Paramount is facing a lawsuit filed by a handful of streaming subscribers.
They filed the lawsuit on Thursday, aiming to block the $110 billion merger of Paramount Skydance, and Warner Bros.
Lawsuit
The plaintiffs of the lawsuit are three current Paramount+ subscribers and two prospective subscribers (Pamela Faust, Len Marazzo, Lisa McCarthy, Deborah Rubinsohn, and Gary Talewsky). All of them allege that increased prices and reduced viewing options will be in their future as a result of the merger.
The lawsuit was brought by two Bay Area law firms in federal court in San Jose, California.
Paramount aims to solidify the merger sometime in the third quarter, but may face additional opposition from the federal government or a coalition of states.
However, the plaintiffs want Paramount to not only break up the deal between Paramount and Warner Bros., but also force Skydance to divest itself of Paramount.
The subscribers claim the acquisition will largely reduce competition in streaming, news, and theatrical distribution in violation of antitrust laws.
The Clayton Act
Along with breaking up the Paramount and Warner Bros. deal, the lawsuit seeks triple damages under the provision of the Clayton Act that “allows private parties to sue if they are harmed by an anticompetitive merger.”
The suit claims, “Skydance’s nontrivial acquisition of Paramount Global and the proposed nontrivial acquisition of Warner Bros. Discovery reflect the same strategy of refusing to compete by building better products, investing, innovating, or winning customers through rivalry on the merits, but instead pursuing scale through consolidation that eliminates independent rivals and weakens the competitive constraints that protect consumers.”
It also provides evidence of these types of mergers, including the Disney-Fox deal and the Amazon-MGM deal, consolidating many major production companies.
The lawsuit continues, “These acquisitions show an industry moving by successive combinations toward fewer independent rivals, exactly the consolidation backdrop that heightens the competitive threat posed by the next merger, even if the combined firm remains smaller than the largest platforms.”
Trump Administration
The lawsuit even brings up the Trump administration, alleging that Skydance sidled up to them to win approval of the Paramount deal.
It goes on to state that Skydance agreed to “align CBS News’s editorial posture” with the White House, and thereby “reduced the credibility, editorial independence, and investigative vigor of its reporting.”
Less Variety
The plaintiffs, in addition to the Clayton Act, allege that they will not have as many options to watch and enjoy at the movie theater if the deal goes through.
The complaint states, “Plaintiffs allege that if Paramount’s proposed acquisition of Warner Bros. Discovery is consummated, the combined firm will reduce theatrical film output and narrow release slates, leaving moviegoers with fewer theatrical titles, less genre and budget variety, and fewer meaningful alternatives at local theaters, thereby diminishing the value of the theatrical experience by making trips to the movies less likely to offer appealing options and reducing the ability to substitute among titles when a particular film is unavailable, sold out, or unappealing.”
Paramount’s Response
David Ellison, the Paramount Skydance CEO, has pledged in the past to increase theatrical output, while also releasing at least 30 films a year once the Warner Bros. merger is completed.
The company came out with a statement on Thursday in response to the lawsuit, claiming it is “without merit.”
It added, “The combination of Paramount and WBD will create a stronger competitor that is well positioned to serve as a champion for creative talent and consumer choice.”