Are blockbuster movies a separate market? Or is it compatible with other forms of entertainment?
That question may be at stake in the $111 billion Paramount-Warner Bros. merger. On July 13, a coalition of 12 states filed a lawsuit seeking to block the deal, arguing that it would lead to undue concentration in the theatrical and basic cable markets. The most likely argument is that the combined entity will control 30% of the “highest grossing movie” market.
California Attorney General Rob Bonta is leading a lawsuit to block the Paramount-Warner Bros. merger.
“I think this is a strong case,” said Aviel Garcia, a partner at Kesselman Brantley Stockinger. “I think big movies like ‘The Odyssey’ or ‘Spider-Man.’ Those are very different movies than art movies.”
The lawsuit, led by California Attorney General Rob Bonta, is based on a 1986 Ninth Circuit case in which AMC accused rival Circuit Shufi Enterprises of illegally monopolizing the top-grossing movie market in San Jose, California. Syufy argued that all first-run movies are effectively competing with each other and that AMC’s definition is too narrow.
However, the court sided with AMC, pointing out that “if the admission price for ‘ET’ increases, audiences will not flock to ‘Dinner with Andre.'”
Entertainment has changed a lot over the past 40 years, but one thing remains true: the state federation is all about gambling. Paramount Skydance claims the lawsuit is “fundamentally flawed” and vows to fight it in court.
That’s a big risk for the state. Antitrust lawsuits are expensive, and when states bring cases, they typically work with the Justice Department, which has more resources to take on the world’s biggest companies.
But under President Trump, it’s a different story. Amid the perception that federal enforcement is leaving crony capitalism behind, states like HPE-Juniper Networks, Live Nation-Ticketmaster, and Nexstar-Tegna are pursuing more aggressive policies in case after case.
The Department of Justice has already approved the Paramount-Warner merger. In the Trump era, states have the final say.
“We are the most important law firm in the country right now,” Paula Blizzard, head of California’s antitrust division, said during a panel discussion last year. “Working for us now is so sexy.”
Mr. Blizzard came to the AG’s office nearly a decade ago after a long career in both antitrust enforcement roles. In her early years, she worked at the Justice Department’s Antitrust Division in San Francisco, where she was part of the trial team that unsuccessfully tried to block Larry Ellison’s 2005 acquisition of PeopleSoft by software giant Oracle.
Blizzard is now targeting Ellison’s son, David. David is using his father’s $40 billion fortune to consolidate two of Hollywood’s five traditional studios. Blizzard’s boss, Attorney General Rob Bonta, explained the lawsuit against the merger at a press conference in front of the Hollywood sign.
July 13th.
At times, his arguments seemed more political than legal. The Ellisons are courting Tram. The Wall Street Journal reported that Larry Ellison donated $45 million to his re-election campaign. Bonta said he has already sued the Trump administration more than 70 times.
“Our role is even more important because President Trump is promoting a policy of economic fraud,” he said. Oregon Attorney General Dan Layfield made a similar argument at his own press conference two hours later. “There are credibility issues with the way the U.S. Department of Justice makes decisions,” Rayfield said. “What we want as a state is a partnership with the U.S. Department of Justice, and we don’t have that right now.”
If you do it alone, it will cost a lot. Between outside economists and litigators, states could end up spending $20 million.
“California has a pretty big budget, but it’s a pittance compared to the infrastructure that the federal government has in place,” said Mark Roemer, a former Justice Department economist who now teaches at Swarthmore College.
California has been preparing for this battle. In May, Gov. Gavin Newsom sought and won an additional $14 million for antitrust enforcement, saying the Justice Department had abandoned the area. The firm has posted openings for lawyers who want to work on the Paramount-Warner Bros. case and other high-profile cases.
“We really hope to bring in a lot of great new talent to help us with what we expect to see an increase in litigation over the next two, four, or five years,” Blizzard said at an industry webinar in June. “We do all the fun incidents.”
Even with the help of the Justice Department, suing powerful companies is always an uphill battle. And without it, California and other states would be determined to be underdogs. Paramount has hired Jeffrey Kessler, a prominent antitrust litigator who defended states in the Live Nation case, as well as Eric Stock, who ran the antitrust division at the New York attorney general’s office, and Andrew Finch, a former chief deputy to Makan Delrahim in the Justice Department’s antitrust division. Mr. Delahim is currently Paramount’s chief legal officer.
“This is a pro-competitive deal,” Kessler told Variety. “This is really needed for the industry as a whole. The new combination will result in more shows and movies being produced than either company would have produced alone.”
Hollywood unions aren’t convinced by such promises.
“We need guarantees, and we need penalties to go along with it,” said Lindsey Daugherty, president of the Hollywood Teamsters union. “They can say this all day long. But if there is no remedy associated with it, they may say one thing and do another.”
Antitrust litigation often ends in a settlement that includes certain terms. However, at least for now, there is no consensus.
“We always welcome legitimate concerns,” Kessler said. “Nothing has been proposed by the state.”
