Twelve states sue to block Paramount’s Warner Bros. Discovery deal

A coalition of 12 states has sued to stop Paramount’s planned acquisition of Warner Bros. Discovery, challenging a $111 billion media transaction that the Justice Department has already cleared, according to The New York Times. The litigation creates a potentially costly barrier to closing and places state attorneys general at the center of a high-profile antitrust fight in the entertainment sector.

The coalition includes California, New York and Washington, the Times reported. The states argue that combining Paramount with Warner Bros. Discovery would damage movie theaters by creating a larger film distributor with greater market power.

California Attorney General Rob Bonta accused the Justice Department of an “abdication” of its antitrust duties after the federal agency cleared the deal, Reuters reported. His criticism reflects the states’ position that federal approval does not end antitrust scrutiny when state enforcers believe a transaction may harm competition.

State enforcement moves to the foreground

The case is described by the Times as one of the most prominent tests of states’ efforts to act as antitrust regulators in their own right. State attorneys general can bring challenges separate from federal agencies, seeking court orders that delay or prevent a merger from closing if they persuade a judge that the deal would undermine competition.

That mechanism matters for companies pursuing large acquisitions. A federal clearance can remove one regulatory hurdle, but litigation by states can still change the timing, economics and legal risk of a transaction. In this case, the states are seeking to block the takeover rather than impose conditions after the deal is completed, according to the Times.

The lawsuit also comes after a recent Supreme Court ruling that the Times said has unsettled the regulatory outlook for federal agencies. Against that backdrop, state officials are pressing a more active role in merger oversight, particularly where they see local markets or consumers as exposed to harm.

Focus on film distribution

The states’ argument centers on the theatrical movie business, according to the Times. Paramount and Warner Bros. Discovery both operate in film distribution, and the coalition says a combined company would become a giant distributor with the ability to hurt theaters.

The available reporting does not include Paramount’s detailed response to the lawsuit or the specific remedies the states would accept short of blocking the transaction. For now, the legal challenge adds uncertainty to one of the largest proposed media combinations and signals that state antitrust enforcers intend to test their authority even after federal regulators have stepped aside.

This story draws on original reporting from NYT DealBook.