A coalition of 12 state attorneys general, led by California, has filed a lawsuit to block the proposed acquisition of Warner Bros. Discovery by Paramount Global, citing significant antitrust concerns. They argue the merger would lead to higher prices, reduced content quality, and less choice for consumers in the entertainment market.
Paramount vehemently denies these claims, stating the merger will create a stronger competitor better positioned to challenge industry leaders and will benefit entertainment workers. The legal challenge creates uncertainty for the deal, despite prior approvals from the U.S. Department of Justice and various global jurisdictions.
Antitrust Challenge: 12 States Sue to Block Paramount-Warner Bros. Discovery Merger
California and 11 other states have filed a lawsuit to block the proposed acquisition of Warner Bros. Discovery by Paramount Global, citing antitrust concerns. The legal action aims to prevent the combination of two major media conglomerates, arguing it would harm consumers through higher prices and reduced content quality.
In a significant move that could reshape the media landscape, a coalition of 12 state attorneys general, led by California's Rob Bonta, has filed a lawsuit challenging the proposed acquisition of Warner Bros. Discovery (WBD) by Paramount Global. The lawsuit, lodged in the U.S. District Court for the Northern District of California, argues that the merger would violate antitrust laws by leading to higher prices, lower quality content, and a reduction in choices for consumers in the film and television industry.
The legal challenge comes amidst weeks of speculation and follows an earlier report by CNBC's David Faber that a lawsuit was imminent. The deal, if completed, would combine storied film studios Paramount and Warner Bros., alongside their respective streaming platforms Paramount+ and HBO Max. Paramount CEO David Ellison has previously indicated that the streaming services would be consolidated post-transaction. Furthermore, the merger would create the largest portfolio of TV networks in the U.S., uniting CBS, MTV, and BET with CNN, TNT, and others.
Attorneys general from Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, and Washington have joined California in this legal action. In a statement, California Attorney General Rob Bonta asserted, "The unlawful merger of these two entertainment behemoths would lead to higher prices, lower quality, and less content for film and television, harming movie theaters, basic cable distributors, and ultimately, audiences on every sofa and movie theater seat in the U.S."
Paramount has responded vehemently, calling the lawsuit a "misrepresentation of competition in the entertainment industry today" and vowing to "vigorously defend the transaction." A spokesperson for Paramount argued that delaying the deal would "only harm entertainment workers who have already suffered over recent years as technology has disrupted their livelihood and cost California tens of thousands of entertainment jobs." The company contends that the merger will create a stronger, more competitive entity better positioned to challenge dominant players like Netflix.
The lawsuit highlights concerns that the combined entity would control nearly a third of films and basic cable TV programming. The attorneys general are seeking to prevent the merger from closing until the judicial process is complete and have threatened to seek a temporary restraining order.
This legal hurdle follows the U.S. Department of Justice's approval of the merger in mid-June, which found no likely harm to competition or American consumers. Various global jurisdictions have also given their assent, though the European Union is still under review with a provisional deadline of July 22. Paramount has submitted concessions to address EU concerns.
The potential financial implications of a delayed closing are significant. Paramount has agreed to pay a "ticking fee" to WBD shareholders if the deal extends beyond September 30, amounting to an additional 25 cents per share per quarter, potentially costing hundreds of millions of dollars per quarter.
Support for the antitrust challenge has come from industry groups. The Writers Guild of America (WGA) and Cinema United, a trade association for movie theaters, have released statements backing the coalition's position. The WGA expressed concerns about reduced jobs, lower wages, less programming variety, and higher consumer prices. Cinema United warned of significant and lasting ramifications for movie theaters nationwide.
Paramount and Skydance's pursuit of WBD began in September of the previous year. After a bidding process that involved Netflix, Paramount ultimately reached an agreement to acquire WBD for $31 per share. The deal has faced scrutiny over foreign funding components and antitrust reviews on both sides of the Atlantic.
