Introduction
There is something almost too on-the-nose about Paramount Skydance’s acquisition of Warner Bros. Discovery. HBO, the home of Succession, has been absorbed into the kind of media empire the show spent four seasons satirizing. The roughly $110 billion deal gives Paramount — which already owns CBS, Pluto TV, Nickelodeon, MTV, Comedy Central, and BET — Warner Bros. Discovery’s holdings, including CNN, HBO, TNT, Food Network, and Discovery Channel [1].
A coalition of 12 states sued to block the deal, arguing that it would eliminate one of Hollywood’s five major studios and place a vast share of the film and television industry under one corporate roof [2]. The Writers Guild of America (WGA) filed a separate challenge, arguing that the merger would reduce competition for writers and weaken their bargaining power [3]. Judge Araceli Martínez-Olguín granted the states a temporary restraining order, finding that they had raised “serious questions” about the merger’s effect on competition [4], and days later Paramount agreed not to close until the court ruled on the merits or June 1, 2027 [5]. Instead of going to trial, the states settled with Paramount on September 21 [6]; the WGA settled separately with court approval [7]; and the court approved the states’ consent decree on September 30 [8].
The states alleged that the merger violated Section 7 of the Clayton Act, which prohibits acquisitions whose effect “may be substantially to lessen competition, or to tend to create a monopoly” [9]. The statute is meant to stop harmful mergers before they happen. The result therefore raises a question about antitrust law’s modern reach: whether courts reviewing negotiated settlements can still enforce Section 7’s preventive purpose.
This article argues that the Paramount–Warner Bros. settlement shows how deferential review of consent decrees allows behavioral promises to substitute for the structural relief Section 7 was designed to secure. The decree left Paramount in control of two of Hollywood’s five major studios and relied on production quotas, monitoring, and later enforcement to manage the consequences [10]. That gap matters most in an industry where ownership determines what gets produced, distributed, and seen, because behavioral conditions can regulate Paramount’s output without restoring a competitor that would have made independent decisions about it.
Section One: Section 7 of the Clayton Act
Congress enacted the Clayton Act in 1914 amid growing concern over powerful corporations and industrial trusts [11]. Congress later expanded Section 7 through the Celler–Kefauver Act of 1950, which extended the law to cover asset acquisitions and a wider range of mergers [12]. In Brown Shoe Co. v. United States (1962), the Supreme Court explained that Section 7 was meant to stop anticompetitive mergers “in their incipiency,” before their harmful effects fully developed [13].
Section 7 prohibits acquisitions where “the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly” [14]. The word “may” makes merger review preventive. A plaintiff does not have to prove that a merger has already raised prices or created a monopoly. It must show that the merger could reduce competition in a relevant market [15]. Private plaintiffs must also show antitrust injury, meaning harm of the kind the antitrust laws were meant to prevent [16]. The 2023 Department of Justice and Federal Trade Commission Merger Guidelines recognize competition involving wages, working conditions, innovation, quality, and consumer choice [17].
The states’ settlement resolved their lawsuit, but it did not necessarily prove that their concerns had disappeared. Instead, Paramount agreed to conditions intended to address some of the alleged harms, including film-production requirements, worker protections, and separate cable negotiations [18]. The WGA also settled its separate lawsuit, reportedly because continuing the litigation without the states’ support would have been financially difficult [19]. These settlements therefore reflected a legal compromise rather than a definitive conclusion that the merger was harmless. The concerns were managed through conditions attached to the merger, while Paramount was still allowed to acquire Warner Bros. and retain control over its major assets.
This makes the case useful for examining whether the settlement fulfilled Section 7’s preventive purpose.
Section Two: Defining the Market
The states’ case depended on how the markets affected by the merger were defined. Their complaint focused on three areas: the distribution of wide-release theatrical films, anticipated blockbuster films, and basic cable channels [20]. The states described the merger as an attempt to “extinguish competition” [21].
Paramount presented the market differently. It argued that it competed in a broader entertainment industry that included Netflix, Amazon, Disney, Apple, YouTube, and other streaming platforms [22]. Under this definition, the merger would give Paramount greater scale to compete against “Big Tech” and protect “Hollywood talent,” as CEO David Ellison argues [23]. He is set to receive $50 million in cash and stock units initially valued at $100 million as the merger closes [24].
California Attorney General Rob Bonta rejected this framing. He called Paramount’s focus on Netflix “a distraction,” arguing that the states’ complaint concerned theatrical films, blockbuster releases, and cable licensing rather than streaming [25]. Entertainment lawyer Corey Martin described the states’ decision to exclude streaming as a “novel approach,” while observing that “it’s hard to envision this deal in its totality without considering streaming” [26].
The states’ narrower market definition was the stronger one, and the settlement gave up the chance to prove it. The relevant markets were theatrical distribution, major blockbuster films, and basic cable licensing because streaming services are not interchangeable with those products: Netflix may compete for viewers, but it does not distribute films through theaters or license traditional cable channels in the same way. Section 7 asks whether a merger may substantially lessen competition “in any line of commerce,” which directs the analysis to the specific markets where the merging firms actually compete [27]. The states’ complaint did exactly that, focusing on theatrical distribution, blockbuster films, and basic cable rather than the broad “entertainment” market Paramount urged [28]. Under that analysis, Paramount’s argument that it needed Warner Bros. to compete with “Big Tech” does not outweigh the immediate loss of competition between two major studios. However, defining the market this way is only the first step.
