The lawsuit, spearheaded by California Attorney General Rob Bonta and several other states, seeks to prevent the merger on antitrust grounds.
David Ellison, Paramount's chief executive, has stated that the streaming platforms would be unified after the combination. Moreover, the deal would create America's biggest collection of television channels, consolidating CBS, MTV, BET from Paramount with CNN, TNT, and other WBD networks.
WBD shareholders endorsed the merger in April, and Ellison noted during a recent earnings call that the deal remains on schedule to finalize by September. Lawmakers on both sides of the Atlantic have examined the deal, particularly regarding foreign financing included in Paramount's bid.
The U.S. Department of Justice said in its official determination, "The Division has completed its analysis of the proposed merger of Paramount and Warner Bros. and determined based on the evidence received in its investigation that the transaction is not likely to result in harm to competition or American consumers." Additional international regulators have also cleared the transaction as it progresses toward completion.
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Nevertheless, the European Union has yet to approve the deal, with its latest provisional decision date now July 22. Paramount submitted concessions earlier this month, according to a public filing by the European Commission, aiming to alleviate worries about the merger.
Hollywood insiders have voiced apprehension about the merger, pointing to possible reductions in movie output and job cuts across the sector. Ellison has pledged that the merged entity will release 30 films annually and has reiterated his commitment to safeguarding employment.
The state lawsuit adds a fresh obstacle to a merger that has already navigated federal approval. If successful, the lawsuit could delay or derail the combination, forcing the companies to defend the deal in court. The states' antitrust concerns center on the potential for reduced competition in film production, streaming, and television advertising markets. California, as the home state of both Hollywood and many of the merging companies' operations, has a particular interest in preserving competitive conditions.
This legal challenge comes amid a broader wave of antitrust scrutiny in the media industry. In recent years, regulators have blocked or conditioned several major media mergers, citing concerns over market concentration and consumer choice. The combination would control a vast library of iconic films and TV shows, as well as significant advertising inventory, raising alarms among smaller competitors and consumer advocates.
State attorneys general have increasingly taken an active role in antitrust enforcement, particularly in media and technology sectors. This lawsuit represents a significant challenge to a deal that would reshape the entertainment landscape by combining two major studios and their streaming services, potentially dominating the market for film distribution and television advertising.
The lawsuit could be filed as early as Monday, July 13.
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