antitrust case

Paramount Skydance has agreed to delay its purchase of Warner Bros. Discovery to as late as next June as David Ellison’s media company mounts its defense to the antitrust challenge brought by California Atty. Gen. Rob Bonta and his coalition of 11 other state attorneys general.

The major concession comes as Paramount was facing an Aug. 3 hearing to try to convince U.S. District Judge Araceli Martínez-Olguín that its proposed $111-billion deal — which would reshape Hollywood with the combination of two historic studios — would not violate U.S. antitrust laws.

The judge appeared to be leaning toward the arguments of the state attorneys general, who have alleged the proposed union of two big film studios and television networks including HBO, CBS, CNN, Comedy Central, Nickelodeon and TBS, runs afoul of the 112-year-old Clayton Antitrust Act.

In a stipulation filed Friday, Paramount agreed to hold off on closing its blockbuster purchase until after the states’ antitrust case can be decided in a trial before the Oakland-based judge or by June 1, 2027, whichever date comes first.

The move came after Martínez-Olguín issued a temporary restraining order earlier in the week — requested by Bonta and the others — which paused the deal until next month’s preliminary injunction hearing when she was set to decide whether a lengthy moratorium should be imposed.

Privately, Paramount officials were worried they might lose that round before Martínez-Olguín, so, during negotiations with the states, Paramount stipulated that it would not close the deal on its preferred timetable.

Paramount had wanted to finalize the takeover this month — or at least have it wrapped up by Sept. 30.

In a statement, Bonta celebrated the delay as “great news for audiences, movie theaters, and the many people who write, build, and create the art, news, and entertainment so many of us enjoy.”

“Our argument against this illegal merger is straightforward: When too few corporations have too much power in markets central to American life, it makes things more expensive, and it makes things worse,” Bonta said.

Now, Paramount will incur added deal costs and significant legal fees as it prepares the case for a full-blown trial. Paramount, in a statement, framed the delay as “a significant win” for the company.

“The result is exactly what we have sought from the outset: a direct path to a trial based on the evidence,” a Paramount spokesperson said in a statement. “This is the fastest and clearest way to prove that this transaction is good for competition, good for consumers, and good for creators, a conclusion dozens of competition authorities around the world have already reached. We look forward to proving our case at trial.”

On Wednesday, the European Commission gave its blessing, allowing the Paramount-Warner merger to move forward in European countries. More than 40 jurisdictions have given their consent. The U.S. Justice Department last month signed off — an approval that had been expected because of President Trump’s desire to see the Ellison family own CNN.

Paramount shares slipped on the news, falling 3.3% to $8.21 — marking the year’s lowest trading day. Warner’s stock gains since Monday’s restraining order ruling were suddenly erased. Warner shares finished at $25.77 — 17% lower than Paramount’s deal offer.

Now Paramount will have to pay Warner Bros. Discovery investors more than the $31 a share it previously promised.

In a show of confidence earlier this year, the company boasted it would quickly secure the necessary regulatory approvals to finalize the Warner purchase by late September. As an added incentive to win over investors, the company said it would pay so-called “ticking fees” should the deal encounter snags.

Those fees of $.25 a share per quarter begin Oct. 1, adding about $650 million to the pricetag each quarter until close. If Paramount is unable to close the deal by June 1, it would owe Warner Bros. Discovery a $7 billion breakup fee.

Larry Ellison, co-founder of software giant Oracle, is bankrolling his son’s ambitions to acquire a second major entertainment company in less than a year. The Ellison family acquired the smaller Paramount in August.

The Democratic state attorneys general, including from New York, New Mexico, Nevada, Colorado, Oregon and Washington, filed their lawsuit nearly two weeks ago.

The state attorneys general have alleged the deal would harm competition in three markets: films released widely (in more than 3,000 theaters); potential blockbuster films; and a concentration of cable TV channels.

Paramount insists that streaming marketshare be included in the market definition because a combined Paramount+ and HBO Max would still trail industry leaders, Netflix, YouTube, Amazon Prime and Disney+.

“Plaintiffs’ market definitions bear no relationship to the realities of today’s marketplace and cannot withstand scrutiny,” Paramount’s spokesperson said.

In her order earlier this week, Martínez-Olguín wrote that the plaintiff states presented “compelling evidence” that the merged company could wield too much control in theatrical distribution.

