California leads 11 Other States in Suing to Block Paramount’s Acquisition of Warner Bros. Discovery – Graphic Policy

As expected, California and 11 other states have filed a lawsuit to stop Paramount Skydance‘s acquisition of Warner Bros. Discovery. They state that the $110 billion deal would lessen competition in film distribution and television as well as harm theaters and television distributors.

The lawsuit is being lead by California Attorney General Bonta and includes Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, and Washington.

The lawsuit was filed in the U.S. District for the Northern District of California and alleges the deal violates Section 7 of the Clayton Act. That focuses on lessening competition through mergers and is an attempt to prevent monopolies.

In the lawsuit the attorneys general allege:

• Wide Release Theatrical Film Distribution, where Warner Bros. and Paramount are two of the five major film distributors and would combine for around 27% share of the market. After the merger, only three distributors will control 75% of these films and only four distributors (Defendants, Disney, Universal, and Sony) will control 86% of them.
• Anticipated Top-Grossing Theatrical Film Distribution, a submarket of theatrical film distribution focused on anticipated blockbuster films with wide audiences and large production budgets. After the merger, Defendants will control more than 30% of these films, and four distributors (Defendants, Disney, Universal, and Sony) will control more than 90% of them.
• Licensing Basic Cable Television Channels, or the market for distributing basic cable channels to cable and satellite providers. Warner Bros. is the second largest and Paramount is the third largest in this market, and they would combine for a 27% share.

In June, the White House and the Department of Justice approved the merger. Oregon has been investigating Paramount Skydance’s “Project Warrior” which was focused on winning approval for the deal. They recently withdrew motions regarding their own lawsuit. It’s unknown if they’ll continue to pursue that as they are a part of this.

Paramount Skydance still faces a hurdle in the European Commission and the U.K. The company has attempted to address EU competition concerns such as ending a film distribution venture it has with Universe Pictures. The European Commission has extended its deadline for its decision from July 7 to July 22.

Paramount Skydance wants the deal to close before September 1, 2026 or the cost will increase the longer it drags on. The price increases 25 cents per share per quarter it’s not approved. That would add $627 million to the cost of the overall deal each quarter, or roughly $7 million per day. This lawsuit will likely drag on for months if it moves forward making it unlikely the deal will close by that date. The company has said delays could force it to renegotiate the deal’s financing, cause uncertainty for its stock price, or end the the transaction altogether.

Source: Graphic Policy