Twelve states settle antitrust suit, clearing Paramount's merger with Warner Bros. Discovery

Twelve states dropped their antitrust challenge to Paramount's buyout of Warner Bros. Discovery on Monday, removing the last legal obstacle to a merger that combines two of Hollywood's oldest studios, CBS and CNN, and the HBO Max and Paramount+ streaming services.

California Attorney General Rob Bonta, who led the coalition, said the settlement was not an endorsement. "I don't think these two companies should merge," he said. Oregon Attorney General Dan Rayfield, whose state joined the suit, said the agreement "keeps real competition in place" and protects Oregon's film production industry.

The settlement requires Paramount to release 30 films per year in theaters for the first two years and 32 per year for the three years after, including at least four independent films annually. The company must spend at least $1.5 billion over five years above its 2025 U.S. production levels and contribute $47.5 million to a fund for workers displaced by the merger. If Paramount misses its film-output targets, it must divest Miramax Studios and pay $30 million per missed film toward union health and retirement funds. The settlement also requires a board to protect editorial independence at CNN and CBS, though it does not specify how the board would enforce its recommendations. Paramount must keep its Melrose Avenue and Burbank lots open and negotiate its basic cable channels separately from Warner Bros.' channels for five years.

The Writers Guild of America, which had separately sued, also settled. Paramount agreed to pay $17.5 million into the union's health fund and to prohibit writer layoffs at CBS News for five years. The WGA said it still believes the merger will damage writers but could not afford to pursue the case alone now that the states had withdrawn.

The deal is reported as either $81 billion or $111 billion. Paramount is financing it with nearly $80 billion in debt, according to the Los Angeles Times. Larry Ellison, billionaire founder of Oracle, agreed to backstop $47 billion in equity. Royal families from Saudi Arabia, Qatar, and Abu Dhabi are contributing $24 billion for an equity stake. The FCC approved the foreign investors to own nearly 50% of the merged company last week, with the Ellison family retaining voting control.

Paramount has told Wall Street it will cut more than $6 billion in costs. A Los Angeles County economic report estimated 4,500 workers in the region could lose their jobs.

Critics called the settlement inadequate. Lina Khan, who chaired the Federal Trade Commission under Biden, said behavioral remedies "routinely fail." Alvaro Bedoya, a former FTC commissioner now with the American Economic Liberties Project, said billionaires "bribed, censored, and bullied their way to the top" and that layoffs would follow.

The Los Angeles Times reported that California Governor Gavin Newsom, Los Angeles Mayor Karen Bass, and Xavier Becerra, the Democratic nominee for California governor, had pressed Bonta to settle rather than take the case to trial. Paramount CEO David Ellison had threatened to move the studio from its Melrose Avenue lot to Texas or Tennessee. Ellison said Monday the combined company would be based in Los Angeles.

The settlement requires approval from a federal judge.