States sue to block Paramount-Warner Bros. merger

A dozen states sued Monday to block Paramount Skydance’s proposed acquisition of Warner Bros. Discovery, escalating a legal fight over a roughly $110 billion media merger that would combine two of the nation’s biggest entertainment companies.

The lawsuit, led by California Attorney General Rob Bonta and filed in federal court in California’s Northern District, argues the deal would reduce competition across film, television and cable programming. The states say the merger would lead to higher prices for consumers, fewer choices in news and entertainment, and less opportunity and lower pay for industry workers.

“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 U.S.,” Bonta said in a statement.

The states joining California are Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington.

Bonta said the states are seeking to stop the companies from completing the deal while the case proceeds. His office said the coalition has asked the companies to halt the merger until the case concludes and would seek a temporary restraining order if they do not agree.

“With this lawsuit, California and our sister states are fighting for free and fair markets, not rigged markets,” Bonta said. “America has no kings in government or our economy.”

If combined, Paramount and Warner Bros. would control nearly a third of cable programming and nearly a third of the U.S. motion picture industry, according to Bonta’s office. The proposed company would bring together Paramount’s film studio and cable networks such as Comedy Central and Nickelodeon with Warner Bros.’ holdings, including the “Harry Potter” franchise, CNN, HBO Max, TBS and TNT. NPR reported the deal would also combine Paramount+ and HBO Max, CBS Sports and Turner Sports, CBS News and CNN, and cable channels including VH1, MTV, HGTV and Discovery.

Paramount Skydance did not immediately respond to CBS News’ request for comment. A Warner Bros. spokesperson referred CBS News to Paramount Skydance.

Paramount has argued that the transaction would strengthen the combined company and promote competition, including against streaming companies such as Netflix, Amazon and Apple. The company has previously committed to releasing 30 films a year in theaters through the combined business, saying that would support job growth. In April, after more than 5,000 industry professionals signed an open letter opposing the merger, Paramount said the deal would give creators “more avenues for their work, not fewer.”

“This transaction uniquely brings together complementary strengths to create a company that can greenlight more projects, back bold ideas, support talent across multiple stages of their careers, and bring stories to audiences at a truly global scale,” Paramount said at the time.

The Justice Department closed its investigation into the transaction in June, saying the deal “is not likely to result in harm to competition or American consumers.” NPR reported the department approved the acquisition after an eight-month review. The Federal Communications Commission has not yet signed off because Paramount owns broadcast licenses for 28 local television stations.

Any delay could be costly. Paramount has previously said it expects the deal to close in the third quarter. If the merger is not completed by Sept. 30, Paramount has agreed to pay shareholders a 25-cent-per-share “ticking fee,” totaling about $650 million per quarter. NPR reported that securities filings show Paramount would owe Warner $7 billion if the deal is not completed by June 4.

Bonta has been scrutinizing the transaction for months. In February, he announced a California Department of Justice investigation and said his office would conduct a “vigorous” review. In late June, he told MS NOW the deal presented “red flags in the air everywhere.”