Friday’s agreement came after Martínez-Olguín on Thursday extended the restraining order for another 14 days — until Aug. 17 — in recognition the two sides needed time to hash out their scheduling requests. In addition, the Writers Guild of America has filed its own antitrust lawsuit, and the judge agreed to allow that case to move forward with the states’ case.

The Aug. 3 preliminary injunction hearing will be canceled as the two sides prepare for a trial.

“We are eager to continue to make our case in court …to ensure this unlawful merger never sees the light of day,” Bonta said.

The months-long delay is expected to affect Warner Bros. Discovery Chief Executive David Zaslav’s proposed $887-million exit package.

As part of a pact earlier this year, Warner board members agreed to cover Zaslav’s expected $335 million in tax obligations tied to his enormous payout, according to regulatory filings. However, Warner is not on the hook to cover Zaslav’s tax bill should the deal extend into 2027.

The merger has faced stiff resistance in Hollywood and beyond. More than 5,000 entertainment industry workers have signed an open letter calling on Bonta to block the merger.

Britain’s culture minister has also signaled that she may open a full inquiry into the proposed media consolidation, which could also bring other delays.

“This victory in putting the merger on hold belongs to the people who refused to treat the merger as inevitable,” Norm Eisen, a former ambassador and Obama White House ethics lawyer who is helping lead the #BlocktheMerger campaign.

“Artists, journalists, filmmakers, and consumer advocates spoke out despite the risk of retaliation, more than 5,500 people signed our open letter,” Eisen said in a statement. “This collective resistance is turning the tide.”

Only a few days ago, Paramount Skydance’s planned $111-billion takeover of Warner Bros. Discovery appeared to be on the glide path to completion.

The deal, which would be the largest merger in Hollywood history, had won approval from several foreign governments and, on June 12, Justice Department antitrust regulators.

The Justice Department’s assent looked to be a major step toward fulfilling the ambitions of David Ellison, the son of multibillionaire tech tycoon Larry Ellison, to bring together Paramount and Warners, which owns CNN and CBS among other properties, under one roof.

The Justice Department’s action ignited suspicions that the Ellisons had profited from their support of President Trump. But it has turned out not to be the last word on the deal. The very next day, California and 11 other states filed a motion to block the merger, stepping in where the Justice Department chose not to tread.

“I will not let Warner Bros. and Paramount merge without a fight,” California Atty. Gen. Rob Bonta said in announcing the states’ action. A hearing on the motion is scheduled for Friday in San Francisco federal court.

There’s more to this development than an effort to block Ellison’s attempt to repave the entertainment landscape for his own benefit, even though, as my colleague Meg James reports, the states’ motion “poses a major headache” for Ellison. It’s also a pointer toward a major restructuring of antitrust enforcement in the United States.

Customarily, state regulators have piggybacked on antitrust cases brought and managed by the federal government. The feds generally have greater resources than most individual states to conduct the investigations that can lead to antitrust lawsuits. States often have relied on the government to craft consistent and coherent theories of antitrust law to undergird their lawsuits.

But the Trump administration’s apparent pullback from aggressive legal pursuit of allegedly anti-competitive mergers has left a vacuum that states have moved to fill. That’s what’s driving their motion to block the Paramount-Warner Bros. deal.

Dating back to the first Trump term, California and other states have enacted new laws resembling federal statutes requiring merger proponents to provide detailed information about planned deals.

States also have filed their own lawsuits to challenge anticompetitive conduct by pharmacy benefit managers and algorithmic pricing that has driven up housing rents via alleged collusion.

States may have an advantage over the federal government in that their regulators can move faster on complex cases than the feds. That’s what happened in the fight against the proposed 2023 merger of supermarket companies Kroger and Albertsons, something that was widely feared to presage higher prices at the shelf.

Although the Federal Trade Commission moved to block the merger, so too did Oregon, Washington and nine other states in court. The companies called off the merger after a state court in Washington and a federal court in Oregon, ruling on that state’s lawsuit, simultaneously enjoined the merger on Dec. 10, 2024. One day later, Albertsons dropped the proposal.

Some supporters of effective antitrust enforcement suggest that the states’ involvement in these cases could be an effective counterweight to the mercurial approach taken toward enforcement under Trump, which seems to be driven by personal pique, as Paul Glastris, editor of the Washington Monthly, has written.

