Paramount Faces Lingering Antitrust Risks After $110 Billion Warner Bros Deal

With Paramount Skydance Corp.’s $110 billion acquisition of Warner Bros. Discovery Inc. now complete, litigation seeking damages remains an option for the deal’s many opponents, although pursuing such claims presents significant obstacles.

 

The acquisition brings together two major film studios under a newly formed company called Skydance, which will house dozens of television networks and two major subscription streaming services, Paramount+ and HBO Max.

 

The deal has also sparked widespread concern among lawmakers and members of the film industry, who have warned that the merger could lead to lower-quality programming, higher prices, fewer employment opportunities for television workers, and less variety and fewer viewpoints across cable channels.

 

A private plaintiff could eventually bring a case, given that the merger has affected “so many different constituencies”, said Kathleen Bradish, vice-president and director of legal advocacy at the American Antitrust Institute.

 

“Everyday people seem to be concerned about this,” Bradish said. “There will certainly be watchful eyes on it.”

 

Opponents who could become plaintiffs have already made their objections known. Last month, press freedom and film advocacy groups forming the “Block the Merger” coalition challenged a settlement reached with 12 state attorneys-general who had sued to block the transaction after the Department of Justice closed its investigation.

 

The coalition had previously gathered more than 200,000 signatures from industry professionals and consumers opposed to the merger.

 

Another group representing writers, performers and production workers also criticised the settlement, arguing that it was unfair and failed to address the harm alleged by the states.

 

Neither group provided a comment.

 

Deep Pockets

 

Bringing a private lawsuit after a merger has been completed is a risky and expensive undertaking, said Josh Davis, an attorney at plaintiffs’ law firm Berger Montague.

 

However, a wealthy individual motivated by social concerns could potentially finance such litigation, he said. Alternatively, plaintiffs’ lawyers could agree to work on a contingency-fee basis, receiving payment only if the case succeeds or produces a settlement.

 

“The question is, ‘Is there someone with deep enough pockets who stands enough to gain enough financially, or has enough money that they are okay if it may not be a winning proposition for them?’” Davis said.

 

The merged company’s conduct will help determine when potential claims might emerge.

 

Viable cases could take more than a year to develop because damages must accumulate for long enough to demonstrate actionable harm, such as higher prices, suppressed wages or reduced innovation, Bradish said.

 

“If they go and cut salaries right out of the box, then they are handing a damages case to somebody,” she said.

 

The merged company could also face claims of monopolisation under Section 2 of the Sherman Act if it achieves sufficient market share in relevant markets, Bradish said. She noted that other mergers, including the combination of Live Nation Entertainment Inc. and Ticketmaster, had not prevented subsequent antitrust challenges.

 

Last year, a group of consumers secured class certification in a case challenging arbitration agreements used by Live Nation and its Ticketmaster unit.

 

Live Nation also encountered compliance problems under its 2010 consent decree with the Department of Justice, Bradish said. Private plaintiffs subsequently brought damages claims following the merger.

 

“That’s one model of a company that did not shake its antitrust problems,” she said.

 

Nevertheless, private plaintiffs seeking to challenge the Paramount transaction will need to establish legal standing, said Alex Russell, a partner in Goodwin Procter’s antitrust and competition practice.

 

“The plaintiff will need to show not just some hypothetical injury, but concrete injury in fact that is traceable to the merger,” Russell said.

 

Bringing a claim immediately after a merger makes it difficult to demonstrate concrete harm. Waiting too long, however, could expose plaintiffs to a “laches” defence, under which Paramount could argue that an unreasonable delay in bringing proceedings has prejudiced its position.

 

Attempts to reverse a merger and “unscramble the egg” are inherently difficult, Russell warned. She noted that only one private plaintiff had successfully obtained a court-ordered divestiture in a merger-related case.

 

In that case, door manufacturer Jeld-Wen Inc. was required to sell a plant it had acquired as part of its 2012 takeover of CMI, a manufacturer of the panelled “skins” used as door exteriors.

 

The fact that there is only one successful example “kind of tells you a lot about the hurdles that private plaintiffs face in the situation”, Russell said.

 

Potential Plaintiffs

 

One significant legal question is whether consumers in the 12 states that agreed to the consent decree would be prevented from bringing their own antitrust claims.

 

Members of the Block the Merger coalition have sought clarification on the issue, warning that due process concerns could arise if people who were not parties to the settlement were nevertheless bound by its terms.

 

The coalition has also questioned whether the agreement could prevent consumers and workers in those states from pursuing their own potential claims under the Clayton Act, including seeking a future divestiture.

 

Potential plaintiffs in states that did not join the settlement could also pursue damages claims relating to labour markets.

 

“You could have actors who are saying they are getting paid less as a result of this,” Davis said. “That would be more novel but it also could be quite credible.”

 

Moviegoers who purchase tickets from cinema operators rather than directly from studios such as Paramount, as well as cable television subscribers who contract with service providers such as Comcast, could potentially bring claims as indirect purchasers, said Mark S. Hegedus, general counsel at the American Antitrust Institute.

 

Direct purchasers, including consumers who subscribe to streaming services directly from HBO, could also sue, he said.

 

Businesses and individuals providing services to film and television productions, including costume professionals and hairdressers, might also join forces to seek damages, Hegedus said.

 

“There’s a whole set of people who provide services for movie production and television production that may not even be covered by the unions,” he said.

 

Merger Under Close Scrutiny

 

With so many opponents, the transaction will remain subject to intense scrutiny, and any alleged breach of its terms could trigger further legal action, said Abiel Garcia, a partner at Kesselman Brantly Stockinger LLP.

 

Under the settlement, Skydance has agreed to produce 30 films for theatrical release each year, invest $1.5 billion in domestic film production over five years, and establish an independent news oversight board.

 

“You’re going to have people watching Paramount like a hawk,” Garcia said.

 

The case is The State of California v. Paramount Skydance Corp., US District Court for the Northern District of California, No. 4:26-cv-07116.