By Jody Godoy
Feb 27 (Reuters) – California has a lot to lose if Paramount Skydance buys Warner Bros Discovery and could stand in the way of a deal, while Paramount’s deep political connections to the Trump administration are expected to smooth the path to federal regulatory approval.
State Attorney General Rob Bonta said on Thursday that California is already investigating the deal and will be “vigorous” in its review. Hours earlier, Paramount beat out streaming giant Netflix in a months-long battle for control of the storied Hollywood studio.
“As the epicenter of the entertainment industry, California has a special interest in protecting competition,” Bonta said in a post on social media site X on Friday.
Paramount’s bid is likely to raise concerns about job cuts in California that also dogged Netflix’s bid. Paramount sees $6 billion in cost “synergies” in the deal, which is often code for massive layoffs and cutting, or sharply paring back, entire units. It can also mean reducing the number of suppliers and squeezing existing contractors for better terms after the two companies merge. None of that is good news for the California economy.
While Paramount initially came in with what the Warner Bros board viewed as an inferior offer, it was highly successful in stirring up political opposition to Netflix’s bid among Republicans in Washington. Now, Bonta and California Governor Gavin Newsom, both Democrats, are expected to be the biggest hurdles to Paramount after the media conglomerate won the fight by upping its offer price.
Any delays could add to the price tag of the deal valued at $110 billion. Paramount has bet on closing quickly, promising to pay Warner Bros shareholders a 25-cent per share quarterly “ticking fee” starting in October if the deal has not closed.
“We are confident that this transaction is indeed pro-competitive and look forward to continued constructive engagement with regulators around the world, including state attorneys general,” a Paramount spokesperson said.
A Warner Bros spokesperson declined to comment.
State intervention to block the deal is “very likely,” TD Cowen analysts said in a note on Thursday, adding that “approval from federal regulators seems likely given the political environment.”
Newsom, a potential 2028 presidential candidate, has gone out of his way to present himself as a leader among the political opposition to President Donald Trump. Bonta has sued the federal government repeatedly over Trump administration decisions on issues such as clean energy, pipeline projects and health funding.
U.S. Senator Adam Schiff, a California Democrat, said on Thursday that “what was true for Netflix is still true now for Paramount,” calling for the deal to face “the highest levels of scrutiny.”
HOLLYWOOD LABOR CRITICIZES DEAL
The Writers Guild of America, a union representing thousands of television and film writers along with other media workers, has said a Paramount takeover of Warner Bros would hurt jobs. Warner Bros canceled $2 billion in content after merging with Discovery in 2022, and Paramount’s recent merger with Skydance led to 1,000 layoffs, the union said in written testimony to the U.S. Senate.
Academy Award-winning actor Mark Ruffalo urged state attorneys general to talk about how the deal would harm competition, hurt quality for consumers and drive down wages.
“There are lots of agents in Hollywood who can tell you how past mergers and consolidations have hurt their clients and business. There is lots of talent that can tell you the same,” he said in a post on X.
“I’m in conversation with my AG colleagues about Paramount/Warner Bros,” Bonta replied in his own post.
CALIFORNIA EXPERIENCED AT BLOCKING MERGERS
After California probes the deal, it can file a lawsuit seeking to block the transaction. If the court agrees the deal would unlawfully harm competition, it will enter an order preventing it from closing. The parties could then decide to stretch out the process and appeal the ruling, abandon the deal, or negotiate a settlement.
California has challenged large mergers in the past. In 2019, it co-led a group of states challenging T-Mobile’s acquisition of Sprint. While the states lost in court, California secured a settlement recouping its costs and getting temporary commitments to keep jobs in place and offer low-cost plans for consumers.
California also joined the Federal Trade Commission and several other states in a successful bid to block Kroger’s takeover of rival grocery chain Albertsons.
While the state often works with federal enforcers, Bonta’s office has also levied criticisms against some settlements that cleared the way for mergers. For example, it is part of a coalition of 13 states opposing a Justice Department settlement allowing Hewlett Packard Enterprise’s $14 billion acquisition of Juniper Networks.
Over the past few years, Bonta’s office has staffed up on competition enforcers under the leadership of antitrust head Paula Blizzard. A longtime state antitrust enforcer, Blizzard previously worked at the DOJ and at the Federal Communications Commission, which enforces federal regulations on broadcasters.
(Reporting by Jody Godoy; Editing by Chris Sanders and Nia Williams)
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