A dozen states file lawsuit to block Paramount Skydance-Warner Bros. Discovery merger

State attorneys general from a dozen states, including California, New York and Washington, filed a lawsuit to block Paramount Skydance's $110 billion takeover of Warner Bros. Discovery.

Why it matters: The lawsuit could derail or delay the closing of the deal, which could cost Paramount hundreds of millions of dollars.

• The coalition of states said they asked the two companies not to close their merger until after the judicial process concludes, adding it will file a temporary restraining order.
• The coalition is composed of California, Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington.

Zoom in: The states argue the deal is anticompetitive on three grounds:

1. Wide release theatrical distribution: They argue after the merger, "only three distributors will control 75% of these films and only four distributors (Defendants, Disney, Universal, and Sony) will control 86% of them."
2. Top-grossing theatrical distribution: They say after the deal "Defendants will control more than 30% of these films, and four distributors (Defendants, Disney, Universal, and Sony) will control more than 90% of them."
3. Cable reach: "Warner Bros. is the second largest and Paramount is the third largest in this market, and they would combine for a 27% share," the states attorneys general note.

What they're saying: "The unlawful merger of these two entertainment behemoths would lead to higher prices, lower quality, and less content for film and television, harming movie theaters, basic cable distributors, and ultimately, audiences on every sofa and movie theater seat in the U.S.," California Attorney General Rob Bonta said in a statement.

• Writers Guild of America West and Writers Guild of America East commended the states in a joint statement. WGAW president Michele Mulroney called the deal "one of the worst proposed mergers we've seen."
• WGAE president Tom Fontana said, "The damage this deal would do to America's entertainment and news industries would be an absolute, unmitigated disaster. This merger must be blocked."
• Theater trade group Cinema United also welcomed the state attorneys general's lawsuit, saying, "The ramifications of further movie studio consolidation will be significant and lasting, not just in Hollywood, but on Main Streets across this nation where local movie theaters serve as cultural and financial cornerstones for communities of all sizes."

The other side: Paramount criticized the lawsuit, arguing it "distorts settled antitrust law and is based on a misrepresentation of competition in the entertainment industry today"

• The company reiterated its stance that it believes the deal "creates a stronger competitor against dominant streaming and technology platforms who have harmed the market for theatrical exhibition and jobs in the entertainment industry."
• A spokesperson said the company will defend the transaction and argued, "Delaying this transaction will only harm entertainment workers who have already suffered over recent years as technology has disrupted their livelihood and cost California tens of thousands of entertainment jobs."

Catch up quick: The Justice Department in June approved Paramount's takeover of WBD.

• While that approval was expected, regulators abroad and in the U.S. continued to probe the deal.
• The U.K. Competition and Markets Authority said last month it will formally launch an investigation into the deal.
• European Union regulators seem more open to approving the deal with remedies. Bloomberg reported that Paramount is open to selling some of its children's TV network assets to help win EU approval.

The big picture: State attorneys general are moving aggressively to sue corporate giants in an attempt to fill a void they argue is being left by federal antitrust regulators.

• Earlier this year, more than two dozen bipartisan state attorneys general continued an antitrust lawsuit to break up Live Nation and Ticketmaster after the Justice Department's surprise settlement with the combined company. A jury ultimately ruled in their favor.
• A coalition of states sued to block Nexstar and Tegna from merging on antitrust grounds, even though the Justice Department and FCC approved the deal. A federal judge blocked the deal until the lawsuit is sorted out.

Go deeper: State AGs play antitrust cops