Key Points
- A coalition of 12 state attorneys general files an antitrust lawsuit seeking to block Paramount Skydance’s proposed acquisition of Warner Bros Discovery.
- The states argue the $111 billion transaction would reduce competition, increase prices, diminish content output and harm movie theaters, cable distributors and consumers.
- Paramount vows to fight the lawsuit, arguing the combined company is necessary to compete with streaming giants like Netflix and that delaying the deal would hurt Hollywood workers.
A coalition of 12 state attorneys general filed an antitrust lawsuit on Monday seeking to block Paramount Skydance’s proposed acquisition of Warner Bros Discovery, creating the most significant legal obstacle yet for one of the largest media mergers in history.
The lawsuit, filed in the Northern District of California and led by that state’s Attorney General Rob Bonta, argues the $111 billion transaction would substantially lessen competition across theatrical film distribution, basic cable television and the broader entertainment industry. Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington joined California in the complaint.
If completed, the merger would unite Paramount Pictures and Warner Bros Studios under one company, while combining streaming services Paramount Plus and HBO Max. Paramount has previously said the streaming platforms would eventually be integrated. The combined company would also own CBS alongside cable networks including CNN, TNT, MTV and BET.
“The unlawful merger of these two entertainment behemoths would lead to higher prices, lower quality, and less content for film and television,” Bonta said in announcing the lawsuit, arguing the deal would harm movie theaters, cable distributors and pay TV consumers.
According to the complaint, the transaction would leave four companies — Paramount Skydance, Disney, Universal and Sony — controlling roughly 86 percent of the market for widely distributed films and more than 90 percent of major blockbuster releases. The states also contend the combined company would control more than one-quarter of the nation’s major basic cable channels, giving it increased leverage in carriage negotiations with pay television providers.
The attorneys general are asking the court to block the merger and have warned they will seek a temporary restraining order if the companies attempt to close the transaction before the litigation concludes. California has standing because Paramount and WBD operate film studios in the state, and Paramount has six licensed TV stations associated with its broadcast business CBS.
Paramount sharply rejected the lawsuit, calling it a misapplication of antitrust law that ignores today’s competitive media landscape: A company spokesperson said the transaction would create “a stronger, well-capitalized, creative-first media company” better able to compete against dominant streaming platforms, particularly Netflix.
Paramount also argued that delaying the merger would harm entertainment workers and California’s production economy, while protecting Netflix from additional competition after the streaming giant unsuccessfully pursued WBD last year.
The lawsuit introduces fresh uncertainty for a transaction that had appeared to be nearing completion after receiving clearance from the U.S. Department of Justice in June. Federal regulators concluded the merger was unlikely to substantially lessen competition, and Paramount has secured approvals in numerous international markets, though reviews remain ongoing in the European Union and the United Kingdom.
Following those approvals, Bonta reaffirmed his position that the transaction was “not a done deal,” affirming that there were “red flags everywhere” in the transaction but declining at the time to say whether he was seeking to challenge the matter through litigation.
A prolonged court battle could also carry a financial cost. Under the merger agreement, Paramount must pay WBD shareholders an additional 25 cents per share — approximately $650 million — for each quarter the transaction remains uncompleted after September 30.
The lawsuit drew support from Cinema United, the trade association representing movie theater owners, and the Writers Guild of America, both of which argued the merger would reduce competition, eliminate jobs and ultimately lead to fewer films and television programs being produced.
More Stories
- DOJ green-lights Paramount-Warner Bros merger; California AG says deal not done
- California, New York prepping lawsuit to block Paramount-Warner Bros deal
- Paramount asks judge to toss lawsuit over proposed Warner Bros Discovery merger
- Paramount moving forward with plan to consolidate Pluto TV, Paramount Plus technical stack
- California AG: “Red flags everywhere” in Paramount-Warner Bros deal
