# Anthropic Sues Government & Paramount-WBD Deal

An episode of [Bloomberg Law](https://invisiblenetwork.ai/podcast/277975394), 18 Mar 2026, 33 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7c892d84-801f-4c0b-b0e9-ae2b0012ff5f/cd2f44b1-1420-4537-b0eb-b4110178ce4f/audio.mp3?utm_source=Podcast&in_playlist=91224201-26a6-429d-ac3c-ae2b0012ff6d

Dorothy Lund, a professor at Columbia Law School and co-director of the Ira M. Millstein Center for Global Markets and Corporate Ownership, discusses Anthropic challenging the Trump administration designating it a “supply chain risk.” Then antitrust attorney Richard Wolfram, discusses a possible wrench in the Paramount-Warner Bros Discovery deal. June Grasso hosts. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio. Anthropic,
[0:09] Speaker 1: the AI company is suing the Trump administration to stop
[0:14] Speaker 1: what it calls an unlawful campaign of retaliation. The Pentagon
[0:19] Speaker 1: designated Anthropic as a supply chain risk following a dispute
[0:24] Speaker 1: over limits the company wants on how its products are used,
[0:29] Speaker 1: in particular, its technology not being used for mass surveillance
[0:33] Speaker 1: of Americans or to power fully autonomous weapons. It's the
[0:38] Speaker 1: first time the federal government is known to have used
[0:41] Speaker 1: the designation against a US company. Anthropic is asking a
[0:46] Speaker 1: court to issue a preliminary injunction to block the government's
[0:49] Speaker 1: ban while the legal fight plays out. My guest is
[0:53] Speaker 1: Dorothy Lund, a professor at Columbia Law School and co
[0:57] Speaker 1: director of the school's Ira M. Milstein Center for Global
[1:01] Speaker 1: Markets and Corporate Ownership. Dorothy Defense Secretary Pete Hegsif designated
[1:07] Speaker 1: Anthropic as a national security supply chain risk. That's a
[1:12] Speaker 1: designation that's usually used to bar companies that are linked
[1:16] Speaker 1: to foreign adversaries.
[1:18] Speaker 2: Yeah, this is quite unusual. I think this is the
[1:20] Speaker 2: first time in US history that an American company has
[1:24] Speaker 2: been given this designation. So if you look at the
[1:27] Speaker 2: companies typically on this list, it's companies with ties to China,
[1:32] Speaker 2: ties to Russia that you know, the government wants to
[1:35] Speaker 2: say there's particular risks. You know, we would be very
[1:38] Speaker 2: cautious about contracting you know, this Chinese company or this
[1:41] Speaker 2: Russian company. It's never happened before that US company has
[1:45] Speaker 2: been given this designation.
[1:48] Speaker 1: What are the grounds for Anthropics suit against the government.
[1:51] Speaker 2: My understanding is that essentially Anthropic is saying this designation
[1:56] Speaker 2: is not being given for the right reasons. Instead, this
[1:59] Speaker 2: is fora for our refusal to accede to certain demands
[2:05] Speaker 2: that you made that we didn't want to accede to.
[2:08] Speaker 2: So you have it really identified a security threat that
[2:12] Speaker 2: would cause us to really deserve this label. Instead, you're
[2:17] Speaker 2: just punishing us and retaliating against us for not going
[2:21] Speaker 2: along with what you've demanded from us in a way
[2:23] Speaker 2: that violates our rights.
[2:25] Speaker 1: Anthropic had said that it refused to remove guard rails
[2:30] Speaker 1: against its technology being used for mass surveillance of Americans
[2:35] Speaker 1: or to power fully autonomous weapons. Can companies like this
[2:40] Speaker 1: when they're dealing with, you know, depending on the military,
[2:44] Speaker 1: put in sort of reservations like that in their contracts.
[2:48] Speaker 2: Yeah. You know, the typical sort of thinking here is that,
[2:52] Speaker 2: you know, it's a matter of corporate governance or you know,
[2:55] Speaker 2: corporate decision making for a company that is providing a
[3:00] Speaker 2: service to set certain guardrails on that, right. You know,
[3:03] Speaker 2: this should only be used in certain ways. And the client,
[3:07] Speaker 2: even if the client is the Pentagon, the client has
[3:11] Speaker 2: the right to say, well, I don't want to work
[3:13] Speaker 2: with you. I don't like this contractual limitation that you've
[3:16] Speaker 2: given me. But I can break my contract with you.
[3:19] Speaker 2: I can go with somebody else, and you know, we'll
[3:21] Speaker 2: deal with whatever repercussion to the contract says about that.
[3:25] Speaker 2: But this is how things work in the free world, right,
[3:28] Speaker 2: And it's sort of another interesting moment where the Trump administration.
