California Attorney General Rob Bonta led a coalition of 12 attorneys general in filing a lawsuit to challenge the $110 billion acquisition of Warner Bros. Discovery, Inc. by Paramount Skydance Corporation, according to a July 13 statement. The lawsuit, filed in the U.S. District for the Northern District of California, seeks to block the merger, which officials claim would extinguish competition between two major Hollywood entities.
The proposed merger is described as the largest in Hollywood history. The coalition alleges that if the merger is permitted, the combined entity would control nearly one-third of theatrical motion pictures and nearly one-third of basic cable programming in the United States. Attorneys general from Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, and Washington joined California in the legal action.
Attorney General Bonta stated that the merger would lead to higher prices, lower quality, and less content for film and television, which would impact movie theaters, basic cable distributors, and audiences. Bonta noted that the consolidation could lead to fewer opportunities for important stories to be told and fewer ways for audiences to encounter diverse perspectives.
The lawsuit alleges that the merger violates Section 7 of the Clayton Act, which prohibits mergers that may substantially lessen competition or create a monopoly. Specific areas of concern cited include wide release theatrical film distribution, anticipated top-grossing theatrical film distribution, and the licensing of basic cable television channels.
In the area of wide release theatrical film distribution, Warner Bros. and Paramount are currently two of the five major distributors. The coalition alleges that after a merger, the combined share would be around 27%, leaving only three distributors to control 75% of these films. In the submarket for anticipated top-grossing theatrical films, the merger would result in the defendants controlling more than 30% of the market, while four distributors would control more than 90%.
In the basic cable television channel market, Warner Bros. is the second largest and Paramount is the third largest. A merger would result in a 27% market share. The lawsuit argues that the loss of competition between these two companies would remove leverage for distributors and threaten viewers with reduced variety and higher prices.
The coalition has requested that Warner Bros. and Paramount refrain from closing the merger until the judicial process concludes. If the companies do not agree, the coalition intends to file a temporary restraining order. The California Department of Justice has also launched an Antitrust Complaint Form for individuals to report potential anticompetitive conduct.
