A Supreme Court decision from 63 years ago concerning two banks in Philadelphia has resurfaced as a pivotal element in the controversy surrounding Paramount’s $110 billion acquisition of Warner Bros. Discovery. This deal was previously approved by the Justice Department and all 68 jurisdictions worldwide that reviewed it. Yet, 12 state attorneys general are now attempting to block the transaction, leaning on this historical case for their argument.
In the case of United States v. Philadelphia National Bank (PNB), the Supreme Court prohibited the merger of two banks at a time when the banking landscape was relatively straightforward. The products were primarily checking accounts and loans, and the competitive environment was localized. The Court established a somewhat arbitrary concept, stating that a merger resulting in around 30% market share would typically be seen as detrimental to competition. This benchmark, rooted in the stable and predictable realm of traditional banking, essentially answered Congress’s query about whether a merger would significantly reduce competition. Now, if the states apply the narrow market definition to invoke PNB’s 30% threshold, they could create a legal presumption of harm, which they hope will bolster their case, even without concrete evidence of consumer damage.
There’s an ongoing debate about how relevant PNB is to contemporary antitrust issues. Many legal experts argue that relying on such an arbitrary figure without fully assessing the potential repercussions of a merger is a critical weakness. In the case at hand, the concern stands out even more sharply due to how the states are invoking PNB. The application of the 30% threshold is broad, and the states have carefully drawn their market boundaries to hit that number.
In 1963, the banking situation in Philadelphia was much simpler. If you needed a checking account, you simply went to a local bank, and that was that.
The states approach the Paramount acquisition similarly, treating the entertainment landscape as if it were still confined to traditional formats. Their argument counts only wide-release films and basic cable packages, deliberately ignoring streaming services, platforms like YouTube, sports rights, and other forms of competition that vie for our viewing hours. It’s almost like declaring someone to be the tallest among a group after asking everyone taller to leave.
If you were to ask any household about their viewing habits today, you’d find that YouTube is the most-watched television source in the U.S. Streaming has taken over a significant share of TV viewing time. Giants like Netflix and Amazon are investing in live sports. The complaint implies that the new entity would dominate a market from which viewers are increasingly disengaging. The ability of plaintiffs to manipulate market definitions in order to trigger PNB’s presumption of harm has drawn criticism, leading to calls for PNB’s reconsideration. Interestingly, under certain readings of this 1963 ruling, courts are prevented from considering whether a merger might enhance overall competition. The Supreme Court previously indicated that benefits in one area cannot compensate for disadvantages in another, a principle courts have adhered to since.
This line of reasoning, however, seems to give undue weight to an overly simplistic interpretation. At its core, PNB suggests that a merging firm can’t defend against claims of harm in one market by citing unrelated advantages elsewhere. It doesn’t instruct courts to disregard everything outside a narrowly defined market, but some enforcers have been applying it as if it did, which is what the states are relying on.
The central question surrounding this deal—whether merging two traditional studios would strengthen their competitive stance against companies like Netflix, Amazon, Apple, and YouTube—deserves genuine consideration. In a streaming-dominated landscape where content reigns supreme, the drive to continuously produce fresh films and shows is crucial for motivating both studios to improve their offerings. The competitive factors at play must not be overlooked.
And then there are consumers—the simplest and perhaps most crucial question is: how would an average viewer experience harm from this merger? The states focus on statistics rather than concrete stories of real damage, possibly because the narrative of harm is less compelling than the numbers.
Now consider it from another angle. If the deal goes through, it could lead to a single studio with the scale and motivation needed to compete against tech giants. But if it falls apart, we’d be left with two independent companies struggling to keep pace. Blocking this merger doesn’t preserve competition.
Antitrust laws are intended to protect competition and, by extension, the individuals who benefit from it. A metric designed for small, neighborhood banks simply can’t be used to evaluate a business where, for instance, a teen’s smartphone competes with a movie theater.
There’s a broader issue at play here as well. Federal regulators conducted a contemporary analysis and approved the deal, yet a dozen state officials re-evaluated it using a 63-year-old standard in a court of their choosing. If that can happen with any deal, federal approval doesn’t hold much significance.
Congress should ensure that large-scale deals receive a single expert review under a modern standard, as is customary in Europe. Until that happens, Philadelphia National Bank will continue to be invoked in debates about consumer harm that the states struggle to substantiate.
