12 Democratic states sue to block Paramount's $111bn Warner Bros Discovery acquisition

The lawsuit

A coalition of 12 Democratic state attorneys general filed an antitrust lawsuit on Monday in the US District Court for the Northern District of California, seeking to block Paramount Skydance's acquisition of Warner Bros. Discovery. The states, led by California Attorney General Rob Bonta, argue the $111 billion deal violates the Clayton Act by substantially lessening competition in three specific markets: wide-release theatrical film distribution, anticipated top-grossing theatrical film distribution, and the licensing of basic cable channels to distributors.

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 US.

The suit names Arizona, California, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington as plaintiffs.

Market concentration claims

Bonta's office provided specific market-share figures the combined entity would control. In wide-release theatrical distribution, Paramount and WBD together would hold a 27% share. For anticipated top-grossing films (a subset defined as blockbusters with wide audiences and large production budgets), the combined studio would command three-tenths of that market, or 30%. In basic cable channel licensing, where WBD is currently the second-largest player and Paramount third, the merged company would account for 27% of the market. The complaint states that for every dollar generated by wide-release theatrical films and basic cable channels, the combined company would pocket more than a quarter.

The deal would create a company with unprecedented power and influence over news and entertainment worldwide.

Financial stakes and ticking clock

Paramount CEO David Ellison said in May that the transaction was on track to close by September. The deal received approval from WBD shareholders in April and was cleared by the US Department of Justice in June, which concluded it was not likely to harm competition or consumers. However, the states are seeking to freeze the deal while the lawsuit proceeds. Any significant delay would trigger a quarterly "ticking fee" of approximately $650 million payable to WBD shareholders starting in October. Paramount is expected to use about $80 billion in debt to support the acquisition and has outlined a $6 billion synergy plan that is likely to involve significant job cuts, including in California where both companies are based.

Political dimension

The lawsuit pits Democratic state attorneys general against the Trump administration, which backed the deal through the Department of Justice's approval. President Trump has publicly praised Larry and David Ellison, the billionaire family controlling Paramount, and has urged the sale of CNN to new owners. The financing structure also involves sovereign wealth funds from Saudi Arabia, Qatar and the United Arab Emirates as major investors who would forego voting rights.

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.

Company and industry response

A Paramount spokeswoman said on Sunday that the company was prepared to address legitimate antitrust issues, adding that the merger raises no such concerns. The company expects to release 30 films per year from the combined studios. The European Commission is reportedly expected to approve the deal this month with some concessions, according to people familiar with the matter. Filmmakers, actors and industry professionals have already voiced opposition, arguing the consolidation would further reduce competition in the US media industry and concentrate control over news and entertainment worldwide.