[3:33] Speaker 2: You know, historically the conservative ideology has been very accepting
[3:39] Speaker 2: of this idea that private markets will lead to the
[3:43] Speaker 2: right results. Right, you wouldn't want to have the government
[3:45] Speaker 2: interfering with private markets. And if a private entity doesn't
[3:50] Speaker 2: want to do a deal on certain terms, you know,
[3:54] Speaker 2: that's that and the market will sort it out there.
[3:56] Speaker 2: Maybe there'll be somebody else that's willing to provide that
[3:58] Speaker 2: product at that price or that's service under those terms,
[4:01] Speaker 2: but that the government wouldn't then, you know, try to
[4:05] Speaker 2: get into that space and influence it. And so I
[4:08] Speaker 2: think it's sort of this interesting moment again of the
[4:10] Speaker 2: Trump administration doing something that historically conservative politicians have not
[4:16] Speaker 2: wanted to do, which is to interfere with markets and
[4:18] Speaker 2: sort of how markets set prices and terms and contracting.
[4:22] Speaker 2: Parties that don't like it can walk away, but there's
[4:24] Speaker 2: nobody forced to contract with anybody else.
[4:27] Speaker 1: The government filed papers in opposition to Anthropics motion for
[4:32] Speaker 1: a preliminary injunction, and it said that Anthropics showed hostility
[4:37] Speaker 1: in its negotiations with the Pentagon and that led the
[4:41] Speaker 1: government to question whether it was a trusted partner and quote,
[4:46] Speaker 1: for national security reasons, the terms of service for a
[4:49] Speaker 1: plaintiff Anthropic PBC's artificial intelligence technology have become unacceptable to
[4:56] Speaker 1: the executive branch. But the government didn't point to anything
[4:59] Speaker 1: that would be a security justification for the designation as
[5:04] Speaker 1: a supply chain risk, so it sort of missed the point.
[5:08] Speaker 2: Yeah, and just back to where we started in this conversation.
[5:13] Speaker 2: You know, the idea of somebody posing a supply chain risk,
[5:17] Speaker 2: is this idea of like you know, foreign infiltration, the
[5:20] Speaker 2: idea that some foreign government that is hostile to the
[5:23] Speaker 2: United States is going to get some information or some
[5:27] Speaker 2: advantage by virtue of this you know, organization freely contacting
[5:32] Speaker 2: in the United States. So even under the terms that
[5:34] Speaker 2: the government is bringing up in its lawsuit, the idea
[5:38] Speaker 2: that there's hostility towards the government, it doesn't really even
[5:41] Speaker 2: speak to this idea of you know, foreign infiltration. It
[5:45] Speaker 2: just sounds like, you know, negotiations didn't go so well.
[5:49] Speaker 2: And so again I think the hook to the designation
[5:53] Speaker 2: seems to be quite tenuous.
[5:55] Speaker 1: Anthropic is asking the court for a preliminary injunction, as
[5:58] Speaker 1: I mentioned, saying it could damage the company's reputation and
[6:02] Speaker 1: cause multiple billions of dollars in losses this year. The
[6:07] Speaker 1: hurdles to get a preliminary injunction are high. Do you
[6:11] Speaker 1: think Anthropic might clear those hurdles?
[6:13] Speaker 2: Typically a preliminary injunction an order to win, you have
[6:17] Speaker 2: to show that without getting this injunction, there's going to
[6:21] Speaker 2: be irreparable harm, and there has to be a strong
[6:24] Speaker 2: likelihood of winning on the merits right. And by the way,
[6:27] Speaker 2: this harm can't be something that can be fixed after
[6:30] Speaker 2: the fact using money damages and so I think here
[6:34] Speaker 2: in this case, I think this is a really a
[6:35] Speaker 2: good example of where a preliminary injunction would make a
[6:38] Speaker 2: lot of sense. You know, I think, Okay, so open
[6:40] Speaker 2: Aye is going to lose this government contract, right the
[6:44] Speaker 2: Department of Defense, and so that is hundreds of millions
[6:48] Speaker 2: of dollars, but it's you know, ultimately not a big deal.
[6:51] Speaker 2: But I think the bigger impact here is the government's
[6:55] Speaker 2: demand that no federal agency do work with Anthropic and
[6:59] Speaker 2: all also that other third party entities that contractor the
[7:03] Speaker 2: government also stopped doing business and Nthropic and that for
[7:08] Speaker 2: a company that is in an early stage of growth
[7:12] Speaker 2: that is, you know, in a really competitive race AI race,
[7:16] Speaker 2: not just in the United States but also globally, for
[7:19] Speaker 2: them to sort of be blacklisted like this is really
[7:23] Speaker 2: quite harmful. I mean, you know, I think they're prommentators
[7:26] Speaker 2: who've looked at this and said, this is the equivalent
[7:28] Speaker 2: of giving Anthropic the death penalty. And I don't think
[7:32] Speaker 2: that's a real exaggeration. I think, you know, in this moment,
[7:35] Speaker 2: for Anthropic to lose the ability to contract with a
[7:39] Speaker 2: broad swath of entities would really be damaging. It might
[7:44] Speaker 2: not be able to recover from that.
