A coalition of 12 US states has filed an antitrust lawsuit seeking to block Paramount Skydance’s proposed acquisition of Warner Bros. Discovery, escalating regulatory pressure on one of the largest media mergers in recent history despite the transaction’s approval by federal antitrust regulators.
The lawsuit, led by California Attorney General Rob Bonta and filed in federal court on Monday, contends that the roughly $110 billion deal would unlawfully concentrate power in key segments of the entertainment industry, including theatrical film distribution and cable television licensing. Bloomberg Law first reported that a multistate legal challenge was imminent, citing a person familiar with the matter.
According to reporting by The Washington Post, state officials have been examining the merger even after the U.S. Department of Justice concluded last month that the transaction was unlikely to harm consumers. Reuters previously reported that several states were preparing legal action amid concerns that the combination could diminish competition in Hollywood and lead to job losses and reduced output of major films.
The states’ complaint argues that merging Paramount and Warner Bros. Discovery would combine two of Hollywood’s major studios under a single corporate umbrella, giving the combined company substantial leverage in negotiations with movie theaters, cable distributors and content buyers. The lawsuit reportedly focuses in part on the market for large-budget “tentpole” films, a critical revenue driver for both studios.
Industry groups and labor organizations have raised concerns that further consolidation could reduce the number of major buyers and producers of entertainment content. Critics of the transaction have warned that fewer major studios could result in diminished bargaining power for creative workers and fewer distribution opportunities for independent productions.
Paramount Skydance has rejected those concerns, maintaining that the merger would strengthen its ability to compete against larger technology and streaming rivals such as Netflix and Disney. In a statement following the Justice Department’s review in June, the company said the transaction would create a stronger competitor in an entertainment market increasingly dominated by global streaming platforms.
The Justice Department’s Antitrust Division closed its investigation last month, concluding that the merger would likely “increase competition across the media and entertainment ecosystem,” according to a department statement cited by The Washington Post and the Associated Press. Federal regulators determined that the combined company could better compete for audiences, technology investments and talent in an industry undergoing rapid transformation.
Related: State Challenge to Media Deal Draws Allegations of Election-Year Motivations
The transaction would unite a wide array of media assets, including Paramount Pictures, CBS, Paramount+, Warner Bros. Studios, HBO Max and CNN. Shareholders of Warner Bros. Discovery approved the acquisition in April, marking a significant milestone toward completion of the deal.
Nevertheless, state officials have continued to pursue independent reviews under their own antitrust authorities. Reuters reported earlier this month that Oregon had sought additional records related to Paramount’s regulatory strategy and lobbying activities before later withdrawing a request to delay the transaction.
The merger has also attracted political scrutiny because of its potential impact on major news organizations, particularly CNN and CBS News. The Washington Post reported that some lawmakers and advocacy groups have questioned the concentration of media ownership and the influence that large corporate combinations could have on the news landscape.
Media consolidation has become an increasingly contentious issue in recent years as traditional entertainment companies seek scale to compete with streaming giants and technology platforms. Antitrust scholars and state regulators have argued that mergers involving content creation, distribution and streaming services warrant heightened scrutiny because of their potential effects on pricing, consumer choice and labor markets.
The multistate lawsuit now creates a significant legal obstacle for Paramount Skydance’s effort to complete the acquisition. While the federal government has cleared the transaction, the states are seeking judicial intervention that could delay or potentially block the merger if the court finds that it would substantially lessen competition in violation of antitrust law.
Paramount Skydance has continued to characterize the acquisition as lawful and pro-competitive. Warner Bros. Discovery has largely declined public comment on the litigation. The case is expected to proceed in federal court as state attorneys general pursue their challenge, while regulatory reviews in certain international jurisdictions also remain ongoing.
Source: The Washington Post
