A coalition of 12 states filed an antitrust lawsuit Monday to block the merger of Paramount Skydance and Warner Bros., defying the Justice Department, which approved the merger last month.
A coalition led by California Attorney General Rob Bonta argues that the $111 billion deal violates the Clayton Act by reducing competition in three distinct markets: large-scale theatrical distribution, “top box office” theatrical distribution, and basic cable licensing.
“The illegal merger of these two entertainment giants will lead to higher prices, lower quality, and less content for movies and television, hurting movie theaters, basic cable distribution companies, and ultimately the audience on every couch and movie theater seat in America,” Bonta said in a statement Monday.
The complaint alleges that the combined company will control 27% of the wide-release theatrical distribution market, 30% of submarkets containing “anticipated blockbuster movies,” and 27% of basic cable bundles. States argue that such consolidation would harm theaters and cable and satellite broadcasters, which rely on competition among distributors.
Paramount and Warner Bros. are two of the five remaining legacy studios. All five companies, including Disney, Sony and Universal, control 86% of theatrical distribution and 90% of blockbuster distribution, according to the states. Warner Bros. and Paramount are also basic cable distributors in second and third place, respectively.
“Consolidation here not only leads to higher prices, but it also means fewer opportunities for important stories to come to fruition and fewer ways for viewers to encounter stories, ideas and perspectives beyond their own experiences,” Bonta said. “No one is above the law in this country. In this case, California and our sister states are fighting for free and fair markets, not rigged markets. America has no king in its government or economy.”
Paramount argued that the partnership would benefit consumers and create a strong streaming competitor to Netflix, Amazon, and Disney. CEO David Ellison has repeatedly promised that the combined company would release at least 30 films a year, maintaining and expanding the companies’ current production levels.
“These types of challenges don’t make much sense,” Paramount’s lawyer, Jeffrey Kessler, said in an interview with Variety last week. “From California’s perspective, this agreement will lead to increased production, improved employment, and increased talent employment in California and elsewhere.”
The Justice Department issued an unusually long commentary in June congratulating the merger and arguing that the deal would not harm competition in the theatrical, streaming and linear TV markets. Meanwhile, Hollywood unions have also balked at or opposed the deal altogether, warning that further industry restructuring threatens thousands of jobs.
Each state is expected to seek an injunction to halt the transaction, and Paramount expects to complete the transaction after July 22nd.
Last week, Oregon Attorney General Dan Layfield asked a court to halt the merger for 60 days, arguing that Paramount had obstructed the investigation by not responding to requests for documents. Layfield sought records of Paramount’s lobbying efforts against the Trump administration and suggested the Justice Department’s decision could be the product of a “corrupt deal.” His office withdrew the request on Friday.
The 12 states participating in the coalition are Arizona, California, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, and Washington. Both are represented by Democratic attorneys general.
Bonta reiterated that the deal raised “red flags” and warned that his office would not abide by the Justice Department’s position. Under the Trump administration, the Justice Department’s Antitrust Division withdrew from several cases, including one against Ticketmaster Live Nation that was pending trial. States are becoming more willing to go it alone, as they did this spring when they obtained an injunction to prevent the Nexstar-Tegna merger from taking effect.
