A last-ditch effort to block the merger between Paramount Skydance and Warner Bros Discovery (WBD) is heading to court as 12 Democratic state attorneys general attempt to stop the $111bn deal they say violates antitrust law and reduces competition in both the film and cable television industries.
The lawsuit, which was filed on Monday, faces a crucial hearing on Friday to determine if a judge will temporarily pause the deal or allow it to continue toward approval. The merger was already approved by the Department of Justice in June.
California’s attorney general, Rob Bonta, who is leading the suit, told the Guardian on Thursday he was optimistic about their chances in court. The lawsuit argues that the merger violates the Clayton Act, a federal antitrust law that prohibits illegal market concentration.
“In our complaint, it’s really clean, clear, concise,” he said. “It’s precise with the data points that we’ve shared and courts have traditionally accepted exactly those types of arguments and that kind of data as a basis for finding a merger to be presumptively unlawful.”
Bonta said he was “disappointed” that no Republican attorneys general signed on to the Paramount case, though he was able to form a bipartisan coalition that has been successful at temporarily blocking the merger of the television conglomerates Nexstar and Tegna.
“I hope it’s not because of any pressure from the head of the Republican party, Donald Trump, on any those Republican entities, because antitrust cases should be non-partisan or bipartisan,” he added. “They’re just about free and fair markets, and I think we all agree on that.”
Washington state’s attorney general, Nick Brown, said he was surprised by the volume of constituents who contacted his office to express concern about the merger, which would lead to less competition among film distributors and streaming services and could lead to higher prices for consumers.
New Jersey’s attorney general, Jennifer Davenport, agreed that the top concern was higher prices and fewer content choices for consumers.
“We just knew that it was bad for New Jerseyans,” Davenport said. “This is more important than ever that we fight for the competition in the industry, because we are seeing it as just another component of rising costs in our state.”
The concerns raised in the lawsuit, including the potential for reduced competition, are particularly relevant for New Jersey, which has seen a wave of recent investment by major studios and entertainment companies thanks to generous tax credits.
Netflix plans to invest $1bn to create a new production facility in Fort Monmouth, New Jersey, while Lionsgate is building a dedicated production facility in Newark. Paramount, the defendant in the case, is slated to serve as the anchor tenant for a 58-acre facility called 1888 Studios.
“Yes, we do have a burgeoning film industry, and yes, we were the birthplace of the American film industry,” Davenport said. “But ultimately, when we think about what the harm is to New Jersey, we see rising costs – not just for consumers, but we also see that lack of competition that could happen here. And that’s bad for the industry as well, for artists, for storytellers and the next generation of people who are going to work in this business.”
While the lawsuit did not directly deal with the potential combination of two major news outlets, CBS News and CNN, which are owned by Paramount Skydance and WBD, respectively, Brown – of Washington state – said he was concerned about consolidation in news media.
“I think that we need more voices out there explaining to people what’s happening in their country and in their governments,” he said. “And so when you see fewer people in control of more news sources, I think it really is something that raises red flags for me.”
Bonta also expressed concern that the merger would lead to a reduction in content, including journalism. “It also means less news,” he said. “Less journalists doing less investigative journalism, telling fewer stories, doing less truth telling and truth seeking. And so that has an impact on CNN and CBS, that argument. And we make an argument that when you have workforce reductions, then you get less perspectives and less diversity of viewpoints and less volume of viewpoints.”
While Brown noted that corporations seem to be utilizing their connections to the Trump administration to lobby for their causes, calling it “undoubtedly a pay-for-play system to curry favor with the president”, he said he was primarily concerned about the market implications of the deal.
“We’re not going to be impeded by the politics of it. We’re not going to be impeded by the close relationship that Paramount leadership has with the president. That’s irrelevant to us,” he said. “What’s most relevant is the harm that is being done and the laws that were broken, and that’s why we take on this fight.”
Some industry observers suggested that even if the lawsuit loses in court, it could successfully scuttle the deal by dragging out its timeline and making it prohibitively costly to fight. But Brown said he would not be content with simply slowing down the deal – even if “it’s a significant endeavor to sue to block a merger such as this”.
“We want it to be blocked and that’s what we’re asking for,” he said. “And I think we’re in the early stages of what possible remedies that there could be, but we don’t simply want to just delay it. We want to stop it.”
