12 states sue to block Paramount and Warner Bros merger

California and 11 other states sued Monday to block Paramount Skydance Corporation’s $110 billion acquisition of Warner Bros. Discovery, opening a new front in a fight over whether states, not Washington, will become the main brake on media megamergers. California Attorney General Rob Bonta led the coalition and said the deal would be the largest in Hollywood history.

The complaint says the merger would join two of Hollywood’s five major film distributors and two of the five major basic cable channel owners, giving the combined company too much leverage over theaters, cable distributors and audiences. The states said the company would control 27% of wide-release theatrical distribution, 30% of blockbuster film distribution and 27% of the basic cable bundle, figures they say show a direct loss of competition in markets that shape both what gets made and what reaches consumers.

Bonta and the other attorneys general, from Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington, argued that the transaction would violate the Clayton Act by lessening competition in wide-release theatrical distribution, top-grossing theatrical distribution and basic cable licensing. They asked Paramount and Warner Bros. not to close the merger while the case moves through court and said they would seek a temporary restraining order if necessary.

Paramount has countered that the combination would create a stronger streaming rival to Netflix, Amazon and Disney. David Ellison has said the merged studio would release 30 movies a year, and Paramount has said it would cut $6 billion in redundant infrastructure, marketing and corporate jobs. Those efficiencies are the center of the companies’ case, but the states are betting that claims about scale will not outweigh the loss of bargaining power for theaters and cable operators, or the reduced choice that comes with one company absorbing a large share of both movie distribution and basic cable programming.

The Justice Department approved the deal in June, saying it was not likely to harm competition in streaming video on demand, linear television or film production and distribution for theatrical release. The state lawsuit now makes the courts the next test of whether that federal green light is enough, even as Paramount’s ticking fee could add about $650 million per quarter if the deal does not close before October. Theater owners, actors and writers have already lined up against the merger, warning of fewer films, fewer jobs and less consumer choice.