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Discovery/WarnerMedia Merger Draws New Congressional Fire

Lawmakers worry the pending $43 billion merger might harm workers and create less diversity in programming.

More than 30 congressional Democrats have signed a letter sent to Attorney General Merrick Garland and Justice Department antitrust chief Jonathan Kanter, calling for an investigation into the pending $43 billion merger of Discovery and WarnerMedia, which is now owned by AT&T ( (T) - Get AT&T Inc. Report).

“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, according to Variety

“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 merger between the two companies was first announced in May by AT&T and Discovery. 

The idea was to combine WarnerMedia’s various assets such as HBO Max, CNN, TNT, TBS and other Turner networks with Discovery’s collection of unscripted programming.

As the streaming wars heat up and platforms continually vie for viewer attention and eyeballs, all while viewers continually switch between streaming services based on their current offerings. 

WarnerMedia is eager to acquire enough material to stay competitive with Netflix, Disney and Amazon. 

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In the proposed deal, AT&T shareholders would have 71% of the equity in the new company, which would be run by Discovery’s management team.  

The lawmakers have warned that the merger could have a chilling effect on the entertainment industry, as too much consolidation and lack of competition could result in less diversity in content. 

Additionally, Democrats worry that the merger could have an adverse effect on Hollywood’s labor market, and minority workers in particular, as industry-wide mergers have, per the letter, “led to job losses for workers identifying as racial and ethnic minorities compared to their white counterparts.”

The letter was organized by U.S. House members Joaquin Castro (D-Texas); Sen. Elizabeth Warren (D-Massachusetts), David Cicilline (D-Rhode Island), who is chair of the House Antitrust Subcommittee, and Pramila Jayapal (D-Washington), who is chair of the Congressional Progressive Caucus.

In response, AT&T CEO John Stankey defended the proposed merger. 

“What’s been articulated in those letters is really unfounded,” Stankey said during an appearance at the virtual UBS Global Technology, Media and Telecom Conference, as reported by The Hollywood Reporter

 “Having been through a number of these [transactions] in my career, getting letters from members of Congress is not unusual … When you have a lot of members of Congress, there’s always going to be those that have a different lens they want to put on something."

At last check, AT&T stock was down .68%, while Discovery was up 1.65%.