• UK public interest review could extend deal timeline
• CMA likely hesitant to challenge DOJ-cleared deal
• Move may be tactic to unlock remedy negotiations

The UK government’s signalled intervention in Paramount Skydance’s proposed takeover of Warner Bros. Discovery (WBD) could be intended to increase pressure on the parties in their ongoing negotiations with the Competition and Markets Authority (CMA), according to three competition lawyers.

UK culture secretary Lisa Nandy said on 30 June that she was “minded to” issue a Public Interest Intervention Notice (PIIN) under the Enterprise Act (2002) on media plurality grounds.

Her statement invited comments from the parties, which have until next Monday (6 July) to respond.

If Nandy issues a PIIN, communications regulator Ofcom and the CMA would be required to investigate the public interest and competition aspects of the deal and report back to the government.

Political influence

The rationale for Nandy’s potential intervention was not immediately clear – but is likely to be politically motivated, according to two of the competition lawyers.

“It’s possible that this is a way to intervene in the merger for some political reasons, even if there isn’t a strong enough competition case at the CMA,” said the first lawyer.

This is inconsistent with the CMA’s recent position, which has been to favour a growth agenda with a softer approach to merger control, this lawyer said.

Where ministers act in a quasi-judicial capacity, as in this case, decisions are usually heavily driven by officials within their department, a source familiar with the UK government’s thinking said.

But changes at the top of the UK government could be part of the reason for Nandy’s intervention, this source added.

Sir Keir Starmer’s defenestration as prime minister and his likely imminent replacement by former Greater Manchester mayor Andy Burnham has led to considerable ministerial showboating to attract the incoming premier’s attention, the government source added.

“Jockeying for jobs does not drive consistency,” they added.

Nandy’s potential intervention could cause a delay and “is super hypocritical,” said the third competition lawyer. “For ages, the UK government has been clobbering the CMA when it’s been US-US deals, then this happens,” the third lawyer said.

Indeed, the CMA was bruised by its widely criticised intervention in the Activision/Microsoft deal back in 2023 and is likely keen to avoid that level of opprobrium in the WBD transaction, the first lawyer said.

This will be especially true given the US Department of Justice (DOJ) has cleared the deal, this lawyer said. CMA staff are “treading on eggshells” around fears they will be perceived to have overreached, they said.

Remedy concerns 

So, if the CMA has a strong view that certain remedies should be required from a UK competition perspective, it might have sought the political cover a PIIN would provide, the second lawyer suggested.

The CMA began its Phase 1 review on 9 June and the statutory deadline for that is 7 August.

“It’s likely that the parties won’t give the CMA the divestiture package they want, so they’ve said, ‘Let’s escalate this to the Secretary of State,'” this lawyer said.

Potential UK remedies are expected to fall into two broad areas: competition concerns in children’s television channels, including Cartoon Network and Nickelodeon, and media plurality issues linked to UK broadcasting assets such as Channel 5, they said.

“This could be just to get the parties to agree upfront to a remedy with the CMA,” this lawyer continued. “The UK doesn’t want a fight; it is bluff.”

The combined position of Cartoon Network and Nickelodeon in the UK could account for around 50%-60% of the relevant market, giving rise to traditional competition concerns, this lawyer added.

Secondary legislation 

UK law does not allow for online on-demand programme services like Paramount+ to fall under the media plurality rules.

However, Nandy said in her statement she could introduce a new or amended public interest consideration under the Enterprise Act to enable her to intervene. The secondary legislation allowing this would not require a parliamentary vote.

Such a move would be unusual because there have only been two new public interest considerations introduced since the Enterprise Act came into force in 2002, said the third competition lawyer and a consultant familiar with the situation. Once was during the global financial crisis and the second time was during COVID, “which are much bigger crises,” the consultant said.

“It’s odd in that one doesn’t normally think of online on-demand platforms being an important focus of plurality. You think of newspapers and national news services in terms of what you’d worry about with media plurality,” said the first lawyer. “Who gets their news from Netflix?”

Timing

Lawyers agreed that one immediate consequence of a PIIN would be greater uncertainty over the timing of the UK review. Unlike the CMA’s statutory Phase 1 timetable, the reporting deadlines following a PIIN are determined by the Secretary of State.

“If the Secretary of State calls it in, my understanding is that then they take over the timeline, so both for the competition and the public interest side,” the consultant said.

In that case, the CMA would give its report privately to the Secretary of State instead of publishing it publicly, the consultant said. “Then the Secretary of State decides at the end of a timetable that she has set out what decision she makes in Phase 1,” the consultant said.

Under the merger agreement, if the deal is not completed by 30 September, Warner Bros. shareholders are entitled to receive an additional USD 0.25 per share for each subsequent quarter until closing, amounting to roughly USD 650m for every three-month delay.

Recent media PIINs operated over a timetable range of 30 days to nearly four months, the lawyers noted.

One pointed to the Northern & Shell/Trinity Mirror intervention in 2018 which took one month, while another noted that the Telegraph/Daily Mail case allowed roughly two months.

Other media interventions, including Sky/Fox and RedBird IMI’s proposed acquisition of the Telegraph, took between two and four months, said the second lawyer.

Stateside, the deal may still face obstacles despite the DOJ green light. Several state attorneys general, likely led by California, may sue to block the deal.

They may be closely watching the UK process, as an extended review in the UK could allow them more time to prepare their case.

Meanwhile, the parties have also submitted remedies to the European Commission (EC), which has set a deadline of 22 July to review them. There is also an outstanding EC review under its foreign subsidies regulation, with a 14 July deadline.

When approached for comment, a Paramount Skydance spokesperson said: “We are grateful for the continued constructive engagement with all interested government bodies and relevant authorities, including in the UK. We are confident that our proposed transaction does not pose any media plurality issues in the UK and remain confident in our stated transaction timeline.”

A CMA spokesperson said that the authority stands ready should the Secretary of State decide to issue a public interest intervention notice.

The Department for Culture, Media and Sport (DCMS) and WBD did not respond to requests for comment.