A coalition of 12 state attorneys general (AG) on Monday filed a federal lawsuit seeking to block Paramount’s proposed $110 billion acquisition of Warner Bros. under antitrust concerns, threatening what would be the largest merger in the history of Hollywood.
The AGs, led by California AG Rob Bonta, filed the complaint in the Northern District of California. The lawsuit brings action “parens patriae,” which allows state governments to sue on behalf of their residents’ collective economic interests. The complaint asserts antitrust claims in violation of Section 7 of the Clayton Antitrust Act, which prohibits acquisitions when “the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” In a statement, AG Bonta explained:
Today, I am leading a coalition of states in challenging the proposed merger of Warner Bros. and Paramount and asking the court to block the deal. 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. … With this lawsuit, California and our sister states are fighting for free and fair markets, not rigged markets. America has no kings in government or our economy.
The lawsuit argues that combining two of Hollywood’s five major film studios and two of the largest basic cable owners would eliminate competition and provide the companies undue leverage over theaters and cable distributors, ultimately leading to higher prices and less content for consumers. Citing to Supreme Court precedent, the plaintiff AGs argue that “mergers that significantly increase concentration in a concentrated market are presumptively anticompetitive and therefore presumptively unlawful.”
In a statement issued in response to Monday’s lawsuit, a Paramount spokesperson pushed back against the claims:
The lawsuit filed by the state attorneys general, in the most generous light, reflects a fundamentally flawed application of the antitrust laws and is wrong on both the facts and the law. We will vigorously defend the transaction and demonstrate that this challenge is inconsistent with sound competition policy and the competitive realities of the media marketplace. Delaying this transaction will 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.
Because Section 7 of the Clayton Act requires only a showing that competition “may” be harmed, rather than proof of an existing monopoly or actual anticompetitive conduct, the states’ theory is forward-looking, attacking the merger’s anticipated future impacts rather than attempting to identify and current wrongdoing by either company. The plaintiff states ask the court to permanently block the merger and declare it a violation of federal antitrust law.
Paramount Skydance Corp. is a media and entertainment conglomerate whose holdings include Paramount Pictures, CBS, and cable channels such as Nickelodeon, MTV, and Comedy Central. Warner Bros. Discovery, Inc. owns its own major film studio along with cable networks including CNN and TNT, as well as HBO and the streaming services HBO Max and Discovery+. Under terms announced in February, Paramount agreed to acquire all outstanding shares of Warner Bros. for approximately $110 billion, combining the companies’ television networks and streaming platforms under single ownership.