A group of states are preparing to sue to block Paramount’s acquisition of Warner Bros. Discovery as soon as this week, according to four people briefed on the plans, a legal challenge that would create a major hurdle for one of the largest media mergers in history.
A draft of the lawsuit currently circulating contends that the $111 billion deal would harm competition in the market for so-called campaign films, the expensive blockbusters that account for a large portion of studio revenue, among other claims, two of the people said.
California has taken the lead in the lawsuit, and states including New York, Washington and Connecticut have said they will join the effort, according to three of the people, as well as another person familiar with the states’ plans. All spoke on condition of anonymity to discuss a sensitive legal matter before it became public.
Once the lawsuit ends, states could decide to delay filing it or drop it altogether. Reuters previously reported that states could sue as soon as this week.
A Paramount spokeswoman said in a statement that the company was prepared to address “legitimate antitrust issues,” adding that its merger with Warner Bros. Discovery “does not raise such concerns.”
“We are confident that the facts and the law support this transaction and we will continue to vigorously defend it,” he added.
Paramount has said it plans to close the deal in the third quarter of the year. As part of its deal with Warner Bros. Discovery, Paramount has said it would pay the company’s shareholders about $650 million in cash for each quarter that the deal does not close, starting in October.
The lawsuit would disrupt the efforts of billionaire Larry Ellison and his son, David Ellison, to create a Hollywood colossus. The combined company would include two major movie studios, multiple streaming services and the news networks CNN and CBS News, expanding the father-son duo’s influence over the ailing entertainment and media industries.
States are raising the largest remaining legal challenge to the deal in the United States after the Justice Department said last month it would not challenge the transaction. The “film and television industry is highly dynamic and the proposed transaction is not likely to harm competition or American consumers,” the department said in a statement announcing its decision.
Internationally, the company has already obtained approvals from more than 20 countries and regions, including China and Australia. Some international regulators have yet to approve the deal, including Britain. In June, a British official said his government was inclined to examine the acquisition.
David Ellison, a film producer behind movies like “Top Gun: Maverick,” bought Paramount last year with the backing of his father, the founder of Oracle and a friend of President Trump. He then began a campaign to outbid Netflix for Warner Bros. Discovery and reached a deal to buy the company in February.
The deal has renewed scrutiny of the relationship between the Ellisons and Trump. In April, during the week of festivities in Washington for the annual White House Correspondents’ Association dinner, CBS News hosted a big dinner where Trump sat at a table with David Ellison and Makan Delrahim, Paramount’s chief legal officer. Acting Attorney General Todd Blanche also attended the dinner, which was billed as an occasion to “honor the Trump White House” and took place while the Justice Department was still reviewing the deal.
In recent months, opposition to David Ellison’s purchase of Warner Bros. Discovery has grown in Hollywood, as actors, documentary filmmakers and producers have spoken out about the potential risks to the entertainment business. In April, more than 1,000 writers, actors and directors published a letter opposing the deal, saying it would further reduce spending on film and television projects.
Paramount has suggested a series of incentives to California to avoid a lawsuit, according to two people familiar with the company’s position. For example, the company said it could establish a $50 million fund to train unionized workers if they were displaced by new technologies, including artificial intelligence, the two people said.
California Attorney General Rob Bonta has said publicly that he prefers “structural remedies” to address his concerns, which typically involve selling or spinning off a portion of the business.
Paramount has argued that the new company’s sheer size is necessary to compete against streaming heavyweights like Netflix and Amazon. Paramount plans to use the savings from combining operations to invest in better content, a boon for consumers, he said.
In filings last month related to a lawsuit filed by streaming subscribers seeking to block the deal, Paramount executives said in sworn statements that they planned to release at least 30 movies in theaters annually and keep new releases in theaters for at least 45 days before putting them on streaming platforms.
State attorneys general have taken a more active role in antitrust regulation during the second Trump administration, as the president’s appointees increasingly greenlit major settlements and settled lawsuits.
In April, state attorneys general obtained a restraining order to stop the merger of broadcasting companies Nexstar and Tegna. That same month, a group of states won a jury verdict finding that Live Nation, which owns Ticketmaster, had acted as a monopoly, after the Justice Department settled with the company over the same concerns.
Paramount has strengthened its legal team in anticipation of a possible lawsuit. The company hired the lawyer who won the Live Nation verdict for the states, Jeffrey Kessler of the Winston Taylor law firm. Paramount also hired Paul Clement of the law firm Clement and Murphy, known for its work before the Supreme Court, said two people familiar with the company’s position.