[7:45] Speaker 1: Forgetting the legalities for a moment. Even if Anthropic wins
[7:50] Speaker 1: and this is lifted this ban, I mean, is any
[7:54] Speaker 1: agency in the government and the Trump administration then going
[7:57] Speaker 1: to start doing business with Anthropic knowing how the Trump
[8:01] Speaker 1: administration feels about Anthropic, I mean, what the consequences are
[8:06] Speaker 1: even if it wins this lawsuit.
[8:08] Speaker 2: For sure, I think the Trump administration really believes in loyalty,
[8:13] Speaker 2: and now that they've sort of been given this scarlet
[8:17] Speaker 2: letter by President Trump and Pete Hegsas, I'm sure that
[8:23] Speaker 2: you know loyalists and individuals across the government will be
[8:27] Speaker 2: wary to work with Anthropic. I think you know the
[8:30] Speaker 2: government has directed all federal agencies to stop using Anthropic,
[8:35] Speaker 2: So I think your intuition is right there. Although I
[8:38] Speaker 2: think you know the consequences for Anthropic, although that's not great,
[8:42] Speaker 2: there's a much broader market, right Anthropic is looking to
[8:46] Speaker 2: a lot of different places for clients, including other governments,
[8:50] Speaker 2: you know, other corporate clients. And by the way, there's
[8:54] Speaker 2: been a little bit of backlash already against open AI
[8:58] Speaker 2: in the wake of their signing up a deal with
[9:01] Speaker 2: the government so you know, you could imagine that I
[9:03] Speaker 2: don't know quite how this would sort out. Would Anthropic
[9:06] Speaker 2: be rewarded by some swath of clients for sticking to
[9:09] Speaker 2: its guns and would be able to make up that
[9:12] Speaker 2: loss in the future maybe, And will Open Air I
[9:17] Speaker 2: suffer some backlash for its decision to kind of get
[9:21] Speaker 2: in there and essentially poach this client. Maybe. So I
[9:25] Speaker 2: think it's just not clear how this is all going
[9:26] Speaker 2: to shake out.
[9:27] Speaker 1: Other tech companies have filed legal briefs to support Anthropic.
[9:33] Speaker 1: Do you think that there is a concern that if
[9:37] Speaker 1: this punitive label on Anthropic sticks, that it would establish
[9:42] Speaker 1: a precedent.
[9:44] Speaker 3: Oh?
[9:44] Speaker 2: Yeah, absolutely. I mean, we're already in a moment. It's
[9:48] Speaker 2: sort of unprecedented moment in American history of executive branch
[9:54] Speaker 2: interference with private markets. And I don't want to say
[9:58] Speaker 2: this is only a feature of this administration. That's happened
[10:01] Speaker 2: in during the Biden administration and prior administrations as well,
[10:04] Speaker 2: but I think we've really seen the Trump administration take
[10:06] Speaker 2: this to new heights. And so I'm sure tech executives
[10:11] Speaker 2: all over are looking at this and saying, we don't
[10:13] Speaker 2: want to be in a situation where we don't want
[10:16] Speaker 2: to agree to certain terms with the US government, whether
[10:19] Speaker 2: it be price or substance, and then the US government
[10:22] Speaker 2: basically puts us on a list that ensures that we
[10:24] Speaker 2: can't survive. You know, I think that's a scary thought.
[10:27] Speaker 2: That's a scary path to lock down. And I think,
[10:29] Speaker 2: you know, even beyond just sort of the typical tech company,
[10:32] Speaker 2: I think AI companies should be looking at this moment
[10:35] Speaker 2: and be quite chilled because I think, you know, the
[10:37] Speaker 2: AI industry is looking down the barrel of a complex
[10:43] Speaker 2: relationship with government. You know, it could be some people say, well,
[10:46] Speaker 2: because this technology is so important, it should be nationalized.
[10:50] Speaker 2: Others say, you know, this is going to have to
[10:52] Speaker 2: be really carefully regulated, and so those regulations haven't come.
[10:56] Speaker 2: And I think Anthropic thought, well, let's get in with
[10:58] Speaker 2: the government and hopefully will have some ability to influence
[11:02] Speaker 2: the path and future direction of how this goes. And
[11:04] Speaker 2: it didn't work out so well for them. So again
[11:06] Speaker 2: I think, you know, for the subset of tech executives,
[11:09] Speaker 2: they are also working in art official intelligence. You know,
[11:12] Speaker 2: this is sort of a chilling moment because it's just
[11:16] Speaker 2: showing you how the government is really willing to go
[11:20] Speaker 2: far and interfering with private markets and they're functioning, and
[11:24] Speaker 2: it to just again the people that say, well, artificial
[11:27] Speaker 2: intelligence should be subject to really burden some regulation and
[11:29] Speaker 2: a lot of government interference. It's suggests that, yeah, the
[11:32] Speaker 2: Trump administration is on board for that.
