California Attorney General Rob Bonta announced Monday that a coalition of 12 states had filed suit in federal court to block Paramount Skydance Corporation’s roughly $110 billion acquisition of Warner Bros. Discovery, arguing the deal would raise prices, reduce the number of movies reaching theaters, and diminish the quality and variety of film and television available to consumers nationwide.

The complaint, filed in the U.S. District Court for the Northern District of California in Sacramento, alleges the merger violates Section 7 of the Clayton Act, the federal law prohibiting acquisitions that are likely to substantially lessen competition.

Bonta, who is leading the coalition, framed the lawsuit as a fight over an industry that touches nearly every American household. He argued that combining two of Hollywood’s five major film distributors would harm movie theaters, basic cable distributors, and consumers by reducing competition and limiting entertainment choices.

According to the complaint, the merged company would control nearly one-third of theatrical film distribution and roughly one-third of all basic cable programming in the United States.

Joining California in the lawsuit are Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, and Washington. The coalition has asked the companies not to close the transaction until the litigation concludes and warned that, if necessary, it will seek a temporary restraining order preventing the merger from being completed.

The legal challenge comes despite federal approval. In June, the U.S. Department of Justice cleared the transaction without requiring divestitures or other conditions, concluding the merger was unlikely to substantially harm competition. The states’ lawsuit reflects the increasingly active role state attorneys general have taken in challenging major corporate mergers even after receiving federal approval.

Paramount sharply criticized the lawsuit.

A company spokesperson said the states’ arguments misinterpret antitrust law and would ultimately benefit Netflix rather than consumers. Netflix had previously explored its own acquisition of Warner Bros. Discovery before Paramount reached its agreement.

The company argued that preventing the merger would strengthen already dominant streaming platforms while delaying investments needed to compete in an industry rapidly changing because of technology and shifting consumer habits. Paramount said it intends to defend the transaction vigorously.

Financially, the stakes are enormous.

Paramount has repeatedly said it expects the acquisition to close during the third quarter, with chief executive David Ellison recently telling investors the company remained on schedule for a September closing.

However, the merger agreement contains a significant financial penalty if completion extends beyond September 30. Under the agreement, Paramount must pay Warner Bros. Discovery shareholders an additional 25 cents per share each quarter the transaction remains pending—an amount estimated at approximately $650 million every three months until the merger closes.

The combined company would reshape the entertainment landscape.

It would unite Paramount Pictures, the CBS television network, and cable brands including MTV, BET, and Nickelodeon with Warner Bros., CNN, TNT, Discovery, and the HBO Max streaming platform. The companies also plan to combine Paramount+ and HBO Max, creating one of the world’s largest streaming services.

The states argue that such scale would allow the merged company to demand higher prices from movie theaters, cable providers, and streaming customers while reducing incentives to produce diverse programming. According to the complaint, only four major studios would control more than 85 percent of wide theatrical film releases if the merger proceeds.

Ellison has sought to address those concerns by pledging the combined company would continue releasing approximately 30 theatrical films annually. State attorneys general dismissed that commitment as unenforceable, arguing it would not prevent reduced investment, fewer productions, or diminished competition.

The dispute has also fueled broader tensions within Hollywood.

According to Semafor, advisers close to Ellison have discussed the possibility of moving some company operations outside California in response to the state’s legal challenge. Meanwhile, more than 1,000 entertainment industry professionals, along with elected officials across California and Los Angeles, have expressed concerns that consolidation could lead to fewer productions and additional job losses.

For consumers, little changes immediately.

If the states prevail, the largest proposed merger in Hollywood history could be blocked. If Paramount succeeds, the entertainment industry will gain another media giant with significant influence across theatrical releases, broadcast television, cable networks, and streaming—reshaping the competitive landscape for years to come.

JBizNews Desk | New York
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