Paramount Slams States’ Lawsuit Over Warner Bros. Merger as ‘One of the Weakest’ in Modern History

Paramount Skydance began to lay out its legal argument Thursday against an antitrust lawsuit brought by a dozen states, calling it “one of the weakest merger challenges in modern antitrust history.”

Paramount’s lawyers filed an opposition to the states’ motion for a temporary restraining order, which would pause the $111 billion merger with Warner Bros. Discovery. In it, Paramount argued that the states’ claim that the merger will harm competition is contradicted by the “real-world economics” of the film business.

“Low barriers to expansion by existing competitors — including Universal, Disney, Amazon MGM, Sony, Lionsgate, A24, and NEON — make Plaintiffs’ concentration figures irrelevant and ensure that competition will remain vigorous,” Paramount’s lawyers wrote. “The real-world economics of film

distribution and the merger’s economic incentives demonstrate that the transaction will increase, not

decrease, theatrical motion picture output and will not adversely affect the price terms to theaters.”

Led by California Attorney General Rob Bonta, a 12-state coalition filed suit on Monday, arguing that the Warner Bros. merger will harm theaters and cable distributors by creating unlawful market concentration. The suit claims that the merged entity will hold 30% of the market for blockbuster film distribution, and that four companies — including Disney, Universal and Sony — will control 93% of that market.

In its opposition, Paramount cited another company — Amazon MGM Studios — and the massive success of its “Project Hail Mary” this year. Paramount argued that Amazon MGM, or other distributors like A24 or Lionsgate, could increase production levels if Paramount cut its output, undercutting any pricing power that Paramount might have over theater chains.

Paramount has previously expressed its opposition to the lawsuit, but this the first time it has spelled out its arguments in court.

The states have also argued that Paramount and Warner Bros. Discovery are two of the three largest owners of basic cable channels, and that the combined entity will have unfair leverage over cable and satellite TV providers. In response, Paramount argued that the Paramount and WBD cable lineups are complementary — and not market substitutes — and that cable providers will still want access to all of the channels.

Paramount also argued that cord-cutting is eroding the leverage of all cable channel owners.

“In this environment, every programmer’s bargaining position is diminishing because the underlying asset (pay television subscribers) on which affiliate fees are calculated is eroding annually,” the company argued.

A hearing on the motion for a temporary injunction is set for 10 a.m. Friday before Judge Araceli Martinez-Olguin.