DOJ approved deal in June; Paramount calls suit “fundamentally flawed”
A coalition of twelve state attorneys general filed suit Monday seeking to block the $110 billion merger between Paramount and Warner Bros., challenging a transaction they describe as the largest media consolidation in Hollywood history. The lawsuit, led by California Attorney General Rob Bonta, argues that combining the two studios would concentrate market power in major cinema releases, blockbusters, and basic cable channels, and would ultimately drive up prices for consumers.
Joining California in the suit were Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, and Washington. New York Attorney General Letitia James, whose office released the lawsuit announcement, said the merger “would combine two of the five major film studios and two of the five major basic cable companies, creating a massive conglomerate in markets for basic cable and theatrical film releases.”
Bonta said the deal would harm audiences. “California’s film and entertainment industry touches the lives of Americans daily — it comes into the living rooms of families, has a starring role in many young people’s first dates, and is a point of immense pride and employment for Californians up and down our state,” he said in a news release. “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.”
In a separate statement to the BBC, Bonta argued the merger would end up harming “audiences on every sofa and movie theater seat in the US.” James struck a similar note, calling the deal a threat to “over a century” of rivalry between the two studios and warning that it would create a company with “unprecedented power and influence over news and entertainment across the globe.”
The lawsuit focuses on three specific markets: major cinema releases, massive blockbusters, and cable TV channels. According to the complaint, the combined company would account for over a quarter of major film releases, and — together with Disney, Universal, and Sony — just four conglomerates would control 86% of that market. The states also contend that the merged entity would control nearly a third of the US theatrical motion picture market and basic cable programming.
The legal theory centers on the loss of competitive alternatives. “At present, if one studio demands unfair prices, a distributor can walk away and deal with the rival,” the BBC reported the lawsuit as stating. “Without that option, the lawsuit argues that theaters and TV networks will face higher fees — costs that will eventually hit consumers through pricier tickets, high cable bills, and fewer choices.” The complaint concludes, according to the BBC’s account, that “nothing justifies these substantial harms to competition.”
The suit marks the second major regulatory hurdle for a deal that had already cleared federal review. In June, the US Department of Justice approved the merger, concluding it did not harm consumers in the United States. Warner Bros shareholders approved the transaction in April at Paramount’s offer of $31 per share, a deal worth $110 billion. The state attorneys general have asked the companies to halt the transaction pending judicial review and have threatened to seek a temporary restraining order if they do not comply.
Paramount responded. In a statement reported by the BBC, the company called the lawsuit “fundamentally flawed” and “wrong,” and said it would “vigorously defend the transaction.” Paramount also argued that delay would harm the entertainment workforce: “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.”
UPI, citing Deadline, reported that Paramount could threaten to leave California in retaliation for the state’s involvement in the lawsuit, a move that would intensify pressure on a state whose entertainment industry is central to its economy.