A coalition of U.S. states is preparing a lawsuit that could block the proposed $110 billion acquisition of Warner Bros. Discovery by Paramount. Legal action could come as early as next week, Reuters reported on Wednesday, citing two sources familiar with the matter.
Shares of Paramount Skydance Corp (NASDAQ:PSKY) dropped nearly 1% in pre-market trading, while Warner Bros Discovery Inc (NASDAQ:WBD) stocks remained virtually flat.
According to Reuters, California Attorney General Rob Bonta is leading a multi-state investigation to determine whether the deal would significantly reduce competition in violation of U.S. antitrust laws. California, New York, and several other states have been examining the merger for weeks, as government officials step up scrutiny of major corporate consolidations.
The proposed merger would bring together two of Hollywood’s largest studios, combining the film and television assets of Warner Bros. with those of Paramount Pictures. Critics—including actors, screenwriters, and theater owners—argue that the deal could lead to job cuts, fewer movie releases, and reduced competition in the entertainment industry.
Paramount is defending the acquisition, arguing that greater scale is necessary to compete with global streaming platforms amid rising content costs. CEO David Ellison has previously stated that the combined company plans to release around 30 films per year, aiming to address concerns raised by theater owners.
Reuters notes that any court-ordered delay could prove costly for Paramount. Under the terms of the merger agreement, if the deal is not completed by October, the company must pay Warner Bros. Discovery shareholders a so-called “ticking fee”—a delay penalty of $0.25 per share, equivalent to roughly $650 million per quarter.
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