California and New York are leading a multi-state coalition preparing to file an antitrust lawsuit to block the $110 billion Paramount Skydance acquisition of Warner Bros. Discovery, opening a second front in Hollywood’s biggest consolidation fight just 48 hours after the Justice Department cleared the same deal without conditions.
The legal challenge has been in the works for months. Mashable reported the coalition includes “several other states” alongside California Attorney General Rob Bonta and New York Attorney General Letitia James, and that the filing is expected in the coming weeks now that the federal regulatory path has closed off as a venue. The states are arguing that the merger would harm consumers through reduced streaming-service competition, theatrical-release output, and connected-TV bargaining power, the same concerns the Justice Department weighed before ultimately green-lighting the transaction.
The state-level move sets up a structural confrontation that has become more common in U.S. antitrust enforcement since the 2020s. State AGs have increasingly used parens-patriae authority to bring their own antitrust cases when federal regulators decline, and the 2024 Microsoft-Activision review provided a template for how a multi-jurisdiction coalition can extract concessions even after a federal clearance has been issued. The Paramount-Warner deal, set to close in the third quarter of 2026, is the largest Hollywood transaction since the Disney-Fox combination of 2019.
Reuters first reported the months-long investigation on June 5, and shares of both Paramount Skydance and Warner Bros. Discovery declined on the news that day. The DOJ clearance on Friday, which we covered when the regulator green-lit the merger without asking for divestitures, has not visibly altered the state AGs’ calculation, according to people familiar with the matter cited by both outlets.
Paramount Skydance declined to comment on Saturday. Warner Bros. Discovery, through a spokesperson, said it “remains confident the transaction meets all applicable antitrust standards and we are prepared to defend that position in any forum.” A senior California Department of Justice official, speaking on background, said the state’s analysis focuses on the combined company’s bargaining leverage with virtual MVPDs and connected-TV ad platforms, a concern that has been independently raised in Roku’s recent run-up amid Comcast acquisition chatter we reported on hours ago.
The financial stakes are large enough that even a partial state-level remedy could reshape the combined company’s structure. Analysts at MoffettNathanson estimated this week that a forced divestiture of CNN, which has been the most politically charged asset inside the perimeter, could shave roughly $4 billion off the combined valuation and reset distribution leverage for the surviving entity. President Trump has separately said publicly that CNN should be sold as a condition of the merger, a position that has frustrated both Skydance’s existing executive team and the Hollywood unions whose contracts are tied to the deal’s close.
Industry observers note that the state AG case, even if it loses in court, can delay the closing well past the third quarter target. Bonta and James have a record of preparing antitrust filings that survive motions to dismiss in California’s Northern District and New York’s Southern District, both of which are venues where the lawsuit is likely to land. Both states have also coordinated this year on a separate AI consumer-protection inquiry directed at OpenAI, the subject of a recent multi-state subpoena we covered.
For Hollywood’s working talent, the case introduces a stretch of contract limbo. The Writers Guild, SAG-AFTRA and the DGA all have minimum-basic-agreement provisions that key off merger close dates, and several show pickups currently scheduled for the fourth quarter have been written with break-clause language that activates if the deal slips into 2027. The state AGs are expected to file before the end of June.
