antitrust lawsuit

California Atty. Gen. Rob Bonta made it clear Tuesday he holds the power to extract major concessions in the battle over the proposed Paramount-Warner Bros. merger.

A day after canceling settlement talks, Bonta said he remains open to meeting with Paramount Skydance executives to find remedies to resolve the antitrust lawsuit stalling David Ellison’s $111-billion takeover, but called on the company to end its “amateur hour” conduct.

“If you want to have an adult, legitimate, serious settlement discussion — no problem,” Bonta said during an appearance in Los Angeles. “But if you want to play games, we’ve got better things to do.”

The attorney general, who is leading the coalition of 12 states that filed an antitrust lawsuit to block the merger, repeated his stance that Paramount must make significant concessions to end the court battle — such as selling cable television channels. However, Ellison has been resistant because his company will need the steady cash-flow from Warner’s basic cable channels, including TBS, TNT and CNN, to make payments on $80-billion in debt Paramount will take on to finance the industry-reshaping deal.

Ellison’s promise to release 30 movies a year, following the merger, won’t cut it, the attorney general said.

Bonta, who was speaking at press conference to highlight public safety, expressed frustration with Paramount afterweeks of drama.

Paramount first threatened to leave California if Bonta continues to wage his court battle. Then, on Friday, Paramount accused actor Mark Ruffalo (a staunch deal critic) of making antisemitic comments, prompting prominent Jewish organizations to join the fray. One Jewish leader suggested Bonta was in cahoots with Ruffalo.

That wasn’t the issue, Bonta said, specifically pointing to leaks about the settlement talks that appeared in various news outlets.

Some reports suggested Bonta’s office sought the negotiations amid withering political pressure. Gov. Gavin Newsom, Los Angeles Mayor Karen Bass and Xavier Becerra, the Democratic nominee for governor, have separately urged a settlement to end the antitrust fight.

Bonta set the record straight: “Paramount reached out to us to have settlement discussions,” he said. “They asked for them.”

Bonta’s beef was that the substance of the nascent negotiations appeared in newspaper articles despite both sides agreeing to hold confidential talks, Bonta said, adding that crossed the line. The Wall Street Journal reported that California’s top prosecutor planned to ask Paramount for agreements to keep Warner Bros. and the Paramount Pictures film studios separate units as well as an agreement to sell some cable channels.

“We thought they were reaching out to us in good faith … unfortunately, they violated the rules of engagement,” Bonta said. “They leaked lies to the press while we were in settlement negotiations. That’s not okay … That is amateur hour.”

Paramount declined to comment. On Monday, Paramount denied it was the source of the leaks.

Bonta’s comments appeared as a show of strength after major court wins.

The coalition of attorneys general, who also represent New York, New Mexico, Colorado, Nevada and Oregon, last month won a temporary restraining order that blocked Paramount from closing the deal. Rather than lose in a hearing over a more consequential preliminary injunction, Paramount voluntarily agreed that it would not finalize the transaction until after the trial or by June 1, whichever date comes first.

U.S. District Court Judge Araceli Martínez-Olguín set a March 2 trial, which was in line with the plaintiff states’ request. Paramount had lobbied for a November date.

“We are winning in this lawsuit,” Bonta said. “They have eight of the biggest law firms in the country, making every imaginable argument under the sun. And they lost, the judge said: ‘You are likely to lose this case’… the states are likely to succeed on the merits.”

For now, no new settlement talks are scheduled.

Bonta expressed an openness to finding a truce.

“If they are willing to clean things up, put a lid on their lying leaks and engage in a way that is sincere and in good faith, we will be where we always are … happy to meet,” Bonta said.

Staff writer Kevin Rector contributed to this report.

In less than a month, Paramount Skydance Chief Executive David Ellison has exhibited a dizzying range of emotions as the goal line for the coveted $111-billion Warner Bros. Discovery deal has moved farther away.

The tech scion initially exuded confidence that Hollywood’s biggest merger in decades was on a fast track to completion by September. Ellison and others downplayed efforts by California Atty. Gen. Rob Bonta to challenge the acquisition — until Bonta and 11 other Democratic state attorneys general gained momentum in their antitrust lawsuit, which now threatens to derail Paramount’s Warner Bros. deal or, at least, make it significantly more expensive.

Ellison and his executives have vacillated from anger to acceptance. Last week, Ellison attempted a high-profile reputation reboot, extolling his love for movies and blaming politics for opposition to the deal.

The mogul has told investors the company is willing to negotiate a settlement with Bonta in hopes of completing the massive merger as soon as possible.

But Ellison also is making contingency plans to shift Paramount’s historic home base from Melrose Avenue to Tennessee — or perhaps Texas — as early as this fall.

Paramount’s board has approved Ellison’s relocation plans, according to people familiar with the situation who were not authorized to speak publicly. Ellison shared the concept with his executive leadership team in a meeting last Wednesday but said his preference was to remain in California, these people said.

The proposal includes potentially selling the 65-acre Paramount lot in Hollywood — as well as the larger Warner Bros. campus in Burbank, should Paramount prevail in the merger battle. Such sales would generate revenue to help pay merger costs, one of the knowledgeable sources said.

Paramount’s sudden relocation plan has further rattled Hollywood, which already is reeling from thousands of job losses in recent years.

Bonta, in a statement Tuesday, blasted Paramount’s latest strategy, calling it “another attempt to blackmail the state into letting an illegal deal through.”

“Paramount has lost the plot as it continues to lose in court,” Bonta said. “My office remains committed to stopping illegal consolidation and protecting a vibrant California economy for businesses that play by the rules.”

