Twelve US states sue to block Paramount's $111 billion Warner Bros. Discovery takeover, citing cinema and competition fears

The legal challenge

Twelve US states filed a lawsuit in a California federal court to block Paramount's $111 billion acquisition of Warner Bros. Discovery. California Attorney General Rob Bonta argued the merger of the two entertainment giants would lead to higher prices, lower quality, and fewer films and television shows. The states contend the elimination of competition between Warner and Paramount would severely harm movie theaters and violate antitrust rules.

With this lawsuit, California and our neighboring states are standing up for free and fair markets, not rigged markets.

The coalition is relying on a law that prohibits mergers likely to impair competition. The states have asked Paramount to delay closing the transaction until the legal proceedings conclude. A ruling on the lawsuit is expected to take months, a delay that could cost Paramount a sum in the triple-digit millions.

Paramount's response and market reaction

Paramount countered that the lawsuit misreads the competitive reality of the entertainment industry and rests on a flawed application of antitrust law. The company said it would vigorously defend the deal. Investors appeared unfazed by the legal move: Warner shares were up roughly two percent after the states' filing.

Competition reviews are also underway outside the United States, including in Europe. Paramount has committed to paying Warner Bros. Discovery shareholders approximately $650 million each quarter as a compensation payment if the acquisition is not completed before October.

The Justice Department's approval

In June, the US government cleared the multibillion-dollar deal without conditions. The Justice Department concluded the merger would harm neither competition nor US consumers, in television, streaming, or film production. According to the Wall Street Journal, the takeover was approved by department leadership before the responsible agency lawyers could issue a recommendation on the matter.

The Ellison family and the Netflix bid

Paramount is backed by the family of software billionaire Larry Ellison, a known supporter of President Donald Trump. Paramount is led by Larry Ellison's son, film producer David Ellison, who aims to gain weight in Hollywood through the acquisition. Paramount is among the smaller players in the industry. Warner's assets include the DC superhero universe with Superman and Batman, film series such as Harry Potter, and a strong streaming business built on the pay-TV channel HBO.

Netflix had originally reached an agreement with Warner last year to purchase the streaming and studio business. Paramount persisted and submitted a higher bid for the entire Warner Bros. Discovery group, including television channels like CNN. The deal is now valued at roughly $111 billion.

Concerns over CNN's independence

Trump critics in the US fear that CNN, which belongs to Warner Bros. Discovery, could lose its editorial independence under Paramount's ownership. Trump has repeatedly said it was especially important to him that the news channel, which often reports critically on him, also change hands in a Warner deal. The newsroom of Paramount's CBS network drew attention for friendlier coverage of the Trump administration after the Ellison family takeover. At the popular newsmagazine 60 Minutes, several correspondents were dismissed, some of whom complained of politicized pressure.