Twelve states, led by California Attorney General Rob Bonta, filed a lawsuit on Monday to block the proposed acquisition of Warner Bros. Discovery by Paramount Skydance Corp. The coalition argues the deal would stifle competition and raise consumer costs, while Paramount maintains the merger complies with antitrust law and will bolster industry competitiveness. The deal, which has been cited in varying reports as an $81 billion to $111 billion transaction, is expected to close during the third quarter of this year.
Rob Bonta Leads 12-State Coalition to Halt Paramount-Warner Merger
Legal Challenge and Antitrust Claims
The antitrust lawsuit, filed in the U.S. District Court for the Northern District of California, seeks to prevent the consolidation of two of Hollywood’s last five legacy studios. Led by California Attorney General Rob Bonta, the 12-state coalition contends that the union of Paramount and Warner Bros. Discovery would violate the Clayton Act by substantially lessening competition in the film and television industries. The states involved in the lawsuit include California, Oregon, Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, and Washington.
The states argue the merger 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.” Oregon Attorney General Dan Rayfield stated, “If this massive corporate merger is allowed to go through, Oregonians will pay the price – through higher bills, fewer jobs, less choice at the box office, and fewer editorial voices.” According to the lawsuit, the combined company would control nearly one-third of U.S. theatrical film distribution and basic cable programming, effectively eliminating competition between two of the nation’s five largest basic cable companies.
The coalition is asking Warner and Paramount not to close this merger “until after the judicial process concludes.” If the companies do not agree to this, the coalition is prepared to file a temporary restraining order.
David Ellison Weighs Moving Paramount Headquarters Out of California
Paramount’s Defense and Corporate Strategy
Paramount has rejected the states’ characterization of the deal. In a statement released Monday, the company argued that the lawsuit “distorts settled antitrust law” and maintained that its merger would instead create a “stronger competitor.”
Behind the scenes, the friction with California regulators has prompted internal discussions at Paramount regarding its future in the state. According to reports cited by Semafor, Paramount CEO David Ellison’s confidantes have pushed him to consider moving the corporate headquarters and reallocating much of the company’s $30 billion in planned annual spending outside of California if Attorney General Bonta were to sue to stop the merger. One Ellison adviser described the current regulatory environment as “inhospitable” for Paramount to operate in, noting that the state’s hostility could push the company to move.
When asked about this potential relocation at a Monday press conference in front of Los Angeles’ Hollywood sign, Bonta responded that Paramount’s considerations “seemed like a last-ditch effort to blackmail my office.”
Paramount Offers Production Commitments to Save Merger Deal
Negotiation Efforts and Industry Impact
Paramount has made repeated entreaties to Bonta to strike a deal that would allow the merger to proceed. The studio proposed a firm commitment, via a consent decree, to produce 30 films annually, with a 45-day theatrical release window and a 90-day streaming window. Additionally, the company offered promises to keep both Paramount and Warner Bros. lots open in California. Ellison and his executives have argued that the combined company would create jobs in California, helping to stymie an existing production exodus that has seen thousands of entertainment jobs lost to other states and Canada in recent years.
The proposed merger would place Warner Bros.’ HBO Max, libraries containing content like “Harry Potter,” and CNN under the same roof as Paramount-owned CBS and the Paramount+ streaming service. As the legal battle unfolds, Paramount stated, “We continue to engage constructively with the remaining few regulators around the world still considering the merger.”
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