California-led states sue to block Paramount’s $110 billion Warner Bros Discovery deal

NEW YORK/LOS ANGELES — California and 11 other states have sued to block Paramount’s $110 billion acquisition of Warner Bros. Discovery, arguing that the deal would create a media giant with too much power to raise prices across the film and television industries.

The lawsuit, filed in federal court in Oakland, California, threatens to derail Paramount CEO David Ellison’s plan to transform the company into a major competitor to streaming and entertainment giants such as Netflix and Disney.

The states, including New York, Arizona, and Minnesota, argued that the merger would harm movie theaters, television distributors, consumers, and entertainment workers by reducing competition, increasing costs, and putting downward pressure on wages.

“After this merger, for every dollar generated by wide-release theatrical films and basic cable channels in this country, the combined company will pocket more than a quarter,” the states said in their lawsuit, describing the proposed merger as one that would create a “media behemoth.”

Paramount rejected the allegations, saying the lawsuit misinterprets antitrust law and inaccurately portrays competition in the entertainment industry.

Political Debate Surrounds Deal

The lawsuit comes amid growing political scrutiny over the merger, with critics questioning whether Paramount’s connections helped secure approval from federal regulators.

The U.S. Department of Justice cleared the deal last month. Paramount CEO David Ellison’s father, billionaire Oracle co-founder Larry Ellison, has maintained ties with Republican President Donald Trump.

The state attorneys general involved in the lawsuit are Democrats. Oregon Attorney General Dan Rayfield said regulators had failed to adequately review the deal and that states were stepping in to protect consumers, small businesses, and the film industry.

Other states joining the lawsuit include Colorado, Connecticut, Massachusetts, Nevada, New Jersey, New Mexico, and Washington.

California Attorney General Rob Bonta criticized the merger, saying the deal reflected concerns over corporate power and competition. The White House did not immediately respond to a request for comment.

In recent years, antitrust enforcement has become a major political issue as officials seek to address concerns over rising costs, corporate consolidation, and the influence of large companies.

Hollywood workers have also opposed the merger, warning it could lead to job losses, while theater owners have expressed concerns that fewer films could reach cinemas.

States Warn of Reduced Competition

The states said that if the deal moves forward, Paramount would control a significant share of the entertainment market, including 27% of film distribution across U.S. theaters, 30% of blockbuster movie distribution, and 27% of the basic cable channel market.

Paramount and Warner Bros. Discovery currently compete for movie release dates and theater space across the country. The states argued that eliminating that competition could lead to higher prices for theaters and moviegoers.

The companies also compete in television distribution, with their combined portfolio including major networks and channels such as CNN, MTV, HGTV, Cartoon Network, and Nickelodeon.

Paramount has argued that the merger would allow it to create more content rather than reduce production. The company said it expects to cut $6 billion in overlapping infrastructure, marketing, and corporate costs while releasing about 30 films annually through its combined studios.

The states said those commitments are not legally enforceable and argued that Paramount would still have the ability to increase prices and reduce quality after the merger.

Deal Delay Could Increase Costs

Paramount shares closed 1.5% higher, while Warner Bros. Discovery shares gained 1.9% following news of the lawsuit.

Legal experts said the case could take months to resolve, potentially adding hundreds of millions of dollars in costs for Paramount. The states have asked the company to delay closing the transaction until the legal proceedings are completed.

“This is a major setback and arguably the most credible threat yet to Paramount’s acquisition of Warner Bros. Discovery,” said Paolo Pescatore, an analyst at PP Foresight.

Paramount has agreed to pay about $650 million in quarterly fees to Warner Bros. Discovery shareholders if the deal does not close before October. The company has warned that delays could force it to renegotiate financing arrangements, create uncertainty for investors, or threaten the completion of the transaction.

A Reuters review of recent federal merger cases found that similar legal challenges have taken an average of about eight months for judges to reach a decision.

-Reporting by Jody Godoy in New York and Dawn Chmielewski in Los Angeles; Editing by Chris Sanders, Nia Williams, Franklin Paul, and David Gregorio/Reuters