Paramount Skydance’s takeover of Warner Bros. Discovery is facing a new legal hurdle from a dozen states.
A coalition of 12 states filed a lawsuit in federal court in California on Monday seeking to block the merger, which they argue would harm movie theaters, cable providers and consumers.
“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.,” California Attorney General Rob Bonta, who is leading the case, said in a press release. “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 other 11 states that joined the lawsuit are Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington.
What’s in the suit?
According to the lawsuit, the combined company would control a 27% share of the market for wide-release theatrical films in the United States. The deal would also reduce the country’s five major film distributors to only four, which would collectively control 86% of wide-release movies.
On the television side, both Paramount and Warner Bros. Discovery own several major cable channels. In addition to the CBS broadcast network, Paramount owns channels including MTV, Nickelodeon, VH1 and Comedy Central. Warner Bros. Discovery owns CNN, TBS, TNT, Cartoon Network, HGTV and the Discovery Channel. The combined company would end up controling more than 50 basic cable channels, according to the lawsuit.
Cord-cutters wouldn’t necessarily be immune to the effects of the deal, either. Paramount CEO David Ellison, the son of Oracle billionaire and Trump ally Larry Ellison, has said the company plans to combine Warner Bros. Discovery’s HBO Max with Paramount+ to better compete with Netflix.
The lawsuit argues that the merged company would hold “enormous bargaining power” over movie theaters and cable companies while reducing competition. The states say that could result in higher price for movie tickets and cable packages, as well as, lower-quality services and fewer overall movies and television shows.
Despite the Trump administration’s Justice Department clearing the merger last month, the states have asked both companies not to close the deal until this lawsuit plays out in court. If the companies move forward, the coalition says it will seek a temporary restraining order.
Paramount and Warner Bros. Discovery did not immediately respond to requests for comment.
Paramount and Warner Bros. Discovery agreed to the roughly $110 billion takeover earlier this year after Paramount fought off a competing bid from Netflix. The deal follows Skydance’s takeover of Paramount last year.
Mega-merger faces continued opposition
This isn’t the first time this deal has faced scrutiny.
Democratic Sens. Elizabeth Warren and Richard Blumenthal have previously called out the Trump adminstration for not adequately reviewing the deal for potential national-security risks. They pointed out that the $24 billion in financing for the deal is coming from the Saudi Arabia’s Public Investment Fund, the Qatar Investment Authority and the Abu Dhabi Investment Authority.
Meanwhile, The Financial Times reported earlier this year that Gulf sovereign wealth funds have been reviewing their investments as the war with Iran continues to put economic pressure on the region.
The cancellation of Stephen Colbert’s late-night show, along with changes at CBS News, has also raised eyes about the Ellisons’ ties to Trump and the potential for political influence on the companies’ news networks.
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