Twelve state attorneys general led by California Attorney General Rob Bonta on Monday filed a lawsuit in federal court in San Francisco to block Paramount Skydance's roughly $111 billion acquisition of Warner Bros. Discovery.
The 37-page complaint alleges the nearly $111 billion deal would violate the U.S. Clayton Act by extinguishing competition, and Bonta said, "It would result in higher prices, lower content quality, and fewer movies and TV shows."
The suit names Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington as co-plaintiffs alongside California.
Paramount responded in a statement, saying, "The lawsuit filed by the state attorneys general, in the most generous light, reflects a fundamentally flawed application of the antitrust laws and is wrong on both the facts and the law. Delaying this transaction will only harm entertainment workers who have already suffered over recent years as technology has disrupted their livelihood and cost California tens of thousands of entertainment jobs."
The takeover bid is backed and guaranteed by Larry Ellison and his family, and the financing plan envisions inviting sovereign wealth funds from Saudi Arabia, Qatar and the United Arab Emirates as nonvoting investors while taking on about $80 billion in new debt.
The U.S. Justice Department approved the acquisition last month after an eight-month review, but the Federal Communications Commission has not yet signed off; FCC Commissioner Brendan Carr has said, "I think this is a good deal, and I think it should get through pretty quickly."
Paramount faces so-called "ticking" payments if the deal is delayed: beginning Oct. 1 the company must pay roughly $650 million every 90 days, and if the transaction is not consummated by next June 4 Paramount will owe Warner $7 billion.
Bonta and the attorneys general cited market figures, saying Warner Bros. and Paramount control about 27% of the wide-release film distribution market and that after the merger four companies would control 86% of widely released films, while combined basic cable channel licensing would represent about 27% of that market.
Industry groups and creators voiced opposition: Michele Mulroney, WGA West president, said, "This is one of the worst proposed mergers we've seen," and Michael O'Leary, chief executive of Cinema United, said, "The ramifications of further movie studio consolidation will be significant and lasting, not just in Hollywood, but on Main Streets across this nation where local movie theaters serve as cultural and financial cornerstones for communities of all sizes." More than 5,000 entertainment workers, including Jane Fonda, Ben Stiller, Bryan Cranston, Javier Bardem, Lin-Manuel Miranda and Mark Ruffalo, signed an open letter urging the attorneys general to block the deal.
The states asked Paramount to delay the closing until the litigation is resolved and Bonta said the coalition would seek a temporary restraining order if Paramount refuses to postpone consummation of the transaction.