms, of which I doubt they'd be in breach of because it's actually a pretty easy agreement with which they can abide.

3:59And I understand that a lot of these terms Paramount had been offering for months, including releasing 30 films a year in theaters.

4:09Jennifer Rie:Yes, you know, they had. And I think in some ways, I believe some of these commitments really aren't a big change from the way they've just always done business. You know, for instance, people are talking about this commitment to release 30 movies to theaters every year. Now, that's release, not make. So it doesn't necessarily have to be a movie that they produce, but they only have to either produce or co-produce 50%. So that's the first thing. And it's really not that different from what they're already each individually. doing. So this isn't asking for much from Paramount. And it seemed like California and the states were holding all the cards.

4:48Paramount was set to face late fees of$7 million a day if it didn't close the deal by the end of the month and$7 billion if the deal fell apart. The states beat Paramount in court, winning a court-ordered pause on the merger, and the company agreed to pause the merger until as late as next June. It seemed like they had an edge in the negotiations at this point.

5:14Jennifer Rie:Absolutely. It was a very odd situation because I think the states very much had leverage, not because their case against the merger was so strong, because honestly it wasn't that strong, but because time. Time and the financial aspects were on their side. And I really think that they could have waited this out. It would have put more pressure on Paramount. Maybe they might have gotten better terms. But then Paramount, knowing I believe that it didn't have the leverage it needed for a settlement negotiation to come out favorably, threatened to leave California. And I think that's what did it, because that would have been devastating on the state and had an impact on the state's economy, as well as so many employees and people who live there.

5:52Jennifer Rie:And I think it was that threat that the attorney general of California called blackmail. I think of it as just trying to do what they can to get leverage that did give them the leverage to get to this settlement and to get to it when they did, which was mid-September. And I kind of thought late September would be more likely. Apparently, pressure was on the Attorney General Bonta from the governor, L.A.'s mayor. I mean, would Paramount really have left California in the end? It really would have been a major disruption to their business and actually quite an endeavor and very expensive for them.

6:24Jennifer Rie:And that was the big question. You know, it was funny. I had so many clients saying, you know, are they going to do this or not? Is this a real threat or not? And I'd say, look, I'm not in their head. I can't say what the company would or wouldn't do. But it was enough of a threat. There was enough of a concern that it did what they wanted it to do, which was to get a settlement out of the states and a settlement that's widely favorable in my view to Paramount. So California had its reasons for this. But the other states, and there were several states that were holding out, including New York, Connecticut, Massachusetts, and Minnesota.

6:57According to Bloomberg sources, they decided that the expense of litigating without California would be too much. So litigation would be too much for those states?

7:08Jennifer Rie:You know, I have to say that if you look at the cases where states have been the plaintiffs and alone without the federal government or without private parties, it tends to be pretty big groups of states. You have 12, you have 14. I think it was something like 14 when the state sued to block T-Mobile and Sprint. You had a pretty big group of states going after Nextar and Tegna and also a big group of states going after Live Nation. They have very small group. You know, they have one or two antitrust attorneys. They don't have the money. They don't have the physical resources. And then they're going up against major heavy hitter lawyers on the other side and unlimited resources, essentially.

7:44Jennifer Rie:They really do need – and California was leading. So you have to remember that this litigation now has been going for quite some time. California has been in the lead. It is a little bit difficult for another state to take over that role and jump in. So I do think that once California and other states, aside from New York, had decided that they were going to settle, the other states really had to, as did the Writers Guild of America. which was also a plaintiff. Yeah, the Writers Guild apparently was blindsided. Right. I haven't seen as much news, but the settlement they reached is even weaker.

8:16Jennifer Rie:And I think they must have been blindsided because their concerns about harm were to writers markets, writers of movies, writers of television shows, writers that are signed on contract with studios. And instead, what they agreed to was some guarantee of employment for CBS News Bureau, which is different from the areas which they said would be harmed. So now let's talk about that. You have now Paramount is going to control both CBS News, and we've seen what's happened at CBS News. So they'll control CBS and CNN. And apparently the Connecticut Attorney General was really pushing for divestiture of those networks, but Ellison would not agree to that.

8:54So now there's going to be an independent editorial oversight board. What does that mean?

9:00Jennifer Rie:Well, you know, let's just say that it's really something that's quite unenforceable. So it's a board made up of five people. They have to be journalists, retired or currently acting journalists. And there are a bunch of qualifications written into the settlement as to what that means to be an experienced journalist. And no more than two can be from the same political party. But here's the kicker. They will be appointed by Paramount. So Paramount will be picking these five people, even though no more than two can be from one political party. So they're picking the editorial board that's supposed to oversee their own business, which that seems to me a little bit ridiculous if you really wanted this neutral editorial board.

