Paramount’s Acquisition of Warner Bros. Discovery Faces Scrutiny

Last week, Paramount Skydance CEO David Ellison moved closer to acquiring rival Hollywood studio Warner Bros. Discovery. The $110 billion deal received approval from the Justice Department, and Paramount announced plans to finalize it quickly. However, California’s top law enforcement official has halted those plans for now.

California Attorney General Rob Bonta stated that the merger remains under investigation by his office. This has drawn attention from within the entertainment industry, as well as from other state attorneys general who may challenge the merger based on state and federal anti-monopoly laws. New York Attorney General Letitia James is reportedly also investigating, and other states are rumored to be involved.

“The most direct tool available to California and New York is an antitrust lawsuit seeking an injunction to block the transaction,” said Scott Wagner, co-head of customs practice at the law firm Bilzin Sumberg.

Bonta and James’s offices have not commented on any potential legal challenges. The merger would bring together two historic film studios, two streaming platforms, and a vast portfolio of broadcast and cable assets under Ellison, who is the son of billionaire Oracle co-founder Larry Ellison.

Concerns have been raised about how this deal would consolidate media ownership. The merger includes CBS News and CNN, amidst scrutiny over changes Ellison may make to news operations. Many argue that fewer buyers for content could shrink job opportunities and raise costs for consumers.

An open letter opposing the merger has been signed by over 5,500 industry professionals, including JJ Abrams, Bryan Cranston, and Jane Fonda. They applaud Bonta and others for examining the merger and contemplating actions to stop it.

Free Press, an advocacy group against corporate media consolidation, argues state attorneys general have a strong case to block this merger. Co-CEO Craig Aaron emphasized listening to voices warning about the merger’s impacts.

The Justice Department doesn’t foresee harm to competition from the deal, and Paramount has emphasized benefits, including plans to increase movie releases in theaters.

“This deal is pro-competitive, resulting in a stronger company better positioned to compete,” Paramount stated following the Justice Department’s approval.

Anticipating state legal challenges, Paramount has brought on renowned litigator Jeffrey Kessler. He argues the merger is essential for bolstering competition in streaming services and network television.

According to Wagner, state attorneys general may further influence the deal through information requests and legal reviews, potentially delaying its completion. Bonta has been critical of the Trump administration’s relaxed federal antitrust enforcement, urging state officials to take a more active role.

California and New York successfully challenged Live Nation and Ticketmaster’s monopoly power in ticket sales earlier this year, and they continue opposing other media consolidations. A recent lawsuit aimed to prevent a $6.2 billion merger between Nexstar and Tegna.

Further complications arise from international regulators’ examination of the merger. The European Union is reviewing financial backing from Middle Eastern sovereign wealth funds, and the UK’s antitrust authority is investigating.

Paramount executives are eager to finalize the deal soon due to financial implications. Warner shareholders are entitled to a fee of 25 cents per share each quarter the transaction remains unfinished past September 30. Missing this deadline could cost Paramount over $600 million per quarter.