[11:34] Speaker 1: Does it fit in anywhere that the government is using
[11:38] Speaker 1: Anthropics AI in the war where they ran right now?
[11:43] Speaker 2: Yeah, So I think this is a way in which
[11:47] Speaker 2: this decision for the government to not just decide you know, okay, sure,
[11:53] Speaker 2: maybe Pete Hegsath doesn't like how the conversations are going
[11:56] Speaker 2: with Anthropic Maybe Pete Hegxsast says, we don't like all
[12:00] Speaker 2: these conversations are going. We no longer want to work
[12:03] Speaker 2: with them going forward, and let's let's figure out a
[12:05] Speaker 2: way to sort of disentangle this. You know, this this
[12:07] Speaker 2: second step though, of trying to basically to coapitate this
[12:10] Speaker 2: company that is really providing a valuable service for the
[12:14] Speaker 2: US military and it's ongoing operations that I think most
[12:19] Speaker 2: sensible people think there aren't great replacements available. So, you know,
[12:24] Speaker 2: this is sort of a moment where government is handcapping
[12:26] Speaker 2: its own military and causing the military. You know, if
[12:31] Speaker 2: you have everything sort of up and running on Anthropic,
[12:34] Speaker 2: to then pivot to a completely different platform that most
[12:38] Speaker 2: people think is not as well cut out for this task.
[12:41] Speaker 2: You know, that's a time consuming, distracting, burdens expensive endeavor.
[12:47] Speaker 2: So to sort of handicap yourself like that and then
[12:49] Speaker 2: sort of again this is Anthropic is one of the
[12:52] Speaker 2: most important and vital artificial intelligence companies that's produced in America, right,
[12:57] Speaker 2: So it's also handicapping a home grown champion company in
[13:02] Speaker 2: this race for AI dominance. So again, it's sort of
[13:06] Speaker 2: a funny strategy on multiple fronts. And you know, if
[13:11] Speaker 2: we want to be generous to the US government, sure
[13:14] Speaker 2: that's totally within their right. If they think that their
[13:17] Speaker 2: contracting party has terms that they don't want to bide by,
[13:20] Speaker 2: that you know, you have the right to walk away.
[13:21] Speaker 2: But then to take this extra step of kneecapping them
[13:25] Speaker 2: is just bizarre.
[13:27] Speaker 1: It may be bizarre, but is it unusual for the
[13:30] Speaker 1: Trump administration? And what's the real goal here?
[13:34] Speaker 2: But I think this gets back to where we started
[13:36] Speaker 2: to with a sort of free speech element. You know,
[13:38] Speaker 2: the goal I think in this moment is to send
[13:40] Speaker 2: a message to the market, which is your failure to
[13:45] Speaker 2: bend the knee is going to cause huge punitive repercussions.
[13:50] Speaker 1: Right.
[13:50] Speaker 2: That's a message that they're trying to send. And it's
[13:53] Speaker 2: just sort of funny from a conservative, quote unquote conservative
[13:58] Speaker 2: executive because the tip conservative ideology here is like what
[14:03] Speaker 2: markets sort themselves out. We're not going to We're not
[14:05] Speaker 2: going to have a heavy handed government thumb on how
[14:09] Speaker 2: markets work. Right, And so in this moment, you know,
[14:12] Speaker 2: it's almost like we're seeing something from a playbook of
[14:16] Speaker 2: a you know, a socialist country or something like that,
[14:19] Speaker 2: where fuelty to the executive is everything.
[14:22] Speaker 1: Well, we'll see what the court thinks about this. A
[14:25] Speaker 1: hearing is scheduled for next Tuesday. Thanks so much for
[14:29] Speaker 1: joining me, Dorothy. That's Columbia Law School professor Dorothy Lund.
[14:34] Speaker 1: The dust is settled, with Paramount winning the bidding war
[14:38] Speaker 1: for Warner Brothers Discovery with an offer that valued the
[14:41] Speaker 1: company at about one hundred eleven billion dollars, including debt,
[14:45] Speaker 1: for the acquisition of the entire company wbd's film library, studio,
[14:52] Speaker 1: and HBO Max streaming service, as well as its cable assets,
[14:56] Speaker 1: including CNN. The Jonstice Department's Anti Trump division didn't take
[15:01] Speaker 1: any action to delay the closing of the deal before
[15:05] Speaker 1: the termination of the statutory waiting period. But that doesn't
[15:09] Speaker 1: stop the DOJ from stepping in, and the States can
[15:13] Speaker 1: also step in and investigate the deal, which is exactly
[15:17] Speaker 1: what California Attorney General Rob Bonta says is happening. My
[15:21] Speaker 1: guest is Anti Trust attorney Richard Wolfram, why you think
[15:26] Speaker 1: the Justice Department didn't take any action at all to
[15:30] Speaker 1: delay the closing of this deal.
