California AG Calls Paramount-WBD Merger 'illegal', Says Threat To Leave State Is 'blackmail'

Attorney General of California Rob Bonta believes that the Warner Bros. takeover project. Discovery (WBD) by Paramount is simply “an illegal merger” as it appears to be on a crusade to stop it from happening.

Paramount CEO David Ellison is looking to acquire WBD in a $111 billion deal expected to close in the third quarter of this year. But the mega-merger has angered critics who fear the merger of two major Hollywood studios would hurt the industry while giving too much power to Ellison’s Paramount.

Bonta on Monday led a group of 12 state attorneys general to file a lawsuit challenging the merger, saying it would “lead to higher prices, lower quality and less content for film and television, harming movie theaters, basic cable providers and, ultimately, audiences on every couch and movie theater seat in the United States.”

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California Attorney General Rob Bonta. (Sarah Reingewirtz/MediaNews Group/Los Angeles Daily News via Getty Images / Getty Images)

The suit, filed in the U.S. District Court for the Northern District of California, claims the merger violates Section 7 of the Clayton Act, which states that mergers that would substantially lessen competition or tend to create a monopoly are unlawful.

“We determined that the law was broken in three markets, with respect to theatrically released films, their distribution, the distribution of the highest grossing films, blockbusters if you will, and also with respect to the licensing of cable channels to cable companies,” Bonta said. Podcast “The City” by Matthew Belloni.

“It is our duty to analyze the different markets and make a decision based on each one as to whether antitrust law is violated or not,” he continued.

Bonta said he believes there are “very strong arguments” in all three markets outlined in the lawsuit. He said consolidation in these areas gives too much power to a small number of people when it comes to dictating terms to theaters and cable companies, which could drive up prices while reducing quality.

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California Attorney General Rob Bonta believes the Warner Bros. takeover plan Discovery by Paramount is simply “an illegal merger.” (AaronP/Bauer-Griffin/GC Images / Getty Images)

“It’s about affordability, and it’s about the ability of ordinary people to enjoy and experience some of the joys of life, a movie, a TV series, at home, on cable or satellite… in a movie theater for an evening. This merger will reduce that experience, the quality, and erode it, and it will drive up the price,” Bonta said.

Belloni questioned why streaming giants that also produce movies and TV shows, such as Netflix, Apple and Amazon, were not mentioned in the lawsuit, as Paramount suggested the merger would put the company in a better position to compete with streaming giants. Belloni noted that 48 percent of viewing in America occurred on streaming services last month, compared to 22 percent for cable channels.

“We looked at all the impacts… and the streaming market is different, and the cable market is different than the theatrical release market, and everyone has their own independent analysis and we landed on three clean markets where the impact of the merger is presumed illegal based on a clear threshold defined by law,” Bonta said.

Paramount said in a press release Monday that “the practical effect of this lawsuit is to protect dominant streaming platforms like Netflix and technology companies from much-needed competition while preventing the significant benefits this transaction will bring to consumers, creators, workers and the Hollywood economy as a whole.”

After Belloni read the statement aloud, Bonta said it was “painful to hear” and rejected the idea that Paramount is “helping” consumers or workers.

“It’s selfish, and it’s just not true,” Bonta said, adding that he wouldn’t allow a company to do “illegal things” from an antitrust perspective simply to compete with streaming giants.

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David Ellison, CEO of Paramount. (Charly Triballeau/AFP via Getty Images / Getty Images)

Bonta was then questioned about a Semafor report that Ellison could potentially displace Paramount of California if the state continues to delay the merger.

“Threatening a state that’s just doing its job enforcing the law here, it seemed like a somewhat desperate last-ditch effort to blackmail the states into allowing an illegal merger. And that’s just not going to happen,” Bonta said.

Paramount fired back shortly after the suit was filed, saying the lawsuit “reflects a fundamentally misapplication of the antitrust laws and is erroneous on both the facts and the law.”

“We will vigorously defend the transaction and demonstrate that this challenge is inconsistent with sound competition policy and the competitive realities of the media marketplace. Delaying this transaction will only harm entertainment workers who have already suffered in recent years as technology has disrupted their livelihoods and cost tens of thousands of entertainment jobs in California,” a Paramount spokesperson said in a statement to Fox News Digital.

“The combination of Paramount and WBD will create a stronger, well-capitalized, creative-focused media company better positioned to compete with companies like Netflix that have come to dominate the industry in terms of viewership, premium content and creative talent,” the spokesperson continued. “Simply put, any attempt to block this transaction undermines the very principles that antitrust law is supposed to promote: more competition, more choice for consumers, and more opportunity for creators and workers.”

Paramount’s spokesperson said the company “will continue to fight any attempt to derail” the landmark deal.