Democrats in Congress are taking aim at the pending $43 billion merger of WarnerMedia and Discovery, pushing the Justice Department to scrutinize the transaction on antitrust grounds.
In a letter sent Monday to Attorney General Merrick Garland and Justice Department antitrust chief Jonathan Kanter, the legislators assert that too much consolidation in media will hurt competition in Hollywood's labor market and result in less diversity overall in content.
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"This transaction raises significant antitrust concerns. In particular, the merger threatens to enhance the market power of the combined firm and substantially lessen competition in the media and entertainment industry, harming both consumers and American workers," the letter states. "In light of these concerns, we respectfully urge the Department to conduct a thorough review of this transaction to ensure that it does not harm American consumers and workers by illegally harming competition."
The letter was spearheaded by U.S. House member Joaquin Castro of Texas, Sen. Elizabeth Warren of Massachusetts, House member David Cicilline of Rhode Island, who is chair of the House Antitrust Subcommittee; and House member Pramila Jayapal of Washington, who is chair of the Congressional Progressive Caucus. It's also signed by Sen. Ben Ray Luján of New Mexico and more than two dozen other liberal House members, including Alexandria Ocasio-Cortez and Jamaal Bowman of New York, Barbara Lee, Ted Lieu, Zoe Lofgren and Juan Vargas of California, Al Green and Sheila Jackson Lee of Texas and Rashida Tlaib of Michigan.
The outcry over the transaction unveiled by AT&T and Discovery in May is a sign that media watchdog organizations and others are preparing to step up public pressure on the Biden administration to monitor the pace of M&A in Hollywood and beyond.
The spur to the Justice Department comes as Kanter's division prepares to make decisions next year in its review of the complicated spinoff agreement that has an enterprise value of more than $100 million. There's chatter that industry concerns about the market clout that Disney now flexes across the global entertainment eco-system since its 2019 merger with 21st Century Fox could encourage Biden's Justice Department to take a hard look at the Discovery-WarnerMedia combo.
The deal will bring Warner Bros., HBO and HBO Max, CNN, TNT, TBS and other Turner networks together with Discovery's global suite of lifestyle, unscripted and how-to channels. The goal behind bulking up is to make the enlarged company a more formidable competitor in the global streaming race with Netflix, Disney, Amazon and others. AT&T is eager to send WarnerMedia to a new home through the spinoff that leaves AT&T shareholders with 71% of the equity in the new company, to be run by Discovery's management team.
In the letter, the Democratic legislators raise concerns that employees lose out when two formerly separate large employers become one.
"Competitive markets create more high-quality jobs and give workers more freedom and flexibility to change jobs and negotiate for better pay and working conditions. Furthermore, in the absence of competition, the rise of employers' market power reduces the power of workers to "voice and exit," increasing their risk of exploitation," the letter states. "Enforcement of our anti-merger laws is especially critical for workers from marginalized communities. In the past, mergers across all industries have disproportionately led to job losses for workers identifying as racial and ethnic minorities compared to their white counterparts."
Signed by numerous members of the Congressional Hispanic Caucus, the warning to Garland cites the low representation of Latinx communities at all levels of media as a reason to be vigilant about maintaining diverse voices on the airwaves and on the big screen.
"Despite representing nearly one-fifth of the population, Hispanics are systematically the most under-represented on-screen compared to other demographics' population share," the letter states. "A more consolidated, less competitive marketplace may only reduce the competitive pressure on media companies to provide consumers with more diverse and inclusive programming."
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