Paramount Warner Bros Merger Lawsuit Puts Deal at Risk

Paramount Skydance Corporation faces a coalition lawsuit filed by 12 state attorneys general led by California Attorney General Rob Bonta, creating a legal obstacle after the U.S. Department of Justice closed its investigation on June 12, 2026, the company said in an SEC filing.

States File Antitrust Suit

The multistate lawsuit, filed on July 13, 2026, alleges the merger would reduce competition in film distribution and cable and streaming television, leading to higher prices, lower output, and diminished quality that would harm theaters and pay-TV distributors. The complaint also highlights potential damage to creative labor markets and cites planned cost reductions of about $6 billion, seeking injunctive relief to block or delay the deal’s closing.

Several attorneys general criticized the Justice Department’s review, emphasizing that state enforcement can proceed independently. Oregon’s attorney general has pursued a parallel investigation, focusing on lobbying tied to the deal under an internal program called “Project Warrior.” Oregon asked a Multnomah County court to compel Paramount to produce records and to pause the acquisition for 60 days. A later filing shows Oregon withdrew the immediate-delay motion while continuing its broader review.

Deal Terms and Regulatory Timetable

Paramount Skydance Corporation (NASDAQ: PSKY) agreed to acquire Warner Bros. Discovery, Inc. (NASDAQ: WBD) in an all-cash transaction valued at roughly $111 billion, announced in February 2026. Both companies’ boards approved the deal, and shareholders gave overwhelming approval in April, with closing targeted for the third quarter of 2026. Paramount Skydance was formed when Skydance Media and Paramount Global merged on August 7, 2025, with Class B shares beginning to trade on Nasdaq as PSKY.

On May 27, the companies disclosed results of Warner Bros. consent solicitations for certain debt securities and scheduled related exchange and tender offers to expire at 17:00 New York City time on June 17, 2026, conditioned on closing.

Paramount’s SEC filings list multiple foreign clearances: China’s State Administration for Market Regulation granted unconditional antitrust clearance on June 17, 2026; South Africa’s competition authority approved the merger on June 19; Canada’s statutory waiting period expired on June 20; Spain’s foreign-investment authority issued a no-jurisdiction confirmation on June 11; and Australia’s regulator allowed completion subject to a 14-day waiting period ending at 10:00 ET on June 23, 2026. Approvals or non-reviews were also noted in New Zealand, Kuwait, Austria, and Saudi Arabia.

Paramount has said it will not close the transaction before July 22, 2026, to respect certain regulatory timetables. If closing slips past the September 30 outside date, contractual provisions require quarterly payments to WBD shareholders of about $650 million—roughly $6.9 million per day starting in October 2026—creating immediate financial pressure to complete the deal while the multistate litigation proceeds.

Regulatory Review and Legal Challenges

The U.S. Department of Justice closed its investigation on June 12, 2026, concluding the transaction is not likely to harm competition or American consumers. DOJ stated the deal would increase competition across the media and entertainment ecosystem.

Despite federal clearance, the 12-state coalition led by California is pursuing independent enforcement under antitrust laws, alleging the merger would unlawfully lessen competition in film production and distribution, cable and pay-TV, and streaming markets. The states argue the deal would harm theaters, pay-TV distributors, creative labor, and consumers through higher prices, reduced quality, and job losses. They seek injunctive relief to block or delay closing.

Oregon’s attorney general is separately investigating lobbying efforts related to the deal, demanding records tied to “Project Warrior” and initially seeking a 60-day delay of the acquisition. Oregon later withdrew the immediate-delay motion but continues its investigation.

Economic Stakes and Closing Pressure

The merger agreement includes a ticking fee structure that imposes significant financial penalties if closing is delayed beyond September 30, 2026. Starting in October, Paramount must pay WBD shareholders about $650 million per quarter, or roughly $6.9 million per day, until the deal closes. This creates strong financial incentives to complete the transaction on schedule despite ongoing litigation.

Paramount has committed not to close before July 22, 2026, aligning with European Union merger-control deadlines and regulatory review windows.

International Approvals

Paramount’s filings confirm multiple international approvals: unconditional antitrust clearance from China’s State Administration for Market Regulation, approval from South Africa’s Competition Commission, expiration of Canada’s statutory waiting period, a no-jurisdiction confirmation from Spain’s foreign-investment authority, and clearance from Australia’s competition regulator subject to a waiting period. Additional approvals or non-reviews have been granted in New Zealand, Kuwait, Austria, Saudi Arabia, and several European countries.

The lawsuit by the coalition of state attorneys general introduces a significant legal hurdle that could override federal clearance and delay or block the merger, intensifying regulatory and financial pressure on Paramount Skydance as it seeks to complete the acquisition of Warner Bros. Discovery.