[15:33] Speaker 3: The Justice Department looked at two primary markets, although we
[15:39] Speaker 3: don't know because all it did was take no action,
[15:43] Speaker 3: and in taking no action, it issues no statement. And
[15:47] Speaker 3: it presumably looked at the streaming market and the market
[15:51] Speaker 3: for the studios themselves. There are five big studios in
[15:55] Speaker 3: the streaming market. What the THEJ and the FTC do
[15:59] Speaker 3: to when we assess mergers is look at the concentration.
[16:03] Speaker 3: There are various angles or criteria by which to assess
[16:08] Speaker 3: the change in concentration, and in this case, simply adding
[16:12] Speaker 3: up the streaming markets you get less than thirty percent.
[16:18] Speaker 3: Thirty percent is viewed traditionally under a Seminole Supreme Court
[16:23] Speaker 3: antitrust case called Philadelphia National Bank as the minimum threshold
[16:29] Speaker 3: beyond which a concentration would trigger a presumption of illegality
[16:34] Speaker 3: under Section seven of the Clayton Act. It is a prophylactic,
[16:39] Speaker 3: kind of prospectively looking statute that says that a merger
[16:43] Speaker 3: could be illegal if the effect of the merger may
[16:46] Speaker 3: be substantially to affect competition. There are other criteria, as
[16:51] Speaker 3: an economic test called the Hirfindhal Hirschmann tests. Another way
[16:55] Speaker 3: of looking at would be a loss of head to
[16:57] Speaker 3: head competition. They did not use that. Interestingly, the DOJ
[17:03] Speaker 3: did rely on a loss of head to head competition
[17:06] Speaker 3: in the HPE Juniper merger, but that's a longer story.
[17:10] Speaker 3: The second market would be the studio consolidation, and in
[17:14] Speaker 3: overall percentages that also, by some measures, and I have
[17:19] Speaker 3: no inside information, but by most measures, that also would
[17:23] Speaker 3: come under thirty percent. And the HHIS also would not
[17:27] Speaker 3: trigger the presumption of ilegality under section seven. So that's
[17:31] Speaker 3: why I think that the DOJ did not act. Interestingly,
[17:36] Speaker 3: there is another element to this, and that is the
[17:40] Speaker 3: inclusion of CNN in the purchase. It was not to
[17:45] Speaker 3: be included in the Netflix deal. It was going to
[17:47] Speaker 3: be divested or hived off to another separate company with
[17:51] Speaker 3: the other cable channels.
[17:54] Speaker 1: Last week we saw the state step in to continue
[17:57] Speaker 1: the Live Nation antitrust trial after the federal government settled.
[18:02] Speaker 1: So might the states step in here as well?
[18:05] Speaker 3: Yes. The Attorney General for California, Rob Banta, announced two
[18:10] Speaker 3: Fridays ago that California is investigating. He said the deal
[18:15] Speaker 3: is not done or it's not over, and he is
[18:19] Speaker 3: enlisting other states. Prominently New York and Illinois have been mentioned.
[18:22] Speaker 3: I wouldn't be surprised if there were not others, And
[18:25] Speaker 3: I think the states have a bone in their teeth,
[18:28] Speaker 3: to put it a little crudely, because of this recent
[18:33] Speaker 3: example of the settlement by the DOJ in the Live
[18:36] Speaker 3: Nation case, and there is a lot of smoke around
[18:40] Speaker 3: how that happened. It appears to have happened without any
[18:45] Speaker 3: consultation with the forty attorney team of the DOJ on
[18:50] Speaker 3: the case or with the states. And now as we
[18:52] Speaker 3: have something like thirty two or thirty three states with
[18:56] Speaker 3: the District of Columbia pursuing it and they're stepping into that,
[19:00] Speaker 3: into that vacuum, they see this as part of a trend.
[19:03] Speaker 3: So I think that absolutely the states are interested in this,
[19:10] Speaker 3: I think they will be re examining several of these perspectives.
[19:14] Speaker 3: I don't think they're going to have an easy time
[19:17] Speaker 3: in showing any presumptive illegality with respect to the streaming market.
[19:21] Speaker 3: And by the way, Rob Monta has articulated these two
[19:25] Speaker 3: markets in particular, I think that they may have some arguments.
[19:29] Speaker 3: I'm not advocating, but I think they have some arguments
[19:32] Speaker 3: with respect to the studio consolidation. The figure I've seen
[19:36] Speaker 3: among the five majors is that a combined Paramount Warner
[19:41] Speaker 3: entity would have something like twenty seven percent of the market.
[19:46] Speaker 3: That doesn't ring the bell under that Philadelphia National Bank
[19:50] Speaker 3: threshold standard that I mentioned, nor likely under the HHI analysis,
[19:57] Speaker 3: But there's a breakdown of that and their pros cons
[20:00] Speaker 3: about that. So that twenty seven percent sort of represents
[20:03] Speaker 3: the total revenue across all business lines of the studios.
