Twelve states filed a lawsuit on July 12-13 to stop a $110 billion merger between Paramount Skydance and Warner Bros Discovery. The unusual part: the federal government had already approved the deal a few weeks earlier.

The states argue that combining these two major media companies would hurt consumers. With less competition, they say prices would go up, content quality would drop, and there would be fewer shows and movies to watch. The lawsuit was led by California Attorney General Rob Bonta and includes attorneys general from Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington. The case was filed in federal court in California.

The states are asking the court to freeze the merger while the lawsuit is ongoing — essentially putting the deal on hold until the case is decided.

This lawsuit did not come out of nowhere. Reuters reported June 5 that states were preparing to sue. By July 8, the filing was expected within days. California's attorney general had signaled his opposition since February 27, saying he would conduct a "vigorous" review of the deal.

States and the federal government have independent power to challenge mergers. Think of it like a system of checks and balances: just because the federal government approves a deal does not mean a state cannot sue to block it. States use their own laws to protect consumers and fair competition within their borders. In this case, the states are using that power even though the Justice Department signed off on the merger on June 12. This happens when federal and state priorities differ — for example, when states worry about how the deal might affect local TV pricing or local advertising markets.

Paramount Skydance disagrees with the states. The company says the merger is actually good for competition. It argues the deal would create "a stronger company better positioned to compete against dominant technology platforms" like Netflix and Amazon. Large traditional media companies often use this argument when defending consolidation — they say they need to merge to stay competitive against streaming giants.

The fight is not just in America. The UK is also reviewing the deal. On June 30, UK Culture Secretary Lisa Nandy said she wanted regulators to investigate whether the merger could harm the British public interest — concerns like whether too few companies would control media or whether broadcasting standards would suffer.

A ticking clock adds pressure. Paramount Skydance promised to close the deal by September 30, 2026. If the deal is not finished by then, the company has to pay Warner Bros shareholders $0.25 per share each quarter as compensation for the delay. This type of payment is standard in big mergers. Now that deadline creates urgency: the lawsuit and the UK review might not wrap up before September 30.

This situation is rare in recent US history. States suing to block a merger after the federal government approved it, while a foreign country reviews the same deal at the same time — that does not happen often. Courts will likely focus on a question that has tripped up antitrust cases for years: what business are these companies actually in? Streaming, traditional cable TV, and movie theaters are all blurring together, so where do you draw the line? If the court rules the market narrowly, the merger looks more harmful to competition. If the court rules it broadly, the merger appears less problematic.

Paramount Skydance faces a tough choice if the case is not resolved by September 30. The company can pay mounting quarterly fees to Warner Bros shareholders while the lawsuit continues, or it can try to renegotiate the deal's terms. Either way, it is a pressure cooker — a commercial and legal battle happening simultaneously.