A coalition of 12 Democratic state attorneys general has initiated legal action to prevent the merger between Paramount Skydance and Warner Bros. Discovery. They argue that this merger contravenes antitrust laws by granting the new entity excessive influence in three sectors: wide-release theatrical distribution, major film productions, and basic cable television.
Paramount has countered by stating that the lawsuit “distorts settled antitrust law” and intends to “vigorously” contest the opposition. On Monday evening, the states submitted a motion for a temporary restraining order to pause the proposed Paramount-WBD merger until the antitrust case is resolved. The court has scheduled a hearing for this motion on Friday, July 17 at 10 a.m. Meanwhile, on Tuesday, the Writers Guild of America filed a separate lawsuit to block Paramountâs deal with Warner Bros., claiming it would decrease writers’ pay and reduce job opportunities.
The question arises: do the state attorneys general have a valid case, and could it force Paramount to provide certain guarantees or make concessions to finalize the Warner Bros. acquisition?
The lawsuit claims that the level of market control by Paramount-WBD would hover around or just below 30% in each of the three sectors, which is the minimum threshold historically recognized to argue that such consolidation is detrimental to market players.
At first glance, the case presented by the state attorneys general appears robust, according to Sam Weinstein, a professor at Cardozo School of Law and a former DOJ antitrust lawyer. “It’s not a frivolous complaint. If they can support what they say, it’s a compelling case,” he remarked, while noting that the evidence the states present will be crucial.
Eric Talley, a professor at Columbia Law School, noted on the “Daily Variety” podcast that the case is “facially pretty plausible, and it fits very comfortably into a lot of similar sorts of complaints that have been filed both in media industries and others.”
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“This is a roadblock that I think Paramount Skydance and David Ellison and Warner Bros. Discovery are going to have to contend with,” Talley said. “And it may well play a significant sort of delaying role, if not a kneecapping role, on this deal.”
State attorneys general, including California’s Rob Bonta, have also sued to block Nexstar’s acquisition of TV station group rival Tegna, and earlier this year, they secured a court injunction preventing the companies from proceeding with their merger. “It seems to me over the last couple of years, the memo has gotten lost in the file that state attorneys general have very much the same ability to challenge a merger under the Clayton Act as does the federal government,” Talley observed.
Historically, it is uncommon for states to lead antitrust enforcement actions. Typically, a joint state-federal case with the Justice Department taking the lead is the norm, Weinstein explained. However, after the Trump administration’s DOJ approved the Paramount-Warner Bros. deal without any conditionsâreportedly against the advice of career antitrust lawyers at the departmentâthe states felt compelled to act independently, Weinstein said.
Talley speculated that the attorneys general might succeed in getting a court to temporarily halt the Paramount-WBD transaction “until thereâs a little bit more work thatâs done in the discovery part of this case.” He added that if settlement negotiations occur, they could result in a variety of outcomes, potentially including some concessions from Paramount.
However, some legal experts are uncertain about the states’ likelihood of success.
“I’m not 100% sure this will be successful,” Syracuse University law professor Shubha Ghosh told Variety. Generally, he noted, courts have been lenient in allowing mergers to proceed broadly. Additionally, a judge might determine that the attorneys general’s case defines the markets in question too narrowly. A court’s analysis might consider factors like streaming and AI, and how they influence the industry’s competitive dynamics.
Ghosh pointed out that the distribution of entertainment content “isn’t limited to just movie theaters or basic cable,” but also extends to platforms like YouTube and other streaming services. “The courts could push back and say there’s still competition from that.”
Others believe the states face a challenging situation. “Due to the nature of the movie business, the case is built on flexibleâand highly debatableâmetrics of market share and market power when it comes to distribution,” according to Reuben Miller, head of antitrust at M&A news and data company Dealreporter. He mentioned the lawsuit does little to prove that Paramount’s cable TV channels, like MTV, Nick, and Comedy Central, are “must-have” programming.
The state attorneys general’s case does not focus on the highly competitive streaming market, where a combined Paramount-WBD would not dominate. Paramount has highlighted that its Paramount+ streaming service, along with WBD’s HBO Max, would capture 10.8% of the U.S. market share by December 2025, significantly trailing behind Netflix (32.5%), Disney (16.7%), and Amazon (15.3%).
According to Jennifer Huddleston, a senior fellow in technology policy at the Cato Institute think-tank, a growing number of streaming platforms compete with various other entertainment options. This competition includes traditional cable television and movie theaters, as well as user-generated content like short-form videos on TikTok and Instagram Reels or longer videos on YouTube. Huddleston emphasized: “Any challenge should be focused on the impact on consumer welfare and not on favoring certain competitors or less successful elements of the market.”
The outcome of the case will depend on whether the judge is convinced by the arguments that Paramount-Warner Bros. will exert anticompetitive control in the specified markets. The case has been assigned to Judge Araceli MartĂnez-OlguĂn of the U.S. District Court for the Northern District of California, a Biden appointee with a background at the ACLU and the National Immigration Law Center. MartĂnez-OlguĂn is also presiding over a lawsuit filed by Paramount+ subscribers who claim they face higher prices and fewer viewing options due to the Warner Bros. merger.
Weinstein warns against overemphasizing the significance of Judge MartĂnez-OlguĂn’s perceived political inclinations in this case. “All things being equal, judges in antitrust cases tend to be more apolitical than in, say, civil rights cases,” he stated.
Columbia’s Talley remarked that Paramount has agreed to pay a “ticking fee” of 25 cents per share to shareholders for every quarter the deal remains incomplete after September 30, equating to a cash value of approximately $650 million each quarter. “September occurs before November, which is when the elections are taking place,” he commented on the “Daily Variety” podcast. “So I think it’s quite likely that we’re going to see a little bit of a delay game going on at least until the November elections.”
In some respects, the states’ antitrust case serves as a proxy for larger, emerging questions, Talley noted. One major question that “is very, very hard to ignore right now” is: How does the federal government interact with and regulate the media?
Paramount and CBS “have been moving in a particular direction,” he said, while “many of the assets of Warner Brothers Discovery, notably CNN, have not been moving in that same direction. And so I think at some level, whether you interpret this as an antitrust battle or almost like a battle for the cultural hearts and minds of the American and state public, this certainly is going to be playing at least a subtextual role in the antitrust case as well.”