[20:08] Speaker 3: If that is broken down into theatrical movie gross receipts,
[20:13] Speaker 3: then that percentage defined as a sub market amounts to
[20:17] Speaker 3: something like forty percent. You've got a large percentage of
[20:21] Speaker 3: those big five, So that becomes a concern in the
[20:25] Speaker 3: HHIS in that case would trigger a presumption of illegality.
[20:29] Speaker 3: Then the question becomes who is getting hurt, where is
[20:34] Speaker 3: the competition being affected, and who does that effect.
[20:38] Speaker 1: You're going to stay with me, Richard. Coming up, we're
[20:40] Speaker 1: going to talk more about what might happen, including whether
[20:44] Speaker 1: the States may step in. I'm June Grosso and you're
[20:48] Speaker 1: listening to bloom. Paramount won the bidding for Warner Brothers
[20:54] Speaker 1: Discovery with an offer that valued the company at approximately
[20:58] Speaker 1: one hundred and eleven billion dollars including debt, and included
[21:03] Speaker 1: the acquisition of the entire company. The Justice Department's Anti
[21:08] Speaker 1: Trust's division didn't take any action to delay the closing
[21:11] Speaker 1: of the deal, but that doesn't stop the DOJ from
[21:14] Speaker 1: stepping in, and the States can also step in and
[21:18] Speaker 1: investigate the deal, which is what California Attorney General Rob
[21:23] Speaker 1: Bonta recently announced that state was doing. I've been talking
[21:27] Speaker 1: to Anti trust attorney Richard Wolfram. If the States step in,
[21:31] Speaker 1: would this end up then going to trial?
[21:34] Speaker 3: Not necessarily, I mean, there's always room for negotiation and signaling.
[21:41] Speaker 3: The States could present to the party's a form of
[21:46] Speaker 3: a complaint or say that they're going to sue, but
[21:49] Speaker 3: they won't. If the parties would agree to certain conditions
[21:54] Speaker 3: or else they sue they actually file, which of course
[21:57] Speaker 3: makes it a more meaningful kind of threat, and then
[22:00] Speaker 3: you know, we would see how that plays out. As
[22:03] Speaker 3: far as any conditioning that they might seek, I mean,
[22:07] Speaker 3: of course they could seek and might articulate it in
[22:10] Speaker 3: such a way as to express the desire to enjoin
[22:12] Speaker 3: the merger completely. The likelihood of their being able to
[22:16] Speaker 3: do that is I think very small. The question is,
[22:21] Speaker 3: as often happens in these mergers, you know, what part
[22:24] Speaker 3: of this could be carved out and where competition could
[22:27] Speaker 3: be preserved as they see it.
[22:29] Speaker 1: The biggest concern we've seen, especially among Democratic lawmakers, is
[22:34] Speaker 1: the independence of CNN, considering that the Ellison family is
[22:39] Speaker 1: one of the President's biggest allies and mega donors, and
[22:43] Speaker 1: we've seen changes at CBS since they took over, and
[22:48] Speaker 1: Paramount CEO David Ellison has said some conflicting things about CNN.
[22:53] Speaker 1: I mean, would that be one point? Is there a
[22:56] Speaker 1: way to solve that without disrupting the deal?
[23:00] Speaker 3: Well, it would disrupt the deal. I don't think there's
[23:03] Speaker 3: any way to solve it without disrupting the deal. From
[23:06] Speaker 3: the perspective of Paramount, because they want CNN. You know,
[23:11] Speaker 3: query why they want CNN. You know, it has its
[23:14] Speaker 3: own financial issues. I understand Query, it's independence financially to
[23:21] Speaker 3: stand on its own, but assuming it can, it's not
[23:24] Speaker 3: going to be a great provider of revenue for Paramount.
[23:28] Speaker 3: So why do they want it so badly? And the
[23:31] Speaker 3: points you mentioned suggests exactly why they do want it
[23:35] Speaker 3: so badly, So they're not necessarily going to sort of say, okay, fine,
[23:40] Speaker 3: we can you know, get rid of CNN. And David
[23:43] Speaker 3: Ellison has made statements both to the effect that they're
[23:49] Speaker 3: looking to transform it from a news casting perspective, possibly
[23:54] Speaker 3: from an editorial perspective, and he is also more recently
[23:58] Speaker 3: stated that he promises the editorial independence of CNN. It
[24:05] Speaker 3: is one thing, I think, and it's a distinction that
[24:08] Speaker 3: has to be drawn finally, to promise the editorial independence.
