US states prepare legal challenge to Paramount-Warner Bros deal

Hollywood’s biggest blockbuster may be heading for the courtroom before it reaches the closing credits. Several US states, led by California, are preparing a legal challenge to Paramount Skydance’s proposed $110 billion acquisition of Warner Bros, setting the stage for what could become one of the most consequential antitrust battles in the entertainment industry’s recent history.

According to a Reuters report citing sources familiar with the matter, the lawsuit could be filed within weeks, potentially creating a major hurdle for a deal that would unite two of Hollywood’s four major film studios under one corporate roof. While the full list of participating states has not yet been disclosed, the challenge signals growing resistance to a merger that critics argue could further concentrate power in an already consolidating media landscape.

At the centre of the opposition is California Attorney General Rob Bonta, who has emerged as one of the deal’s most outspoken critics. Reuters reported that Bonta recently accused President Donald Trump’s administration of retreating from aggressive antitrust enforcement, forcing state governments to step in despite having significantly fewer resources than federal regulators.

California’s investigation into the transaction remains active, although Bonta’s office declined to provide additional details.

The prospect of legal action rattled investors, with shares of both Paramount and Warner Bros falling after Reuters first reported the development. The market reaction reflects growing uncertainty over whether the transaction will proceed on schedule or become entangled in a lengthy legal battle.

Even if the states ultimately fail to block the merger, the litigation could still prove costly. A temporary court injunction could delay the transaction by several months, pushing back completion timelines and increasing financial pressure on the companies involved.

The stakes are particularly high for Paramount. The company has previously disclosed that if the acquisition remains incomplete beyond October, it will begin making compensation payments to shareholders amounting to approximately $6.9 million per day.

Meanwhile, the US Department of Justice is also nearing a decision on the transaction. The agency reportedly issued subpoenas in March seeking information about the merger’s potential impact on film production, content licensing, streaming competition and theatrical exhibition.

Paramount, however, continues to defend the deal aggressively. A company spokesperson told Reuters that the merger would strengthen competition rather than weaken it, arguing that blocking the transaction would effectively hand an advantage to streaming giants such as Netflix.

The company has also sought to ease industry concerns by committing to retain both studios and maintain a slate of at least 30 theatrical releases annually after the merger closes.

Still, opposition continues to build. Actors, writers and cinema owners have voiced concerns about possible job cuts, reduced competition and the long-term impact on creative diversity. For many observers, the proposed merger is about far more than two studios joining forces, it is a test case for how regulators view consolidation in an entertainment industry increasingly dominated by scale, streaming power and global distribution networks.

The acquisition emerged after a competitive bidding process in which Paramount ultimately outmanoeuvred Netflix for Warner Bros. Shareholders approved the deal in April, but regulatory clearance in the US and other markets remains pending.

For now, the merger’s future hangs in the balance. What was billed as a transformative Hollywood power play is rapidly turning into a high-stakes legal drama, with regulators, politicians, investors and the entertainment industry all waiting to see how the next act unfolds.