California and eleven other US states have filed a lawsuit to stop Paramount Skydance’s $110 billion takeover of Warner Bros. Discovery. They argue that the proposed merger – the largest in Hollywood history – would restrict competition in film and television offerings, causing significant harm to movie theaters, cable television networks and consumers.
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The lawsuit (case 4:26-CV-07116), filed in the U.S. District Court for the Northern District of California under the leadership of California Attorney General Rob Bonta, is also co-sponsored by the attorneys general of Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington.
“The unlawful merger of these two entertainment giants would result in higher prices, lower quality and a limited range of film and television content – to the detriment of cinemas, cable operators and ultimately the audience, whether on their home sofa or in the cinema seat in the USA,” Bonta said in a statement. In the USA alone, the merged company would control almost a third of the cinema films and almost a third of the cable television programs.
“Significant impairment of competition”
The lawsuit accuses Paramount Skydance and Warner Bros. Discovery of violating the Clayton Act with the merger. This US law prohibits mergers that could significantly impair competition or lead to the creation of a monopoly. If the deal goes ahead as planned, Paramount would control 27 percent of theatrical distribution and 30 percent of blockbuster distribution, according to state attorneys general. After the takeover, the group would have a market share of 27 percent for basic cable television channels.
At the end of February, the Hollywood group Warner Bros. Discovery agreed to the billion-dollar takeover by Paramount Skydance and signed a corresponding agreement. Competitor Netflix had previously withdrawn from the bidding war for Warner Bros., thereby clearing the way for Paramount to take over the Hollywood veteran.
The lawsuit now filed by the twelve mostly democratically governed US states (except Nevada) represents a hurdle for Paramount boss David Ellison’s plans to expand his company into a serious competitor to Netflix and Disney. It will probably be months before a court decision is made; This delay could cost Paramount hundreds of millions of dollars, writes Reuters. The plaintiff states have asked Warner Bros. and Paramount not to complete the merger until after the trial has been completed and have said they will seek an injunction if they do not.
Political dimension
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Paramount is backed by the family of software billionaire Larry Ellison, who is known as a supporter of President Donald Trump. Paramount is run by Larry Ellison’s son, film producer David Ellison. The Trump-critical news channel CNN, in turn, is owned by Warner Bros. Discovery. Observers in the US fear that CNN could lose editorial independence under the Paramount umbrella. There are certainly examples of this in the past. After the takeover by the Ellison family, the newsroom of the Paramount broadcaster CBS stood out for its more favorable reporting towards the Trump administration. Trump has repeatedly emphasized that it is important to him that CNN also changes ownership in a Warner deal.
The US government approved the takeover without conditions last month, although competitive reviews were ongoing in several US states. The Justice Department concluded that the merger would not harm competition or U.S. consumers. Several Hollywood stars, actors, screenwriters and others strongly opposed Paramount’s takeover of Warner Bros. Discovery. “Increasingly, a small number of powerful actors are determining what is produced – and under what conditions,” said an open letter rejecting the merger.
“California’s film and entertainment industry shapes the everyday lives of Americans (…),” said California Attorney General Bonta in connection with the lawsuit. “Market concentration in this area not only leads to higher prices, but also to fewer important stories being realized and audiences less exposed to narratives, ideas and perspectives that go beyond their own experience. In this country, no one is above the law. With this lawsuit, California and the other states are fighting for free and fair markets – and against rigged markets.” And as a small dig at Trump, he added: “In America there are no kings in government or in business.”
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