NEW YORK/LOS ANGELES, July 13 (Reuters) - California and 11 states are suing to block Paramount's $110 billion acquisition of Warner Bros. Discovery, alleging the deal would lessen competition in film distribution and cable television, harming theaters and TV distributors.
The lawsuit is a serious threat to Paramount CEO David Ellison's bid to transform his company into a major competitor to Netflix and Disney.
"With this lawsuit, California and our sister states are fighting for free and fair markets, not rigged markets," California Attorney General Rob Bonta said in a statement, adding it "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 did not immediately respond to a request for comment on Monday. The company has previously said any lawsuit politically motivated.
If allowed to move forward with the deal, Paramount would control 27% of the distribution market for films that appear on screens across America, 30% of blockbuster film distribution and 27% of the market for basic cable channels, the states said.
It will likely take months for a ruling on the states' claims, causing a delay that could rack up hundreds of millions of dollars in costs for Paramount. The states have asked Paramount to delay closing the deal until the legal process concludes, and said that they will seek an order keeping the deal from closing if they do not agree.
Paramount and Warner Bros compete for the best release dates and screens at thousands of movie theaters across the country, Bonta's office said. Without that competition, theaters and moviegoers could face higher prices, the AG said. Similarly, pay TV distributors and their subscribers rely on competition between the two companies, which together would control major channels such as CNN, MTV, HGTV, Cartoon Network and Nickelodeon.
The deal, which is being challenged by Democratic attorneys general, has also spurred accusations the Trump administration rewards friends and donors with a regulatory light touch.
The U.S. Department of Justice cleared the deal last month, and went one step further, saying the deal would benefit consumers and workers.
The deal has led to an outcry from actors, writers and others fearing it will hurt jobs. Theater owners also opposed the deal, worrying the combination of the Warner Bros movie studio with Paramount Pictures would result in fewer films.
Paramount has said the deal will allow it to produce more, not less, after it cuts $6 billion in redundant infrastructure, marketing and corporate jobs. Ellison has vowed that the combined film studios would release 30 movies a year.
Paramount CEO David Ellison's father, billionaire Oracle co-founder Larry Ellison, has cultivated ties with President Donald Trump, and the company has hired former Trump officials.
Paramount has committed to pay around $650 million in fees to Warner Bros. Discovery shareholders each quarter if the deal does not close before October. The company has said delays could force it to renegotiate the deal's financing, cause uncertainty for its stock price, or even scuttle the transaction altogether.
(Reporting by Jody Godoy in New York and Dawn Chmielewski in Los Angeles; Editing by Nia Williams and Franklin Paul)
