What’s at stake — legally and politically — in Paramount merger

SACRAMENTO — It’s hard being a global titan these days, when despite beaucoup bucks spent bending government to your will, any little ant of a state attorney general can crawl up your pant leg and bite.

Just ask David Ellison.

After, well, the world seemingly fell in line with his long-planned $110-billion merger of Paramount Skydance and Warner Bros. Discovery in recent weeks, a dozen state attorneys general, led by California’s Rob Bonta, have stymied the deal with a so-far-successful lawsuit that has put the whole thing on ice.

That has Paramount, and presumably Ellison, big mad-sad. So much so that a company lawyer this week suggested Paramount could move out of California if Bonta doesn’t back down.

For those of us in the cheap seats, the whole plot of the Paramount merger has become so convoluted and nebulous it‘s hard to follow exactly what’s going on, and what it all means.

So let’s pull back, and take a big-picture look at what’s happening and what’s at stake — legally and politically.

Legally pretty good

First, the recap: Paramount and Warner Bros. Discovery have been trying to merge since 2024. European regulators, along with those in other countries, cleared the deal, with some conditions in place.

U.S. regulators also backed the deal (which was not surprising considering Paramount went out of its way to court Trump, maybe even settling a multimillion-dollar suit and canning Stephen Colbert as part of that), making it seem like it was all but done.

Then, recently, 12 state attorneys general led by Bonta sued to stop the merger on antitrust grounds and won a temporary restraining order.

So why did the states sue?

Trump’s idea of regulation seems to be to OK anything he likes, or that personally benefits him. Therefore, “the states have come in and played a really important role, since the DOJ has basically walked away from a lot of interest enforcement,” said George Hay, a professor of law and economics at Cornell University. “The states take this really seriously.”

While there have been lots of angles on this merger in the media (including concerns over foreign investments), the antitrust lawsuit is really fairly narrow — the main argument is that the merger will “kill off theaters,” Hay said, and hurt consumers and creators.

Bonta has pointed out that after the merger, the new Paramount would control about 27% of films released into theaters in the U.S., along with basic cable distribution.

On those narrow grounds, “the states have done a good job putting together a credible case, a case that a court’s likely to regard as being plausible,” said William Kovacic, a professor of law at George Washington University.

While the lawsuit is only in preliminary stages, Harry First, a professor of law emeritus at New York University and an expert in antitrust matters, said it has a “decent chance of succeeding.”

That has to worry Paramount, because a long, drawn-out court case is bad for business.

“If you go through appeals, it means that your transaction hangs suspended in the air for a couple of years,” Kovacic said. “It creates all sorts of uncertainty about the future direction of the business.”

The issues that don’t matter, but actually do

Paramount also has PR headaches involved with this deal, though they largely lie outside the scope of the legal action.

Whether or not CNN would retain its editorial independence has been a huge topic of debate. Ellison’s dad, billionaire Larry Ellison, is a huge F.O.T. (friend of Trump) with a hard-right tilt.

The younger Ellison has already been accused of destroying the integrity of “60 Minutes.” Many fear (or hope, depending on their politics) that he will do the same to CNN. But that’s not really an antitrust issue, although Ellison has tried to claim this is political persecution by liberal states.

There’s also been talk from labor unions and some politicians that the merger will hurt workers, which seems like a reasonable fear. In general, First points out, less competition leads to more power for the remaining owners to set the terms of employment.

Again, that’s not what the lawsuit is actually focused on.

Politics front and center

But both of those issues have become popular talking points, more prevalent than the actual issues in the lawsuit.

That reality is creating a political headache for some big political heads, including California Gov. Gavin Newsom and governor-in-waiting Xavier Becerra, who are increasingly receiving pressure from Paramount to make this all go away.

That thumbscrew campaign lost all subtlety this week at a Politico event in Sacramento, where Paramount’s chief legal officer Makan Delrahim said the company would consider leaving the state.

“If I was governor, I wouldn’t want to lose Hollywood from the state. I wouldn’t want to lose a major company like Paramount to another state,” Delrahim said.

Both Newsom and Becerra in recent days have indicated they would prefer some sort of settlement, avoiding a long legal battle that could kill the deal entirely.

NYU’s First sees that as “the weakness of Democrats who say they don’t like concentration and they don’t like concentration in the media and they don’t like companies getting bigger and bigger, and then they fold when the companies have political power.”

Let’s look at that power more closely, though, because if you recall, there are 11 other attorneys general in this suit, including from powerful states such as New York and Colorado.

That means “California doesn’t necessarily dictate what will happen to the case,” Hay said. “It may well be Ellison will twist Newsom’s arm to get Newsom to twist the attorney general’s arm to call off the case or take a very favorable settlement, but it doesn’t kick the other states out.”

While Bonta, at the same Politico event, said he’s had private conversations with Newsom on the issue, he also doesn’t seem interested in folding.

“In a span of weeks, Paramount agreed to halt the merger until a court decision or until June 2027, asked for a November trial, and is now back with another attempt to blackmail the state into letting an illegal deal through. Paramount has lost the plot as it continues to lose in court. It didn’t work the first time — on the eve of our July lawsuit — and it won’t work this time,” Bonta said in a recent social media post.

Don’t forget, Bonta has his own aspirations for governor, and Hay points out that AGs often see antitrust cases as “a political stepping stone” because they are popular with voters.

So what’s next?

As the lawsuit is currently written, First and other legal experts agreed this would be a hard case to settle because it doesn’t leave a lot of room for dealmaking.

That, of course, doesn’t mean a deal couldn’t be done.

But it’s unlikely Ellison will force California to crumble with so many other states in the game, no matter how many threats Paramount drops, and unlikely the merger will escape this lawsuit without concessions that the attorneys general can cite as victories.

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Stay Golden,
Anita Chabria

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