US states challenge Paramount's $110bn Warner Bros Discovery acquisition
A coalition of twelve US states has filed a lawsuit seeking to block Paramount Skydance's $110 billion (€96.2 billion) acquisition of Warner Bros Discovery, alleging the merger would harm competition in the film and television industries. The legal action, led by California Attorney General Rob Bonta, was filed in federal court in Oakland on Monday, according to reports from Al Jazeera and Deutsche Welle.
The lawsuit contends that the merger would cause "substantial harm" to movie theaters, basic cable distributors, and ultimately audiences nationwide. California Attorney General Rob Bonta characterized the deal as "unlawful," stating it would result in "higher prices, lower quality, and less content" for viewers. "Audiences on every sofa and in every movie theater seat would feel the impact of this unlawful merger," Bonta said during a news conference, as reported by Al Jazeera.
The Deal and Its Scope
Paramount Skydance's acquisition of Warner Bros Discovery, which Al Jazeera described as the largest-ever merger in Hollywood, would bring together two of the industry's last five legacy studios. The combined entity would control approximately 27% of nationwide basic cable licensing and 27% of wide-release theatrical film distribution, according to the lawsuit cited by Al Jazeera. The merger would also unite streaming platforms HBO Max and Paramount+ under one umbrella, and place CNN under the same ownership as Paramount's other assets.
David Ellison, CEO of Paramount and son of Oracle co-founder Larry Ellison, has pursued the deal as part of an ambition to create a competitor to Netflix and Disney, as noted by Deutsche Welle. The acquisition follows a bidding war that saw Paramount secure the deal with a $31-per-share offer, according to Al Jazeera.
Regulatory Approvals and Opposition
The lawsuit comes despite the US Department of Justice having approved the merger without conditions, concluding it was unlikely to harm competition or consumers, Deutsche Welle reported. However, the states argue that the deal would lead to higher prices and reduced investment in content, echoing concerns raised by industry critics about consolidation in the media sector.
In addition to the US legal challenge, the merger has faced scrutiny from regulators in other jurisdictions. The European Commission recently granted conditional approval after Paramount agreed to end a film distribution joint venture with Universal Pictures, as reported by The Guardian. The UK's culture secretary, Lisa Nandy, has indicated she is "minded" to intervene in the deal, citing potential impacts on news, children's television, and streaming services. She has asked Ofcom and the Competition and Markets Authority to investigate, according to The Guardian.
Political Dimensions
The merger has also drawn attention from political figures, including former President Donald Trump, who has expressed interest in the implications for CNN, a network he has frequently criticized. David Ellison's father, Larry Ellison, is a close ally of Trump, as noted by The Guardian. The involvement of political figures underscores the broader implications of the deal beyond corporate consolidation.
Next Steps
A hearing on a preliminary injunction, which would temporarily block the merger before a final decision, is scheduled for 3 August, according to The Guardian. The outcome of the US legal challenge, along with the UK review, will determine whether the merger proceeds. The deal has already received approvals from the US Department of Justice and the European Commission, but the legal and regulatory hurdles remain significant.