In 2017, Trump’s Justice Department sued to block AT&T’s acquisition of Time Warner, driven by Trump’s irritation over the coverage he received from CNN, which was owned by Time Warner. (I described the lawsuit as Trump’s doing the right thing for the wrong reason.) The merger eventually went through.

The best example of the states’ willingness to supplant the feds as antitrust enforcers in chief is the antitrust case against Live Nation Entertainment. The federal government and 30 states originally filed the case in 2024 in federal court in Manhattan. The lawsuit sought to break up Live Nation, which has controlled scores of top concert venues, in part by forcing it to divest Ticketmaster, the leading entertainment ticketing firm.

A few days after the trial began this spring, the Justice Department reached a settlement with Live Nation. The settlement led to accusations that the White House interfered in the Justice Department’s work on the case, including that Trump himself personally pushed for a settlement and that the deal was reached without the participation or even the knowledge of the Justice Department lawyers handling the case or of the state attorneys general who were participating. The White House referred my request for comment on these accusations to the Justice Department, which didn’t respond.

The states, asserting that the settlement wouldn’t cure Live Nation’s alleged violations of antitrust law, took over the lawsuit — and won. In mid-April, a federal jury found that Live Nation had maintained a monopoly over the live events business, exposing the company to the states’ claims of as much as $700 million in damages and a possible order that it sell Ticketmaster. The company says it will appeal.

The history of antitrust enforcement in the U.S. generally resembles the complaisant stance taken under Trump. Since the enactment of America’s first antitrust statute, the 1890 Sherman Act, industry has generally benefited from lax enforcement, in part because antitrust theory has been ever-changing. During the New Deal, President Franklin Roosevelt suspended antitrust enforcement so his National Recovery Administration could pursue its mandate to suppress industrial competition, which was thought to drive up prices and thereby foster the Great Depression.

The Supreme Court overturned the National Recovery Administration in 1935, though it had already lost credibility. Roosevelt responded in 1938 by appointing Thurman Arnold, a critic of existing antitrust theory, as the Justice Department’s antitrust chief. In his writings, Arnold implied that antitrust law as then interpreted was a fraud aimed at acclimating consumers to ever-larger business combinations through the pretense that “unfair” or “immoral” deals would be barred.

Arnold’s appointment marked what may have been the most productive period in antitrust enforcement. By the time he departed for a federal judgeship in 1943, he had brought more than 50% of all the cases brought under the Sherman Act in its half-century of existence. He broke the auto industry’s stranglehold on consumer auto lending, and started a case that concluded with the Hollywood studios’ forced divestment of their theater chains.

Since then, there have been a few notable antitrust successes, including the 1982 breakup of AT&T. That resulted from a Justice Department antitrust lawsuit launched in 1974. But the consolidation of major industries into fewer and fewer participants, especially in entertainment, has continued with very few roadblocks.

Occasionally, an aggressive enforcer comes into office. That happened under Lina Khan, whom President Biden appointed as chair of the Federal Trade Commission. (The FTC shares antitrust oversight with the Justice Department.)

Khan’s published academic work had taken aim at what she called the lax antitrust treatment of companies such as Amazon. Her argument was that antitrust enforcers’ focus on whether a monopolizing company brought consumers lower prices overlooked the longer-term consequences of giving companies the unfettered right to build market share at the expense of competitors and the free market.

Amazon “has evaded government scrutiny in part through fervently devoting its business strategy and rhetoric to reducing prices for consumers,” Khan wrote in a key article. Once it reached a critical mass, she argued, nothing would stop Amazon from extracting monopoly rents from consumers.

Khan’s aggressive stance on antitrust law earned her the enmity of targets such as Amazon and Facebook, which tried to force her to recuse herself from FTC cases against them. She refused, but due to corporate distaste for her policies, Trump replaced her as FTC chairman on his inauguration day last year.

The Paramount-Warner Bros. deal could be a key test of states’ authority and willingness to take over antitrust enforcement from the federal government. That’s because they’ll be fighting not only resistance from the merger partners, but the government’s conclusion that the deal poses no threat to consumers.

On the other hand, their case at least will be free of the suspicion that the government’s approval owed more to Trump’s friendship with the Ellison family than to sober, painstaking analysis of how reducing the number of big entertainment companies from five to four would be good for the rest of us.