[24:11] Speaker 3: So in this case, presumably that would mean between CBS,
[24:15] Speaker 3: whose history under Paramount is now pretty clear, and with
[24:20] Speaker 3: the appointment of Barry Weiss as the editor in chief
[24:23] Speaker 3: and as bias Onbudsman, and now there's apparently already an
[24:29] Speaker 3: appointment of someone with no experience in this area. I
[24:32] Speaker 3: believe at or promised to be for CNN of a
[24:37] Speaker 3: bias on budsman. So independence from CBS is one thing,
[24:41] Speaker 3: but control over editorial content from above is another question.
[24:46] Speaker 3: I think they's somewhat distinct, and he has he David
[24:49] Speaker 3: Ellison has said what we want to do is appeal
[24:52] Speaker 3: to the broad seventy percent of the market. That is,
[24:55] Speaker 3: you know, sort of on the left and sort of
[24:57] Speaker 3: on the right, and it's in the middle. We just
[24:58] Speaker 3: want the truth. We're in the truth business. What could
[25:02] Speaker 3: happen This is just theoretical. I don't know what the
[25:05] Speaker 3: States intend or if they're going after this, but typically
[25:09] Speaker 3: in a situation where the enforcer looks in order to
[25:13] Speaker 3: preserve competition, as they see the need to do that,
[25:18] Speaker 3: they may seek to divest a division where they see
[25:22] Speaker 3: an overlap of competition, or they may condition the merger
[25:27] Speaker 3: on guarantees through a firewall of some kind of you know,
[25:32] Speaker 3: independence of decision making. So in this case, that would
[25:35] Speaker 3: mean a firewall where CNN preserves its editorial independence. The
[25:42] Speaker 3: reliability of that is what is in question. And given
[25:46] Speaker 3: the alliance of the lessons and you know, with the administration,
[25:50] Speaker 3: that becomes a more acute question.
[25:54] Speaker 1: The jump administration has appeared to be a lax enforcer
[25:59] Speaker 1: of the anti trust laws. We talked about the Live
[26:03] Speaker 1: Nation settlement. After only four days of trial, the head
[26:08] Speaker 1: of the Antitrust Division was fired. Assuming this deal goes
[26:13] Speaker 1: through in years to come, if a new administration comes
[26:17] Speaker 1: in and doesn't like the deal, can they do anything
[26:20] Speaker 1: about it or is it too late?
[26:22] Speaker 3: It's not too late. Under the Hart Scott Redino Act,
[26:27] Speaker 3: which is the pre merger Notification Act that sets out
[26:32] Speaker 3: the procedures for review and the timing and so forth
[26:37] Speaker 3: a deal. The approval of a deal is never done.
[26:40] Speaker 3: The eggs could be scrambled, and there is precedent for
[26:43] Speaker 3: cases where they have been scrambled. It's a case called
[26:48] Speaker 3: the Chicago Bridge and Iron. The FTC went back after
[26:53] Speaker 3: the deal was consummated, after there had been a mixing
[26:58] Speaker 3: of divisions, and they saw that there was conduct as
[27:03] Speaker 3: a result of the merger that violated, in their view,
[27:07] Speaker 3: the anti trest laws, and they went in and they
[27:10] Speaker 3: undid it. Obviously, that's hard to do and it's a
[27:12] Speaker 3: rare thing, but it can happen. And so you know,
[27:16] Speaker 3: if there were let's just say, an administration with a
[27:19] Speaker 3: different view, a more aggressive view on this particular deal.
[27:23] Speaker 3: For instance, it could go back if it found that
[27:27] Speaker 3: in its view again that there was a violation of
[27:29] Speaker 3: Section seven of the Clayton Act. You know, it's a
[27:32] Speaker 3: very rare and difficult thing to show. Let me also
[27:35] Speaker 3: mention the states they have separate independent jurisdiction to enforce
[27:40] Speaker 3: the anti trest laws, separate from the federal authorities, and
[27:44] Speaker 3: they can sue under their own statutes, but they can
[27:47] Speaker 3: also sue under the federal statutes. And there's also another
[27:50] Speaker 3: technical thing to consider. Are they able to get documents?
[27:55] Speaker 3: How can they get documents from the second request review
[27:59] Speaker 3: that the deal undertook, and typically that's done by a
[28:03] Speaker 3: waiver by the parties. The parties i think would see
[28:06] Speaker 3: it as in their interest to cooperate with that. And
[28:10] Speaker 3: the second is what's the burden of persuasion for the
[28:15] Speaker 3: states to go ahead and what's the timing for them
[28:18] Speaker 3: going ahead? And the timing would be that Bonta has
[28:21] Speaker 3: said that this is on a really fast track and
[28:24] Speaker 3: he was specifically asked does that mean you'll try to
[28:27] Speaker 3: step in in months or weeks? And he said weeks.
[28:30] Speaker 3: And the showing that the states have to make to
[28:33] Speaker 3: preliminarily and join, you know, to try to stop the
[28:36] Speaker 3: thing in its tracks while they do a further review.