Behind Paramount’s pivot is a desperate scramble to bolster its legal case and muster funds to help finance a deal Warner shareholders approved in April.

Paramount offered to pay Warner investors $31 a share as well as so-called “ticking fees” of 25 cents per share for every quarter after Sept. 30 until the transaction closes.

That sweetener was intended as a show of confidence that Paramount’s deal would sail through its regulatory reviews, unlike a Netflix acquisition that faced more regulatory scrutiny. Netflix subsequently dropped its bid.

Paramount was banking on the swift approval of the U.S. Department of Justice, which arrived in June. President Trump is friendly with the Ellison family, and he has been eager for a shakeup at CNN, one of Warner’s properties.

“Ellison thought he had an ace in the hole with Trump [and] the DOJ, but it backfired on him because the clearance was so obviously rubber-stamping,” London-based media analyst Alice Enders said. “Now, the issues have resurfaced and it’s a costly potential delay.”

The ticking fees could add $7 million a day — or $650 million a quarter — to the $81 billion that Paramount had already anticipated paying Warner shareholders. (Paramount also agreed to absorb about $30 billion of Warner Bros. debt left over from last merger, in 2022.)

Ellison has repeatedly defended his proposed purchase, saying the tie-up does not threaten competition because Hollywood has been transformed by Netflix and other deep-pocketed tech giants.

Already, Paramount has received clearances from 65 foreign regulators, including Britain and the European Commission.

To accelerate California approvals, Paramount requested a November trial date for Bonta’s suit. Instead, U.S. District Judge Araceli Martínez-Olguín scheduled a March 2 trial — dealing another blow to Paramount.

Ticking fees alone could add $2.1 billion to the cost of buying Warner Bros. In addition, Paramount said that delaying the transaction until next spring will add $190 million in bridge loan financing costs.

Paramount disclosed that it had $1.6 billion in cash on hand and a revolving loan of $3.2 billion available for its use.

If the deal fails to close by June 4, Paramount would have to pay Warner Bros. a $7-billion breakup fee. That’s when Warner’s board could pull the plug on the Paramount deal.

Puck News first reported Ellison’s latest plan to quickly move Paramount’s operations as soon as October.

“This is a plan — not a threat,” said a person who was in the room when Ellison discussed his plans but who was not authorized to comment.

The relocation campaign echoes a tactic employed by software giant Oracle Corp., co-founded by Ellison’s billionaire father, Larry Ellison.

Oracle was based in Redwood City for three decades, but in late 2020, the company moved its headquarters to Austin, Texas, joining other California tech firms leaving in protest of the state’s high taxes and steep cost of living.

Then, two years ago, the elder Ellison announced that Nashville would host Oracle’s new headquarters. At the time, Oracle saw that state’s healthcare industry as a promising growth business. Oracle since has bet heavily on artificial intelligence.

In contrast, it would be difficult for Paramount to pack up its operations because it depends on producers, directors, writers and stars to make its TV shows and movies. The two studio lots also boast dozens of soundstages; century-old fortresses that would not be easily duplicated. And many Paramount executives are not eager to leave Los Angeles.

Some observers questioned Paramount’s willingness to carry out a move, which surfaced a week after David Ellison’s guest essay in the New York Times, which described his love of Hollywood and movies ever since he was a boy.

Ellison believes the proposed Warner merger is the best way to save Hollywood, saying the combination of two storied studios would strengthen not harm the film industry.

“One moment he’s promising to reinvigorate theatrical releases. The next he’s talking about uprooting two historic companies and moving them 2,000 miles away in order to avoid a lawsuit,” said Gabriel Kahn, journalism professor at USC Annenberg School for Communication.

Paramount’s corporate headquarters are in New York but after the Ellison family’s acquisition last year, the center of gravity shifted west. Ellison and other top executives live in Los Angeles.

Another corporate move wouldn’t disrupt Bonta’s lawsuit, experts say.

Instead, they suggested Paramount’s flurry of recent activities — including winning the support of two large theater chains, AMC and Regal, with promises of a robust movie pipeline post-merger — appeared to be part of a public relations and pressure campaign.

“They lost a lot of leverage now that the trial is set for March,” said Abiel Garcia, a former prosecutor and partner at the Manhattan Beach firm Kesselman Brantly Stockinger.

“And when you don’t have leverage in court, you go the political route,” he said, adding that Paramount seems to be angling for Gov. Gavin Newsom to join the fight.

Newsom, who has presidential ambitions, has been sensitive to the flight of companies from California. However, he has avoided picking a side in the messy merger squabble.

What’s more, the governor lacks authority to intervene in the lawsuit brought by Bonta and 11 other state attorneys general.

“All I know is that if I was governor, I wouldn’t want to lose Hollywood from this state, I wouldn’t want to lose a major company like Paramount to another state,” Paramount Chief Legal Officer Makan Delrahim said late Tuesday at a Politico Live conference in Sacramento. He had been asked about the stances of Newsom and his potential successor, Xavier Becerra, the Democratic gubernatorial nominee.

“I hope it settles before court,” Becerra said at the conference. “It is easier to stand in a conference room and settle than it is to stand in a courtroom.”

Delaying the trial until March has been “devastating,” Delrahim said, adding that Paramount proposed settlement terms on May 19 — but the state attorneys general instead moved forward with their suit.

“It’s costing jobs. It’s costing a lot of uncertainty for a lot of our employees, for Warner Bros. employees,” Delrahim said.

Still, Garcia and others expressed doubts about Paramount’s full-court press.

“It just feels a little over the top. It feels like a PR blitz,” Garcia said. “It suggests to me that they think their case is weaker than I even thought.”

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.