States sue to block Paramount’s Warner Bros. Discovery takeover

(CNN) — Twelve states have sued to block Paramount’s takeover of Warner Bros. Discovery, kicking off a high-stakes antitrust battle that could impede the media mega-merger.

California Attorney General Rob Bonta said the antitrust lawsuit, filed Monday in the Northern District of California, is necessary because the merger “would lead to higher prices, lower quality, and less content for film and television, harming movie theaters, basic cable distributors, and ultimately, audiences on every sofa and movie theater seat in the U.S.”

Paramount is prepared to fight the suit vigorously. The company has said the merger is lawful and “pro-competitive,” creating “a stronger challenger to dominant global streaming and technology platforms.”

Paramount has also pointed out that regulators in markets around the world have already approved the merger, including the US Department of Justice.

In its response on Monday, Paramount called the lawsuit “wrong on both the facts and the law” and said the states had misrepresented competition in today’s entertainment industry.

“The combination of Paramount and WBD will create a stronger, well-capitalized, creative-first media company that is better positioned to compete with companies like Netflix that have come to dominate the industry for audiences, premium content, and creative talent,” the company said in a statement. “Put simply, any attempt to block this transaction undermines the very principles antitrust law is designed to promote: more competition, more choice for consumers, and more opportunities for creators and workers.”

The DOJ’s review was clouded by allegations of political favoritism, given Paramount’s close ties to President Trump and members of his administration. “This reeks of corruption,” Sen. Elizabeth Warren said when the DOJ approved the deal in June.

Thus, Monday’s lawsuit is a high-profile example of state-level officials trying to block a merger that has already been blessed by the federal government.

California was joined by Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington. All twelve states have Democratic attorneys general.

In conversations with CNN ahead of the filing, state-level officials said they believe the Trump administration has largely abdicated its antitrust enforcement responsibilities. So, as one of the officials said, “Someone’s gotta do it.”

A similar coalition of states sued to block Nexstar’s pending acquisition of Tegna, a deal that would merge two rival owners of local TV stations. The states succeeded in convincing a judge to pause the merger while the litigation proceeds.

In this case, the coalition said it “has asked Warner Bros. and Paramount not to close the merger until after the judicial process concludes, and if they do not agree, the coalition will be filing a temporary restraining order.”

Warner Bros. Discovery is the parent company of CNN, and many critics of the deal have raised concerns about the prospect of Paramount owning the cable news network and combining it with CBS News.

However, the states’ antitrust lawsuit is primarily about the merger’s potential impacts on the entertainment industry, not news.

The suit points to three specific areas of competition: “Wide release” film distribution, anticipated blockbuster film distribution, and cable channel licensing.

Combining Paramount with Warner will lessen competition in those areas, “threatening viewers with higher prices, the decline of theatrical exhibition of films, and a reduction in the variety, quality, and amount of content distributed,” the California attorney general’s office charged.

While bracing for the expected lawsuit, Paramount executives and allies have argued that the legal action is a Democratic campaign stunt, noting that some of the attorneys general are up for reelection this year.

Paramount’s critics charge that politics have been at play all along, asserting that the merger is a politically loaded move that hands control of CNN and other media assets to a Trump-aligned family.

A prominent global press freedom group, Reporters Without Borders, issued a statement on Monday morning supporting the state action.

“This monopolistic merger would devastate American journalism by driving deep newsroom cuts, reducing editorial diversity, and further concentrating media in the hands of oligarchs who have already made damaging editorial and personnel decisions at CBS,” Ben Grazda, advocacy manager for the organization’s North America arm, said.

The company has said throughout the process that it is committed to completing the merger this summer, and will have to pay more for Warner Bros. if it doesn’t do so by the end of September.