Paramount Argues States’ Antitrust Lawsuit Against Warner Bros. Merger Is ‘Not the Product of Sound Economic Analysis’

Paramount Skydance filed an answer to 12 states’ lawsuit against its pending acquisition of Warner Bros. Discovery, arguing that the combined companies will “enhance competition” by yielding “more high-quality content in theaters and on cable” as well as “a better combined streaming offering” to compete against Netflix, Disney and Amazon. The legal response, submitted Friday, provides a preview of familiar arguments that Paramount Skydance intends to employ in defending the proposed merger, should the case go unsettled and move forward to a trial in March. The 25-page filing includes the studios’ publicly repeated claim that the combined companies will have an increased investment in content, more than they would as two separate entities, and that the “size of the Merger is precisely what makes that strategy possible.” It also claims that the rise of streaming services have dramatically increased competition in theaters and cable television over recent years and that the states’ “case depends on ignoring this reality.” “The alleged markets are not the product of sound economic analysis or current market realities,” reads the filing. “They have been invented for one purpose and one purpose only: to trigger a presumption — any presumption, not matter how weak — in the hopes the Court will look no further.” The response also notes that the largest theater chains (AMC Theaters, Cinemark and Regal) have “publicly stated that they support the Merger,” despite the 12 states seeking to protect them through the lawsuit. It also noted that Cinema United, the exhibitor industry’s largest lobbying and trade organization, has called for a settlement between the states and Paramount Skydance. The suit also underlines that 68 jurisdictions have approved the merger already and claims that the states “lack regulatory authority over the Merger, which is vested in the U.S. Department of Justice.” However, states are permitted to claim harm for business operations alleged to break federal antitrust laws. A dozen state attorneys general sued to block Paramount Skydance’s pending merger of Warner Bros. Discovery in July, arguing that the proposed $110 billion acquisition would increase leverage over movie theaters, cable and streaming platforms, which would allow the company to raise prices, reduce content spending and present consumers with fewer viewing options. California Attorney General Rob Bonta, who has been leading the states’ suit, and Paramount Skydance have agreed to meet to discuss a potential settlement in late October, as ordered by a magistrate judge overseeing the case. The Writers Guild of America, which has filed its own lawsuit against the pending merger, will also be present for the talks. On Tuesday, Paramount Skydance urged a U.S. district court judge to order the WGA and the 12 states involved in the antitrust case to pay costs related to ongoing ticking fees to Warner Bros. Discovery that activate in October if the merger does not close. Starting on Oct. 1, Paramount Skydance must pay a $7 million-per-day fee for each day the deal isn’t completed, as per the terms initially agreed to in the acquisition agreement. A Sept. 24 hearing date has been set to consider the request.