San Francisco Frontiers - Twelve US states sue to block Paramount's Warner Bros. takeover

The lawsuit, filed in federal court in northern California, marks a dramatic turn in the regulatory battle over the deal -- and a direct challenge to the Trump administration's Justice Department, which approved the merger last month.

The combined company -- which came about after Netflix bowed out of the battle to own Warner -- would control a sprawling roster of assets, including CNN, Warner Bros. Pictures and the HBO Max streaming service.

The saga has become politically charged, with President Donald Trump publicly saying he would weigh in on the deal as the fate of CNN -- a frequent target of the president's ire -- hangs in the balance.

California Attorney General Rob Bonta, who is leading the coalition, said the combination of two of Hollywood's five major film distributors would lead to "higher prices, lower quality, and less content" for audiences.

"In this country, no one is above the law," Bonta said.

"California and our sister states are fighting for free and fair markets, not rigged markets. America has no kings in government or our economy."

The states, all led by Democrats, allege the deal violates the Clayton Act, the federal law that bars mergers likely to substantially reduce competition.

Joining California in the suit are Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington.

Paramount fired back, calling the lawsuit "fundamentally flawed."

"The practical effect of this lawsuit is to shield those dominant streaming platforms like Netflix and technology companies from much needed competition," a Paramount spokesperson said.

The company argued the merger would create a stronger rival to Netflix, Amazon and Apple, and pledged to release at least 30 films a year for full theatrical runs with a minimum 45-day window.

The fate of theatrical releases for Hollywood movies has been a major source of contention for the industry.

Paramount noted that competition regulators in 24 jurisdictions have already cleared the transaction or allowed their review periods to expire.

Ross Benes, a senior analyst at research firm Emarketer, said the lawsuit represented "an easy political win" for the attorneys general but was unlikely to succeed.

With federal agencies sidelined, the state attorneys general lack the jurisdictional muscle to block the deal, he added.

According to the complaint, the combined company would control roughly 27 percent of wide-release theatrical film distribution and a similar percentage of basic cable channel licensing.

The coalition has asked the companies not to close the transaction until the legal challenge is resolved, and warned it would seek a temporary restraining order if they refuse.

Paramount last month secured the green light of federal antitrust authorities, handing a major win to a media empire financed by one of Trump's closest billionaire allies.

- Trump ties -

The approval was a coup for Paramount chief executive David Ellison, whose father, Oracle co-founder Larry Ellison, largely financed the takeover.

The elder Ellison, one of the world's richest men, is a close ally of Trump and a major donor to his political campaigns.

Hundreds of actors and directors have signed a letter opposing the merger, warning it would choke production in an industry already battered by years of consolidation and cost-cutting.

The takeover battle began last year, when streaming giant Netflix and Paramount went to war over Warner Bros. and its prized back catalog.

A wary Tinseltown reluctantly lined up behind Netflix as the lesser of two evils, only to watch Paramount keep raising its bid until the streamer walked away.

V.Perez--SFF