Why Paramount is being sued by 12 US states
What's the story
A coalition of 12 US states led by California has filed a lawsuit against Paramount's proposed $110 billion acquisition of Warner Bros. Discovery (WBD). The states allege that the merger would create a media giant capable of raising prices in film and television, harming theaters and basic cable distributors while negatively impacting audiences. The lawsuit was filed in Oakland federal court, threatening to derail Paramount CEO David Ellison's plans to compete with Netflix and Disney.
Merger impact
States argue merger would lead to higher prices
The states contend that the proposed merger would give Paramount control over 27% of the US film distribution market, 30% of blockbuster movie distribution, and 27% of the basic cable channel market.
They argue that this consolidation would lead to higher prices and fewer opportunities for diverse storytelling in US.
"This merger, in short, would create a media behemoth," the states said in their lawsuit.
Defense strategy
Paramount defends merger amid lawsuit
In response to the lawsuit, Paramount has defended the merger as a move that would allow it to produce more content after cutting $6 billion in redundant infrastructure, marketing, and corporate jobs.
Ellison has promised that the combined film studios would release 30 movies a year.
However, critics fear this could lead to higher prices and lower quality post-merger while affecting thousands of writers, actors, and film crews across states.
Legal proceedings
States request delay in deal closing
The states have asked Paramount to delay closing the deal until the legal process is complete.
If not, they will seek an order preventing the deal from closing.
This comes as a major setback for Paramount's acquisition of Warner Bros. Discovery and could cost hundreds of millions of dollars in delays even if they win.