Paramount Skydance in Legal Clash Over Warner Deal
The leading attorneys from multiple states are preparing a legal challenge against Paramount Skydance Corp.’s $110 billion acquisition of Warner Bros. Discovery Inc., setting the stage for an antitrust lawsuit concerning the Hollywood mega-deal. Following an extensive investigation into the potential competitive impacts of the transaction, senior officials from approximately 10 states are reportedly in the process of drafting a complaint. They are also discussing the logistics for filing a potential lawsuit aimed at halting the merger, with actions expected to be taken as soon as this month, according to sources familiar with the situation. California, the epicentre of the entertainment industry, has been at the forefront of this initiative. No final decisions have been reached regarding filing or which states would participate. Most of the states considering the lawsuit are governed by Democratic solicitors general, although at least two Republican solicitors general are also participating in the investigation, according to some sources. State officials evaluating a case are examining the potential impact of the deal on the companies’ bargaining power concerning those involved in producing films and television shows, according to sources.
Officials from California and various other states have been engaging in discussions with both Paramount and the deal’s opponents, aiming to gather sworn statements or testimony that may be utilised in a potential lawsuit, as reported by sources. “The Paramount acquisition of Warner Brothers remains an active investigation, and we do not have any updates to share at this time,” a spokesperson for California’s attorney general stated. “Opposing this deal means opposing expanded consumer choice, new opportunities for creators and workers, and greater competition throughout the creative ecosystem—the opposite of what antitrust law is meant to achieve,” a spokesperson for Paramount stated. “It also means giving entrenched incumbents like Netflix an advantage they do not deserve. “We will continue to fight against any attempt to derail a deal that plainly benefits consumers, creators, and the industry as a whole.” Paramount shares experienced a decline of 4.3% during Friday’s trading session. Warner Bros. experienced a decline of 2.8%. In addition to California, several states with Democratic attorneys general are considering a lawsuit, including Washington, Oregon, Nevada, Colorado, Connecticut, and New York, as reported by some sources. However, solicitors general from Tennessee and Pennsylvania, both Republicans, along with the top lawyer for Massachusetts, a Democrat, are also involved in the investigation, according to some sources. Attorneys general from New York, Colorado, and Oregon have chosen not to provide any comments. A spokesperson for Connecticut’s top lawyer refrained from providing further comments, stating only that the attorney general is very concerned about the deal. Attorneys general from the other states have yet to provide a comment.
States including California are engaging in discussions with antitrust litigators from prominent law firms regarding the possibility of collaborating on the case, as reported by sources familiar with the conversations. The California attorney general’s office has opted not to provide a comment. A lawsuit would elevate the stakes for the blockbuster merger, potentially jeopardising tech scion David Ellison’s ambitions to ascend to the upper echelons of media moguls. The takeover battle for Warner Bros., in which Paramount ultimately prevailed after an acrimonious bidding war with Netflix Inc., has become a polarising force in the entertainment business. The companies assert that it will provide the industry with a crucial uplift amid significant transformations driven by artificial intelligence, streaming, and wider economic challenges. State solicitors have been stepping up their role in corporate law enforcement following a retreat by the Trump administration. The dynamic is particularly stark on the antitrust front, where federal enforcers at the Federal Trade Commission and Justice Department are increasingly willing to negotiate deals with companies instead of fighting in court. Tension between states and the federal government escalated earlier this year when the Justice Department unexpectedly settled with Live Nation Entertainment Inc. just one week into the trial of a protracted joint antitrust case. Over 30 states declined to endorse the agreement and ultimately secured a jury verdict declaring that the company unlawfully monopolised a significant portion of the live music industry.
In a notable instance of divergence between state and federal approaches to antitrust, the Justice Department has opted not to contest Nexstar Media Group Inc.’s acquisition of Tegna Inc., a move that will result in the formation of the largest broadcast television owner in the United States. A coalition of states has contested that agreement, which is currently suspended while awaiting a comprehensive trial regarding the merger’s legality. Paramount announced in February that the Justice Department’s waiting period for the antitrust review has come to an end. The agency remains in the midst of its investigation; however, a lawsuit from federal antitrust enforcers seems improbable at this time. The antitrust enforcer has not taken action against any mergers since January 2025, even in instances where states or foreign regulators have stepped in. Senior Justice Department officials during the Trump administration contended that achieving a settlement is typically more efficient than engaging in protracted and costly antitrust litigation. Pressure has intensified for states to intervene and challenge the deal as thousands of industry stakeholders, including prominent figures such as Ben Stiller and Glenn Close, have voiced concerns that the agreement will lead to job losses, increased production costs, and reduced options for consumers. “There are red flags everywhere for us,” California’s Bonta stated in May.
Paramount has asserted that the merger will enable the new entity to enhance its competitive stance against online giants such as Amazon.com Inc.’s Prime Video and Alphabet Inc.’s YouTube. The deal will bring together two of the five largest Hollywood movie studios, alongside major news networks CNN and CBS. It will also unite rival streaming services HBO Max and Paramount+, as well as dozens of cable networks. Among the challenges confronting the states are limitations in resources. California Governor Gavin Newsom has recently put forth a proposal for a $14 million increase in the budget, aimed specifically at enhancing antitrust enforcement for the upcoming fiscal year. Oregon’s attorney general is pursuing an additional $2.7 million to expand its antitrust team from eight to 24 personnel. Such lawsuits come with a hefty price tag. In a statement in May, California’s Bonta highlighted that they typically need a minimum of 20 lawyers and $20 million to pursue litigation, expenses that the states are obligated to cover independently when the federal government is not participating. The Paramount-Warner Bros. deal is facing scrutiny on an international level, as the EU’s 27-nation merger watchdog has established an initial deadline of July 7 to make a ruling on the transaction. The competition authority in the UK is currently probing the deal.
