Attorneys general in 12 states have joined forces to file an antitrust lawsuit in a bid to stop Paramount Skydance’s $111-billion takeover of Warner Bros. Discovery. The legal action means the deal may never go through or may be significantly altered if the attorneys general prevail in court or force Paramount to change course.
The effort is being led by California Attorney General Rob Bonta and also includes Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington as plaintiffs.
“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. “In this country, no one is above the law,” Bonta added. “With this lawsuit, California and our sister states are fighting for free and fair markets, not rigged markets. America has no kings in government or our economy.”
The Antitrust Lawsuit
The lawsuit alleges that the proposed merger would violate Section 7 of the Clayton Act, a federal antitrust law barring mergers that could substantially reduce competition. The states argue that the combined Paramount–Warner Bros. entity would control 27% of the wide-release theatrical distribution market, 30% of the market for “anticipated blockbuster films,” and 27% of the basic cable bundle market.
Speculation of the lawsuit had been brewing since last week’s reports of state attorneys general preparations to take Paramount to court over the acquisition of Warner. The lawsuit marks another instance of state attorneys general acting contrary to approvals by the federal government when dealing with the entertainment and media industries.
Previous Approvals and Lawsuits
The U.S. Department of Justice approved Paramount’s takeover in June, seeming to pave the way for the deal to be finalized before the state attorney generals stepped in. The Justice Department being at odds with state attorneys general over an antitrust issue mirrors circumstances of the Live Nation Entertainment lawsuit. In that legal action, the Justice Department settled a monopoly lawsuit with the parent company of Live Nation and Ticketmaster while state attorney generals continued to pursue the antitrust case, eventually prevailing at trial, a decision Live Nation Entertainment has appealed.
Prior to the antitrust lawsuit at hand being filed, in a statement to CNN, which is owned by Warner, Paramount said, “Antitrust authorities around the world have carefully reviewed this transaction, clearing it or concluding that it does not violate any competition laws. That regulatory record underscores what the facts, the law and the economics make clear: this transaction will create a stronger challenger to dominant global streaming and technology platforms, expand consumer choice, increase investment in premium content and theatrical distribution, and create more opportunities for creators and workers.”
The United Kingdom government is also poised to pursue antitrust action against the Paramount–Warner deal. Paramount started pushing to buy Warner in December. David Ellison, CEO of Paramount, said then that they were a better fit than Netflix, which had been the forerunner in the purchase, to acquire Warner. In February, Paramount won the bidding war, but antitrust regulations and overcoming them meant the deal wouldn’t be finalized for months at least.
In conclusion, the antitrust lawsuit filed by the 12 states against Paramount’s takeover of Warner Bros. Discovery has significant implications for the entertainment industry. The lawsuit highlights the ongoing debate over the impact of large mergers on competition and consumer choice. As the case progresses, it will be important to watch how the courts and regulatory agencies navigate these complex issues and balance the interests of the companies involved with the need to protect consumers and promote fair competition.
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