The European Commission has approved Paramount Skydance's proposed $110 billion acquisition of Warner Bros. Discovery under the EU Merger Regulation, subject to a package of commitments aimed at addressing competition concerns in the European theatrical distribution market. The decision concludes the Commission's merger review, although the transaction remains temporarily blocked in the United States pending legal proceedings brought by a coalition of 12 states.

Following a Phase I investigation, the Commission concluded that the merger would not significantly reduce competition in film production, audiovisual content licensing, television channels or streaming services across the European Economic Area (EEA). It found that the merged company would continue to face substantial competition from major US studios, including Disney, Universal and Sony, as well as Amazon MGM, A24, Lionsgate and numerous European production companies.

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The Commission's concerns instead centred on theatrical distribution. Paramount currently distributes its films in 19 EEA territories through United International Pictures (UIP), its long-standing joint venture with Universal Pictures. Regulators concluded that adding Warner Bros.' extensive release slate to that partnership would have significantly increased market concentration and transparency in those territories, potentially leading to less favourable rental terms for exhibitors and ultimately disadvantaging consumers.

To address these concerns, Paramount has committed to divest its stake in UIP within 13 months of completing the transaction. The company has also agreed that, for the following ten years, it will neither enter into any new co-distribution agreement with Universal in the EEA nor transfer Warner's distribution to distributors that also handle Universal or Disney releases in the former UIP territories. The Commission stated that these remedies fully address the competition concerns identified during its review, while an independent trustee will oversee their implementation.

The Commission considered the dismantling of UIP central to addressing the competition concerns it identified in theatrical distribution. The commitments are intended to ensure that the merged company’s films will no longer be distributed jointly with those of Universal or Disney in the affected EEA markets.

Paramount welcomed the decision, describing it as "a major milestone" towards completing the transaction and arguing that the Commission's findings support its position in the ongoing US litigation. The company has consistently maintained that the merger would strengthen competition by creating a media and entertainment group better equipped to compete with global technology platforms.

Despite the European approval, significant uncertainty remains. Earlier this week, a federal judge in California temporarily halted the merger while considering requests for a preliminary injunction brought by the states, which argue that the transaction would substantially reduce competition in film distribution, cable television and theatrical exhibition. A hearing is scheduled for 3 August, while the Writers Guild of America is pursuing a separate legal challenge seeking to block the deal. Should the merger fail to close by 30 September, Paramount would become liable for substantial daily payments to Warner Bros. Discovery shareholders under the transaction agreement.

With the European Commission having now completed its review, attention shifts back to the United States, where the outcome of the court proceedings will determine whether the proposed merger can proceed.