State AG's Are Ready To Challenge PSKY, WBD Merger

California, New York and other states are preparing to file a lawsuit to block Paramount Skydance’s $110 billion acquisition of Warner Bros., sources familiar with the matter told Reuters on Friday.

The lawsuit is expected to be filed in the coming weeks and would represent the most aggressive state-level intervention yet in U.S. antitrust enforcement against the Hollywood mega-merger. It was not immediately clear which additional states would join California and New York.

California Attorney General Rob Bonta, a Democrat leading the opposition, criticized President Donald Trump on Thursday for what he called an “abdication” of federal antitrust responsibility, noting that state governments have fewer resources than federal agencies. Bonta’s office said Friday that California’s investigation remains active.

Market reaction was swift. Warner Bros. shares fell 3.6% on Friday afternoon, while Paramount shares dropped 6.7% after the news. Even if the states’ lawsuit does not ultimately succeed, it could delay the deal by months if a judge issues a pause. Paramount has agreed to pay shareholders a breakup fee starting in October — roughly $6.9 million per day — if the merger has not closed.

The deal, which would combine two of Hollywood’s major studios, has faced pushback from actors, writers, and theater owners who fear reduced competition, fewer films, and job losses. Paramount has pledged to keep both studios operating and to release at least 30 theatrical films per year post-merger.

A Paramount spokesperson defended the transaction, saying it would increase competition and that blocking it would only benefit “entrenched incumbents like Netflix.” The company said it would continue fighting any efforts to derail a deal that benefits “consumers, creators, and the industry as a whole.”