9:41Jennifer Rie:But the board is intended to establish guiding editorial principles. And those principles are supposed to be based on CBS News's and CNN's standards and practices now before they close. So whatever their practicing policies are now, they're supposed to stick to those, and this board is supposed to make sure that they stick to those. And then they're going to resolve disputes if they arise between CBS News or CNN and the management of the combined company. So, I mean, under that, could Paramount put Barry Weiss in charge of CNN? Oh, I do think so, yes. I don't see why not. There's nothing in this that would prevent that as far as I've seen.

10:19And so let's say you see that there's pressure on CNN to take a conservative turn to, let's say, have more stories in favor of the administration. What can be done? Anything?

10:31Jennifer Rie:Well, the first thing that would happen is if there was a dispute, if the journalists object to this, then this dispute between those journalists and the Paramount management would be resolved by this editorial independence board. Now, there's another layer that oversees this entire agreement. There's a monitor, right? There will be an internal monitor and then also an outside monitor chosen by the states and Paramount together. And then that monitor could step in. But the thing is, June, if there's some problem, if whatever's happening is considered a breach, really the only way to fix it, the only way to make the company act differently would be then to go back to court.

11:07Jennifer Rie:You'd need the states. You'd need the attorney generals to agree. They'd have to bring this up back in court in front of the judge that was overseeing this litigation to start. And, you know, that's a lot. And I'm not so sure I see something like that happening. You said before the state's case wasn't necessarily great. But you have this one company controlling two of Hollywood's biggest studios, two major subscriptions, streaming services, and dozens of TV channels, ranging from CBS to HBO. Why isn't that a good case for antitrust? Because at the end of the day, antitrust cases in court, to have a strong case in court, it's going to come down to the way markets are defined and market shares.

11:46Jennifer Rie:It's really mathematical at the end of the day. You look at the market, you look at the market shares in that market, and there's a computation you can do to determine how concentrated that market is. And the guidelines that are used by the Department of Justice, Federal Trade Commission, and generally used by the judges, even though they're not binding, give you a number. And they say, well, if it's over that number, you have a presumption of harm. If it's under that number, you really don't. You're probably not going to win. To get over that number, the states define the markets in a very specific way.

12:16Jennifer Rie:That could be rebutted. And they used market share numbers from a very specific time period. And if you change that time period, those market shares change quite a bit. And using what they used, which Paramount would call gerrymandered, I would call just good advocacy, by using those numbers, they actually barely hit those thresholds of harm. Right. So this was their problem. And if Paramount could have come into court and sort of poked holes in the way they define the market or poked holes in that time period they use for shares, it would have been problematic. And one other really big thing is that in merger cases where you have the threat of new entry, the threat of new entry can be a really good defense.

12:55Jennifer Rie:OK, these may be our shares today, but we have all these other new entrants nipping at our heels and we can't really do anything to let them take our share. And you do have new studios. There's an independent called A24. You have Apple making movies. You have the combined Amazon MGM making some new movies. So they had a decent argument that we have some new entry. So, Court, you really shouldn't even pay much attention to these static market shares because they're not going to be the picture in a year from now or two years from now as these other studios continue to make movies. And so I think that what the states had was a good enough case for that complaint and a good enough case to get their temporary restraining order.

13:31Jennifer Rie:But I view it as fragile. That's how I like to think about it. Kind of easy to poke holes in once Paramount got into court. There was a lot of pressure to let this deal go through on the federal level. I mean, Ellison, father and son, very close to Trump. There was lobbying there. And we saw what happened with the Live Nation antitrust case where it fell apart when trial had already started because of a deal made in D.C. So in a different administration, do you think that the feds would have challenged this? Yes. Yes. I heard rumors. I don't know if they're true or not. Reports that there were DOJ staffers and, you know, the staffers tend to be there a long time.

14:11Jennifer Rie:They're not necessarily politically affiliated. You know, they're neutral politically that the staffers were opposed to this. And it was the decision was made over their head to settle. I do think in a different, particularly if it had been the previous Biden administration, that there probably would have been either, you know, a challenge that was settled with a stronger settlement than this. I think they would have demanded some divestiture, particularly of some cable channels, or they would have actually gone to court to try to block it. They're paying so much. There's investments from outside groups.

14:42Is this deal going to be profitable for them?

