David Ellison may have believed Paramount Skydance could have closed the $111 billion takeover of Warner Bros. Discovery by this point. The deal was blessed by the Justice Department in June (reportedly over the objections of staffers who were reviewing it). It has been officially cleared by the EU, with Paramount agreeing to the relatively minor concession of ending its film distribution partnership with Universal in Europe.
Indeed, Ellison and his team at Paramount were so confident they would easily cruise through regulatory approvals that they sweetened their offer for Warner Bros. Discovery with a “ticking fee” provision — which will pay WBD shareholders 25 cents per quarter for each quarter past Sept. 30, 2026, that Paramount-Warner Bros. doesn’t close. That amounts to about $7 million per day. So if the calendar flips over to Oct. 1 and the WBD merger is not a done deal, Paramount is looking at shelling out real money.
On July 13, a group of 12 state attorneys general (all of them Democrats) filed a legal challenge to Paramount-Warner Bros. merger, alleging the combined company would violate antitrust laws. The states, led by California, are seeking a preliminary injunction to halt the deal until a trial is held on the merits of the case. Here’s a look at where things stand.
Why are the states trying to block the merger?
The states allege that the merger will harm competition in three markets — basic cable, tentpole theatrical releases and wide-release theatrical distribution — by combining two of the top three cable programmers and two of the top five film distributors. The judge hearing the case, Judge Araceli Martinez-Olguin, granted the states a temporary restraining order, which pauses the Paramount-WBD merger for at least 14 days. She also set Aug. 3 for a hearing on the preliminary injunction requested by the states. Paramount is pushing to postpone that date to the week of either Aug. 17 or 24, and wants to hold a three-day evidentiary hearing so that its lawyers can cross-examine the states’ economist and other witnesses.
In her ruling granting the TRO, the judge wrote that, “At best, Defendants’ proof regarding these robust, dynamic markets creates disputes regarding the facts and legality of the Transaction’s market effects” and that “Plaintiff States’ showing at least demonstrates that serious questions going to the merits remain, weighing in favor of preliminary injunctive relief.” She added that Paramount has acknowledged it will not be harmed by the delay until the end of September.
What does Paramount say about the state AG’s antitrust lawsuit?
The company called it “one of the weakest merger challenges in modern antitrust history.” The lawsuit filed by the state AGs “distorts settled antitrust law and is based on a misrepresentation of competition in the entertainment industry today,” Paramount said, adding that it will “vigorously defend the transaction.”
Regarding the states’ allegations the merged company would wield undue market power in basic cable, Paramount said that the Paramount and WBD cable lineups are complementary — and not market substitutes — and that cable providers will still want access to all of the channels. On the film front, Paramount claims that “The real-world economics of film distribution and the merger’s economic incentives demonstrate that the transaction will increase, not decrease, theatrical motion picture output and will not adversely affect the price terms to theaters.” Paramount also has pointed to the success of newer entrants like A24 and Amazon MGM Studios in arguing that the theatrical market is more competitive and dynamic than the state case makes it appear.
From the get-go, Paramount has insisted its merger with WBD present no antitrust issues. According to the company, to date, regulatory bodies and governments representing 65 jurisdictions have “either cleared the transaction or chosen not to challenge it on competition and/or foreign direct investment grounds. These approvals from regulators around the world reinforce what the facts have consistently shown: this transaction is pro-competition, pro-consumer and pro-creative community.”
What about streaming?
Paramount has argued that it needs to merge with WBD in order to combine Paramount+ and HBO Max — and achieve scale to rival the likes of Netflix, Disney and Amazon. In addition to Paramount itself, some observers have criticized the states’ antitrust lawsuit for not taking a holistic view of the entertainment market that incorporates streaming. But in her ruling Monday, Martinez-Olguin rejected the idea that efficiencies in one market offset competitive harms in another. “Courts have expressly and repeatedly rejected the defense that a challenged merger will result in economic efficiencies ancillary to competition in the relevant market,” she wrote.
Could Paramount reach a settlement with the states?
Possibly — but what form that takes is really the question. If Paramount wants to “come forward in good faith and sincerely want to make a settlement offer, we’ll always consider a settlement offer,” California attorney general Rob Bonta, who is leading the state coalition, told CNN last week. “And it would have to include structural remedies. We’re not interested in behavioral remedies — empty promises, self-serving promises, promises that are unenforceable, that won’t be kept, that history shows won’t be kept. So we’ll consider what they propose, but they haven’t proposed anything.”
Paramount, for its part, has not signaled what concessions, if any, it would be willing to consider.
Would the states drop their suit if Paramount agreed to spin off CNN?
No, according to Bonta. In response to an article in which FCC Chairman Brendan Carr (citing an anonymously sourced report) claimed that the antitrust litigation would be dropped if Paramount spun off CNN, Bonta tweeted, “Unsure where this reporting originated from, but I’ve literally never said this. Spinning off one channel from a media conglomerate is not a sufficient remedy to protect consumers and preserve competition in the film and television industry.”
What about the lawsuits filed by the WGA and others?
Paramount is dealing with other legal matters related to the Warner Bros. deal, but the state AGs’ case appears to be the most serious threat to the merger. The Writers Guild of America filed its own antitrust suit, alleging the Paramount-WBD merger will reduce writers’ pay and undermine competition in three labor markets: blockbuster scripts, writing for episodic shows and writers’ overall deals. The union is also seeking an injunction to block the deal.
Meanwhile, Judge Martinez-Olguin denied a preliminary injunction to block the deal sought by a few Paramount+ subscribers, whose lawsuit alleges they will face price hikes and risk losing viewing options as a result of the Paramount-Warner Bros. merger.
In addition, a Paramount shareholder has sued Paramount CEO David Ellison and his tech billionaire father Larry Ellison, alleging they cut an “illegal” deal with President Donald Trump to secure U.S. governmental approval for the takeover of Warner Bros. Discovery. In return, according to the lawsuit, the Ellisons offered “the opportunity to improperly funnel cash” to the president by settling his legal claims against CNN, and they allegedly promised that CNN anchors whom Trump does not like would be fired after the WBD takeover. The challenge in this matter will be proving the allegations. A Paramount spokesperson said in part, “This lawsuit recycles allegations that have already been reported and already addressed. As we’ve said consistently: no commitments from either David or Larry Ellison have been made to any government body, State AG, or federal agency regarding the future of CNN or any other news property, other than the goal to deliver truth-based journalism.”
Would the Ellisons just walk away from the Warner Bros. deal?
This seems unlikely. For starters, Paramount would have to pay Warner Bros. Discovery a $7 billion breakup fee. (That’s on top of the $2.8 billion it already paid to Netflix after outbidding the streamer for Warner Bros.) David Ellison, with the financial backing of his dad, Larry Ellison, demonstrated that he wasn’t going to back down from his pursuit of Warner Bros. Discovery even after Netflix clinched the deal to buy Warner’s streaming and studios businesses. As it stands now, the Paramount-WBD merger agreement is set to expire March 4, 2027, subject to one automatic extension to June 4, 2027. You can be sure David Ellison will do whatever he can to have WBD sewn up before then.
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