California and 11 other US states have sued to stop Paramount's proposed $110 billion takeover of Warner Bros. Discovery, contending that the landmark media deal would stifle competition in film distribution and cable television, to the detriment of movie theatres and pay-TV distributors.
The lawsuit marks a significant setback for Paramount Chief Executive David Ellison's ambition to transform the company into a formidable competitor to streaming heavyweights Netflix and Disney.
California Attorney General Rob Bonta said the lawsuit aims to preserve competitive markets, arguing that the merger would concentrate too much power in the hands of a single media company.
According to the states, the combined entity would control about 27% of the US film distribution market, nearly 30% of blockbuster film distribution and roughly 27% of the basic cable television market.
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The case is expected to take months to resolve, potentially delaying the transaction and adding significant costs for Paramount.
The company has warned that prolonged delays could complicate financing arrangements, create uncertainty around its share price and even jeopardise the deal.
The proposed merger has also drawn opposition from actors, writers and theatre owners, who fear it could lead to job losses and fewer theatrical releases.
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Theatre operators have argued that combining Paramount Pictures and Warner Bros. could reduce the number of films available to cinemas.
Paramount has defended the transaction, saying it would eliminate around $6 billion in overlapping costs while strengthening its content pipeline.
The company has pledged that the merged studio would release about 30 films annually.
Although the US Department of Justice has cleared the deal on antitrust grounds, the multistate lawsuit now threatens to delay one of the biggest media mergers in recent years.
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