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A coalition of 12 states filed an antitrust lawsuit on Monday to block the merger of Paramount Skydance and Warner Bros., defying the Department of Justice, which approved the deal last month.
The coalition, led by California
Attorney General Rob Bonta, alleges that the $111 billion transaction violates the Clayton Act by lessening competition in three distinct markets: wide-release theatrical distribution, “top-grossing” theatrical distribution, and basic cable licensing.
“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.,” Bonta said in a statement on Monday.
The suit argues that the combined company will control 27% of the wide-release theatrical distribution market, 30% of the submarket comprising “anticipated blockbuster films,” and 27% of the basic cable bundle. The states argue that such consolidation will harm theaters and cable and satellite providers that rely on competition among distributors.
Paramount and Warner Bros. are two of the five remaining legacy studios. Together, all five — including Disney, Sony and Universal — control 86% of theatrical distribution and 90% of blockbuster distribution, the states said. Warner Bros. and Paramount are also the second- and third-largest basic cable distributors, respectively.
“Consolidation here not only leads to higher prices — it also leads to fewer opportunities for important stories to come to life, and fewer ways for audiences to encounter stories, ideas, and perspectives beyond their own experiences,” Bonta said. “In this country, no one is above the law. 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.”
Paramount has argued that the deal will benefit consumers, creating a stronger streaming competitor to Netflix, Amazon and Disney. David Ellison, the CEO, has repeatedly promised that the combined company will release at least 30 films a year, maintaining and expanding the two companies’ current output.
“This type of challenge doesn’t make much sense,” said Jeffrey Kessler, an attorney for Paramount, in an interview with Variety last week. “From California’s standpoint, the deal is going to lead to more production and to better jobs and more jobs for talent in California and elsewhere.”
The DOJ gave its blessing to the merger in June, issuing an unusually lengthy commentary arguing that the deal will not harm competition in the theatrical, streaming and linear TV markets. Meanwhile, Hollywood unions have also expressed reservations, or outright opposition, to the deal, warning that further industry consolidation threatens thousands of jobs.
The states are expected to seek an injunction to block the transaction, which Paramount expects to close sometime after July 22.
The Oregon attorney general, Dan Rayfield, asked a court last week to pause the merger for 60 days, arguing that Paramount had stymied his investigation by failing to respond to document requests. Rayfield sought records of Paramount’s lobbying of the Trump administration, suggesting that the DOJ’s determination may have been the product of a “corrupt bargain.” His office withdrew the request on Friday.
The 12 states in the coalition are Arizona, California, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, and Washington. All are represented by Democratic attorneys general.
Bonta has repeatedly stated that the transaction raises “red flags,” and warned that his office would not defer to the DOJ’s position. Under the Trump administration, the DOJ Antitrust Division has backed away from several cases — including a case against Ticketmaster-Live Nation during the trial. The states have started to be more aggressive about going it alone, as when they obtained a injunction blocking the Nexstar-Tegna merger from taking effect this spring.
