US states may sue next week to block Paramount-Warner Bros deal, sources say

Several U.S. states are reportedly preparing to sue as early as next week to block Paramount's proposed $110 billion acquisition of Warner Bros. Discovery, citing concerns over competition. Sources familiar with the matter told Reuters that these states fear the merger could lead to increased subscription prices for streaming platforms and a reduction in the variety of films, news, and other content available to consumers.

Advocacy groups and some state regulators have echoed these concerns, warning that the consolidation of these media giants could stifle competition. The potential for a legal challenge introduces significant financial risks for Paramount. The company is already expected to carry approximately $80 billion in debt following the transaction. Furthermore, Paramount CEO David Ellison has agreed to pay Warner Bros. Discovery shareholders a "ticking fee" of 25 cents per share, amounting to roughly $650 million in cash each quarter, should the deal not be finalized before October.

This move by the states reflects a growing trend of increased scrutiny over major mergers and acquisitions. In early June, Reuters reported that California, New York, and other states were preparing similar legal action. This heightened regulatory attention comes as federal antitrust authorities appear to be adopting a more business-friendly stance. California Attorney General Rob Bonta is reportedly taking the lead in investigating whether the proposed deal violates U.S. antitrust laws designed to prevent mergers that unlawfully harm competition.

Representatives for Bonta's office declined to comment on the ongoing investigation. A spokesperson for Paramount also did not immediately respond to requests for comment. The potential lawsuits signal a significant hurdle for the proposed merger, raising questions about its future and the broader landscape of the media and entertainment industry.