[28:39] Speaker 3: Is considerably higher than for the government. The government needs
[28:44] Speaker 3: to show only general public interest harm. The States need
[28:49] Speaker 3: to show specifically anti trust injury, which means they need
[28:52] Speaker 3: to show harm to their citizens, you know, both economically
[28:57] Speaker 3: and perhaps when we talk about CNN again more general way.
[29:01] Speaker 3: I think they can probably satisfy that, but it is
[29:03] Speaker 3: a higher burden and tell.
[29:05] Speaker 1: Us how viewpoint diversity plays in the States.
[29:09] Speaker 3: Might be interested in what we might generally call the
[29:13] Speaker 3: marketplace of ideas, otherwise known as the viewpoint diversity. It
[29:18] Speaker 3: is interesting and I think sort of most illuminating to
[29:21] Speaker 3: see what the DOJ did. In July. A group called
[29:26] Speaker 3: Children's Health it's an advocacy group in which RFK Junior
[29:31] Speaker 3: was involved before he became Secretary of HHS sued major
[29:35] Speaker 3: media outlets Washington Post, BBC, Reuters, some others for allegedly
[29:40] Speaker 3: colluding with major digital platforms to censor the anti vaccination
[29:46] Speaker 3: and other views of the plaintiff, and the DOJ weighed
[29:50] Speaker 3: in with what's called the statement of interest not on
[29:53] Speaker 3: the merits of the case, not saying how they thought
[29:55] Speaker 3: it should come out, but on the law, and what
[29:58] Speaker 3: they said was that the edged censorship would violate the
[30:02] Speaker 3: anti trest law as if there was an agreement that
[30:04] Speaker 3: was shown because it suppresses viewpoint diversity, that is, the
[30:09] Speaker 3: viewpoints of the plaintiffs as to these medical issues. In
[30:13] Speaker 3: the case of CNN, the question is not that antitrust
[30:19] Speaker 3: would be supporting the views or you might say the
[30:22] Speaker 3: positioning of CNN, but rather its importance. It's almost sort
[30:27] Speaker 3: of like the obscenity test. We know that CNN has
[30:30] Speaker 3: an important place in the media landscape for viewpoint diversity,
[30:35] Speaker 3: and not as an anti trust technical point, but you
[30:38] Speaker 3: could you know, people are pretty much aware that to
[30:40] Speaker 3: the right is Fox, to the left is ms formerly MSNBC,
[30:45] Speaker 3: and there's CNN. It has global scope, it's twenty four
[30:48] Speaker 3: to seven. I think, however, you measure it whether it's
[30:51] Speaker 3: broadcast news and cable as a market or you know, digital,
[30:55] Speaker 3: and in the first CNN is about twenty percent. If
[30:58] Speaker 3: it's digital, CNN is number one. If its independence were compromised,
[31:04] Speaker 3: then that is a serious hit that I think the
[31:08] Speaker 3: DOJ would have to be recognizing as something that is
[31:13] Speaker 3: important to it. Albeit that it did not raise this point,
[31:19] Speaker 3: you know, in effectively clearing the deal and taking no action.
[31:23] Speaker 3: Why it didn't you know, people can have assumptions, but
[31:26] Speaker 3: there is a significant precedent which the DOJ itself cited
[31:30] Speaker 3: going back at least fifty years, on which this advocacy
[31:34] Speaker 3: of viewpoint diversity stands. And then simply that, you know,
[31:38] Speaker 3: California and the other states would have to show that
[31:41] Speaker 3: any suppression of that constitutes the essential finding that's required
[31:46] Speaker 3: of antitrust injury. That this is it is a form
[31:50] Speaker 3: of non economic competition. In a number of newspaper cases,
[31:55] Speaker 3: what the courts have articulated, like in two newspapers in
[31:58] Speaker 3: a town, they've adulated both economic injury let's say, the
[32:02] Speaker 3: loss of advertising with that consolidation, but also editorial and
[32:07] Speaker 3: so this is a very challenging issue, but I think
[32:12] Speaker 3: also an extremely important one, and particularly at this time
[32:16] Speaker 3: in the country.
[32:17] Speaker 1: Well, we'll be watching to see whether the California ag
[32:21] Speaker 1: takes action within a few weeks. That's Anti Trust attorney
[32:25] Speaker 1: Richard Wolfram, And that's it for this edition of the
[32:27] Speaker 1: Bloomberg Law Show. Remember you can always get the latest
[32:30] Speaker 1: legal news on our Bloomberg Law podcast. You can find
[32:33] Speaker 1: them on Apple Podcasts, Spotify, and at www dot bloomberg
[32:38] Speaker 1: dot com, slash podcast, slash Law, and remember to tune
[32:42] Speaker 1: into The Bloomberg Law Show every weeknight at ten pm
[32:45] Speaker 1: Wall Street Time. I'm June Grosso and you're listening to
[32:49] Speaker 1: Bloomberg
[32:52] Speaker 3: A

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