Paramount’s proposed acquisition of Warner Bros. Discovery faces its first real legal challenge as a dozen U.S. states filed suit Monday to block the merger.
Twelve U.S. states, including California and New York, filed a lawsuit in the Northern District of California Monday seeking to block Paramount’s acquisition of Warner Bros. Discovery on the grounds that it would violate antitrust law.
The lawsuit refers to the proposed merger as “anticompetitive,” primarily arguing that combining the two companies would result in more onerous terms for theaters and distributors, higher prices for consumers, and potential job losses for industry professionals.
Paramount issued a statement Monday calling the lawsuit a “flawed application of the antitrust laws” and arguing that its proposed merger would create “a stronger competitor” against the streaming and tech firms that it says are the ones imposing the harms described by the states.
The lawsuit was widely expected, particularly given the speed with which federal regulators signed off on the deal. Other regulatory bodies overseas have signed off as well, though the United Kingdom and European Union have yet to do so.
The main focus of the lawsuit was on the impact on the film and cable industries, less so on the higher-profile issue of news programming. Sports received only a token mention, with the suit noting that the combined “company would own rights to some of the most in-demand television programming, including March Madness and MLB games.” (It should be noted that WBD already owns March Madness and MLB rights.)
Paramount has expected to close its acquisition of WBD during Q3, which began July 1 and runs through September. Should the acquisition not be completed on that timeline, Paramount would owe a $0.25/share daily “ticking fee” to WBD shareholders for every quarter the deal is delayed, amounting to $650 million/quarter.
Paramount, which was officially acquired by Skydance less than a year ago, began pursuing WBD last fall, triggering a bidding war that was initially won by Netflix. It then mounted a hostile takeover effort in December, succeeding after Netflix abandoned its winning bid.
