LOS ANGELES, July 13 (Xinhua) -- California and 11 other U.S. states filed a federal lawsuit on Monday seeking to block Paramount Skydance Corporation's acquisition of Warner Bros. Discovery (WBD), alleging that the deal would reduce competition in film distribution and cable television licensing.
California Attorney General Rob Bonta said the states were "fighting for free and fair markets, not rigged markets." The lawsuit was filed in the U.S. District Court for the Northern District of California.
"The unlawful merger of these two entertainment behemoths would lead to higher prices, lower quality, and less content for film and television, harming movie theaters, basic cable distributors, and ultimately, audiences on every sofa and movie theater seat in the U.S.," Bonta noted in a press release.
In February, Paramount agreed to pay 31 U.S. dollars in cash for each WBD share, valuing WBD at 81 billion dollars in equity value and at 110 billion dollars in enterprise value.
The complaint identifies three markets: distribution of wide-release theatrical films, distribution of anticipated top-grossing films and licensing of basic-cable channels.
The states calculated that the combined company would hold around 27 percent of the wide-release film market, more than 30 percent of the anticipated top-grossing film market and 27 percent of basic-cable licensing revenue.
In the wide-release market, the complaint calculated that the merger would raise the Herfindahl-Hirschman Index, a measure of concentration, by 359 points to 2,074. The states said that level was presumed to substantially lessen competition under federal merger guidelines.
Paramount and Warner Bros. Discovery currently negotiate separately with theaters over ticket-revenue shares, release dates and screen allocation, according to the complaint. It alleged that removing one studio could strengthen the combined company's bargaining power and reduce film output and variety.
The two companies disclosed that their combined cable holdings include CNN, TNT, TBS, Nickelodeon, MTV, Comedy Central, HGTV and Food Network. The complaint alleged that distributors resisting fee demands could risk losing several channels at once.
Paramount said greater scale was needed to compete with global streaming and technology companies. It said the merger would expand its content library, strengthen streaming operations and generate up to 6 billion dollars in annual cost savings.
The company also committed to releasing at least 30 theatrical films annually through the two studios. The states said such commitments would not replace competition between independently controlled companies or constitute enforceable antitrust remedies.
The U.S. Department of Justice said in June that it had closed an eight-month investigation without challenging the deal. The department said it reviewed more than 2 million documents and concluded that the merger was unlikely to harm competition in streaming, traditional television or theatrical film production and distribution.
Regulatory records showed that reviews remained open in the European Union and Britain, while Australia's competition authority had cleared the transaction. ■