A 12-state coalition files antitrust lawsuit to block Paramount's acquisition of Warner Bros

A 12-state coalition files antitrust lawsuit to block Paramount's acquisition of Warner Bros.

A coalition of 12 states led by California has filed a lawsuit seeking to block Paramount's Skydance acquisition of Warner Bros. Discovery (WBD) for $81 billion. The lawsuit has become the biggest obstacle to the merger so far.

If the transaction is completed, the two major Hollywood film, television and news content production and distribution giants will be integrated under the same corporate umbrella.

California Attorney General Rob Bonta said: "This illegal merger will cause the two entertainment giants to further concentrate their market power, drive up prices, reduce content quality and reduce content supply, harming theater operators, cable TV distributors, and ultimately harming American audiences on their couches and in movie theaters." The lawsuit was filed Monday in U.S.

Federal Court for the Northern District of California. In addition to California, several states including New York, Colorado, New Mexico, New Jersey, Connecticut and Nevada also participated in the lawsuit. These state governments contend that the Trump administration has a record of “weak enforcement” in antitrust enforcement.

Bonta cited cases such as Ticketmaster and Nexstar Media Group's acquisition of Tegna: "Not only did they not actively perform their duties, they actually made the situation worse." It is reported that a coalition of state governments has accused Warner's merger with Paramount and their respective cable networks as anti-competitive because the combined company will control nearly one-third of theatrical movies and basic cable programming.

A coalition of state governments demanded that Paramount and Warner not complete the deal until the proceedings are concluded, otherwise they would file for a temporary restraining order to prevent the merger from moving forward.

In this regard, Paramount stated that it will actively respond to the lawsuit and believes that the lawsuit should be dismissed because it "misinterprets the established antitrust legal principles and mischaracterizes the current competitive landscape of the entertainment industry." Paramount has maintained that the merger would strengthen its ability to compete with larger rivals such as Netflix and Amazon and ultimately benefit consumers.

It's the toughest challenge to the Paramount-Warner Bros. exploration deal since the planned merger was announced more than four months ago. Previously, the U.S. Department of Justice had quickly approved the transaction, and most international regulatory agencies had also given the green light.

If the state succeeds in blocking or delaying the completion of the deal, Paramount could face significant financial repercussions.

According to the acquisition agreement, if the transaction is not completed before September 30, Paramount will need to pay Warner shareholders a quarterly "delayed completion compensation fee" of US$0.25 per share, equivalent to a total of approximately US$650 million per quarter. The deal has sparked widespread concern among Hollywood's creative community.

Major film and television unions and theater owners have warned that the deal will weaken market competition and lead to a large number of job losses. In April this year, more than 1,000 actors and producers signed an open letter opposing the merger.

The open letter read: “This transaction will further intensify the already highly concentrated media market structure, and at this time when the industry and audiences are most unbearable, market competition will be further weakened.” The coalition of state governments also pointed out that after the merger of the two major movie studios Paramount and

Warner, they will have an unfair advantage in competing for "prime time slots and the best screen resources" when negotiating with theater operators and other production companies. (

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