Paramount-Warner Bros. Merger Is Challenged in Court by California and 11 Other States

A coalition of 12 Democratic states including California, New York and Washington filed a lawsuit Monday to block Paramount’s $111 billion acquisition of Warner Bros. Discovery, the most serious legal challenge to date for one of the biggest media deals in history.

In their lawsuit, which was filed in U.S. District Court for the Northern District of California, the states argue that the deal would harm movie theaters by damaging the competitive market for distributing films, including blockbusters that generate a large portion of studio revenues. The lawsuit also claims that the deal would give the combined company anti-competitive power over the market for distributing basic cable TV channels, like CNN.

“The merger will end this competition permanently,” the states said in the lawsuit. “The likely result is higher prices, lower quality and less content for film.”

The states are seeking to freeze the deal, which was scheduled to close in the third quarter of the year, while the lawsuit is being adjudicated. That could be costly for Paramount, which has agreed to pay Warner Bros. shareholders $650 million for each quarter the deal doesn’t close, starting in October.

On Monday, the states filed a temporary restraining order, asking the court to halt Paramount from closing its acquisition of Warner Bros. Discovery, after Paramount declined the states’ request to freeze the deal. In the filing, the states said that Paramount told California that it may close the acquisition as soon as July 22. The states requested a response from the court by the end of the day on July 21.

The merger would harm “movie theaters, basic cable distributors and ultimately audiences on every sofa and movie theater seat in the U.S.,” Rob Bonta, the California attorney general, who is leading the lawsuit, said in a statement.

A spokeswoman for Paramount, Melissa Zukerman, said in a statement that the lawsuit “is wrong on both the facts and the law.”

“We will continue to fight against any attempt to derail a deal that strengthens competition, expands opportunity and positions the combined company to compete in an increasingly competitive global media landscape,” she said.

The lawsuit disrupts plans by the billionaire Larry Ellison and his son, David Ellison, to create a Hollywood colossus. If the deal closes, David Ellison, who runs Paramount, will control two news networks, CBS News and CNN; two major movie studios, Paramount Pictures and Warner Bros.; and two popular subscription streaming services, Paramount+ and HBO Max.

The states’ efforts pose the biggest regulatory threat to closing the deal. The Justice Department said in June that it would not challenge the acquisition, which it said was “not likely to harm competition or American consumers.”

Paramount has already secured approvals from 20 countries and regions globally, including China and Australia. But other global regulators are still looking into the deal. This month, the European Union’s antitrust enforcer said Paramount had agreed to concessions to allay concerns over competition. And in June, a British regulator said the United Kingdom was leaning toward examining the deal further.

David Ellison and Larry Ellison have cultivated a warm relationship with President Trump as the family built its media empire. Paramount hosted a dinner “honoring the Trump White House” in Washington this year, part of a week of festivities for the White House Correspondents’ Association. That dinner, which was attended by David Ellison and Todd Blanche, the acting U.S. attorney general, took place while the Justice Department was still reviewing the deal.

The lawsuit filed Monday argues that the merger violates the Clayton Act, a 1914 statute outlawing mergers that lessen competition or lead to monopolies. The lawsuit details the potential harms to competition in the traditional theatrical movie and TV businesses.

When the deal closes, just four companies — Paramount, Disney, Universal and Sony — will control 86 percent of the market for widely distributed films, according to the filing.

The states argue that those same four distributors would control more than 90 percent of top-grossing films, according to the lawsuit. Those films are distinguished by larger budgets, association with significant intellectual property, major marketing campaigns or a general audience, the states said.

Paramount said the deal would benefit movie theaters, noting David Ellison’s pledge to release at least 30 films a year in cinemas.

The lawsuit’s claims about blockbusters allow the states to focus on an area where they say Paramount would be particularly dominant, rather than pinning the case entirely on the larger market for all films in wide release.

That mirrors a tactic that the Justice Department used to successfully block the acquisition of the book publisher Simon & Schuster by Penguin Random House in 2022. In that case, a federal judge found the merger would harm competition among publishers that were buying the rights to books they anticipated would be top sellers.

The states also claimed that the merger would result in Paramount’s controlling more than 25 percent of “major basic cable channels” in the country. That would give the company added leverage in negotiations with cable services that distribute those channels under agreements with Paramount, the states said.

Lawsuits that challenge mergers generally take between several months and a full year to receive a final ruling from a judge. They can stretch on even longer if either side appeals.

Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico and Oregon also joined in filing the lawsuit. Letitia James, the attorney general of New York, said in a statement that the deal “threatens to raise costs for consumers and puts jobs and businesses nationwide at risk.”

A lengthy delay would create further uncertainty for Warner Bros. Discovery, Paramount and its investors, which include the Ellisons and the private equity firm RedBird Capital. Investors have also committed to back the deal, including Middle Eastern sovereign wealth funds that have pledged $24 billion in debt financing.

Cinema United, a trade organization representing more than 31,000 movie screens in all 50 states, said in a statement that it welcomed the lawsuit. The consequences of Paramount’s deal “will be significant and lasting, not just in Hollywood, but on Main Streets across this nation,” the organization added. AMC Theatres, which is a member, previously said it supported the deal.

The legal showdown between Paramount and California has been brewing for months. Paramount has been staffing up its legal team, hiring well-known antitrust litigators, while offering incentives to California including a $50 million fund for workers displaced by technology like artificial intelligence. Mr. Bonta has been building his case, coordinating with other states and speaking to workers who said they would be affected by the deal.

States are increasingly stepping in to block mergers, arguing that the Justice Department under the Trump administration is ignoring deals that harm competition. Already, a coalition of states has sued to prevent the merger of Nexstar and Tegna, two major local TV broadcasters, and pursued a breakup of the entertainment juggernaut LiveNation.