14:45Jennifer Rie:Well, that's the big question now. And I think you'll have to talk to my colleague, Geeta Ranganathan, about that, who's an expert in these companies and these industries. I will say this, that those assets, the Time Warner assets, have a checkered history in terms of their acquisition and success. Those assets, the Warner Brothers assets, have been bought and sold numerous times, and the buyers have not had success. And the craziest thing is that this is such a full circle case, June, because the last time those assets were sold was when AT &T acquired Time Warner. and the Department of Justice went to court to try to challenge that.

15:19Jennifer Rie:And the assistant attorney general in charge of antitrust that challenged the deal was Macon Delrahim, who is now the general counsel at Paramount that guided this through. And at the time, he went to court against AT &T and Tom Warner because he insisted that they divest CNN. And they said, no, we won't do that. And AT &T won in court. Now, sadly for them, they did not make a success of with these assets, as has been the history. I'll sort of think of them as cursed. But it's interesting to me that he's come back around to be involved again in the control of CNN. So tell me this, and we've talked about this before, but how is the Trump administration in the antitrust area?

15:57Are they being any more aggressive than last time we talked? It doesn't seem like it. No.

16:03Jennifer Rie:The answer would be no. And I can give you some data that backs that up so far in 2026, as we come into the fourth quarter, there has been not one single challenge without a simultaneous settlement to a deal by the Department of Justice. I don't even know if there's been one by the FTC. Trump's FTC has challenged a few small healthcare deals, and one deal related to do it yourself adhesive for construction, Gorilla Glue. Oh, Gorilla Glue. Right. Okay, now I get it. I have it at home. Right. So there have been very few challenges across the board since the Trump administration enforcers took over by both the FTC and DOJ.

16:40Jennifer Rie:But really, what's glaring is this year, nothing at all by the Department of Justice. So when you look at it that way, it's a very business friendly enforcement era that we're in on the M &A side right now. And, you know, they're beginning also to settle some of the monopolization suits as well that were existing that they inherited when they took over. And I think we'll probably see a settlement of a suit that's been running for a few years now against Apple, we may see a settlement of an FTC suit against Amazon, I'm just guessing. I'm not talking in the near term, but in the longer term, the ones that are left over that were started by the Biden administration.

17:15So the effort goes into settlements instead of bringing new cases. Thanks so much, Jen. It's great to have you on again. That's Bloomberg Intelligence Senior Litigation Analyst Jennifer Rhee. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful.

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18:44Turning to environmental law news, the Trump administration has announced rule changes that will effectively erase efforts undertaken by Presidents Barack Obama and Joe Biden to address climate change. EPA Administrator Lee Zeldin announced the agency is repealing rules that limit planet-warming greenhouse gas emissions from coal and gas-fired power plants, one of its most aggressive moves so far to unwind U.S. environmental regulations. It means providing companies that choose to invest in America with the certainty that their work will pay off and their money won't get tied up in unnecessary burdensome regulatory battles.

19:27The EPA says removing the rule will save power plants more than$300 billion in costs. It also estimates it will result in an additional 533 million metric tons of carbon dioxide emissions by 2040. This follows the agency's axing in February similar EPA climate standards for cars and trucks, another major source of emissions, and the reversal of the legal underpinning for those rules known as the endangerment finding. Joining me is environmental law expert Pat Parenteau, a professor at the Vermont Law and Graduate School. Pat, where do we stand with the EPA repealing these rules? So this is the second shoe to drop following EPA's repeal of the endangerment finding, which of course, as we've talked, undergirds all of the regulation of greenhouse gas emissions from every source, you know, mobile sources, cars and trucks, but also stationary sources, power plants, etc.

20:33So they've already repealed the tailpipe emission standards for cars and trucks. And now they've repealed the greenhouse gas controls for power plants. And in addition to repealing the Biden administration rules for power plants, they've also initiated another rulemaking to completely eradicate greenhouse gas emissions from the Clean Air Act. So this is a two-step kind of process that they're engaged in. But all of it is premised on their argument that, in fact, EPA lacks authority to regulate greenhouse gas emissions under the Clean Air Act. So, you know, that's what they're going for. What they want is a case to get back to the U.S.

21:23Supreme Court and have the court review its ruling in the landmark Massachusetts versus EPA case and either overturn it completely or at least revise it to the point where it agrees with EPA now that EPA doesn't have the authority to regulate these emissions. So that's kind of where we are. So if EPA doesn't have the authority to regulate greenhouse gas emissions, then which agency has the authority? Well, no federal agency would. The question would be, does that open the door to state regulation? And the answer would be, yes, it would. I mean, to the extent that some states, like California, of course, and others, might be willing to step in and try to fill the gap.