Section Three: Applying Section 7 to the Merger
Once the relevant markets are defined, the central question is whether Paramount’s acquisition of Warner Bros. was likely to reduce competition in those markets. Section 7’s use of the word “may” requires the court to evaluate probable future effects rather than wait for measurable harm to occur [29]. The legal inquiry therefore turns on evidence: how closely the companies competed, how difficult it would be for new studios to replace them, and whether the merger would give Paramount greater leverage over theaters, cable providers, and creative workers.
The states’ argument rested on concrete concentration figures. Their complaint alleged that combining Paramount and Warner Bros. would leave four distributors controlling more than 85 percent of wide-release theatrical films in the United States [30]. In basic cable, the combined company and Disney would control approximately 59 percent of the market [31]. Those figures matter because Section 7 doctrine treats concentration as evidence of harm. Under United States v. Philadelphia National Bank (1963), a merger that produces a firm with an undue market share and significantly increases concentration is presumed anticompetitive, and the merging parties must come forward with evidence rebutting that presumption [32]. The 2023 Merger Guidelines apply the same logic through the Herfindahl-Hirschman Index: a market with an HHI above 1,800 is highly concentrated, and a merger that raises the index by more than 100 points in such a market is presumed to substantially lessen competition [33]. If proven at trial, the states’ allegations would have put Paramount in the position of rebutting a presumption rather than the states proving harm from scratch. Entry would have been a hard rebuttal to make: a new studio would have to build a film library, production operation, theater relationships, and distribution network capable of challenging companies that already controlled most of the market.
Paramount’s response rested on projected benefits. The company argued that combining its resources with Warner Bros. would allow it to invest more heavily in films and compete against larger streaming platforms [34]. The settlement ultimately required Paramount to invest $1.5 billion in U.S. productions over five years and release at least 30 films annually [35]. Those commitments may produce more content, but the merger guidelines ask a different question [36]: can the promised benefits only be achieved by a merger? Could Paramount increase production through financing agreements, distribution partnerships, or independent investment without eliminating Warner Bros. as a competitor? By settling, the states gave up the chance to force Paramount to answer that question. At trial, they could have required Paramount to prove that these benefits could be achieved only through the acquisition. Without that proof, the claimed efficiencies risk becoming a general argument for allowing large companies to become larger. Therefore, the states should have held out for structural remedies — such as selling selected studios, networks, or distribution assets — rather than agreeing to allow the merger to proceed primarily through behavioral promises.
Section Four: Why the Remedies Were Insufficient
The judge’s ruling evaluated the settlement rather than deciding whether the merger would have violated Section 7 after a full trial [37]. The parties’ proposed consent decree stated that the settlement was a compromise and was not to be construed as an admission that Paramount violated antitrust law [38]. Under Ninth Circuit precedent, approving a consent decree is within the district court’s discretion, and the court should enter it if it is “fair, reasonable and equitable and does not violate the law or public policy" [39]. The decree must also come within the scope of the pleadings, further the objectives of the law, and not violate the statute underlying the complaint [40].
Judge Araceli Martínez-Olguín ultimately described the agreement as a “fair, reasonable, and good faith approach to address the competitive harms” alleged by the states [41]. She also concluded that the desire for stronger conditions did not “rise to the level of legal violations upon which the Court can reject” the negotiated settlement [42]. That reasoning explains why the merger was allowed to proceed, but it also reveals the limits of the court’s review. The judge did not determine that Paramount’s acquisition would preserve competition. She determined that the negotiated conditions were legally sufficient to resolve the states’ claims.
The decree contained significant obligations. Paramount had to meet minimum annual film-release requirements, spend at least $300 million more each year on U.S. film production than it had spent in 2025, maintain certain pricing commitments with theaters, and negotiate separately over Paramount and Warner Bros. cable channels for five years [43]. The agreement also created an internal compliance monitor, an independent monitoring trustee, and a committee of five states to oversee enforcement [44]. Divestiture remains available if Paramount breaches certain obligations [45].
Those terms may address specific conduct, yet they leave Paramount as the owner of both major studios. The decree regulates how the combined company must release films, negotiate with theaters, and handle cable licensing. It does not, however, restore the independent bargaining relationship that existed before the acquisition. A production quota can guarantee a number of releases; it cannot guarantee that Paramount will face a separate competitor when deciding which films to finance, which projects to distribute, or how aggressively to negotiate with theaters.
The decree does include divestiture, but only as a penalty. Paramount closes the deal first and keeps both studios unless it later breaches its obligations, in which case it may have to sell selected assets [46]. A divestiture required before closing would have changed the market structure on day one. Instead, the burden falls on regulators to detect a violation and return to court after the competitive structure has already changed. Paramount receives control first and faces the possibility of losing selected assets later if enforcement fails.
The monitoring system may limit some abuses, but only structural divestiture would have addressed the concentration created by the merger itself. Enforcement also depends on resources. The WGA reportedly settled its separate lawsuit because continuing without the states’ support would have been financially difficult [47]. Litigation is costly, and a decree that depends on later enforcement means returning to court after the market has already changed. Section 7 was meant to prevent that outcome, not remedy it.
Section Five: What Review Should Ask
This Section argues that courts should review state merger settlements more closely than the general consent-decree standard allows. It then addresses the two strongest objections to that view.
The court reviewed the decree under a general consent-decree standard, not one designed for merger remedies. Under United States v. Oregon (1990), a decree must be fair, adequate, reasonable, and lawful, but it need not secure the optimal outcome [48]. That inquiry is indifferent to the question Section 7 makes central: whether the remedy restores the competition the merger would eliminate. Congress posed that question for merger decrees in the Tunney Act, which directs courts to assess a proposed decree’s competitive impact and the alternative remedies considered [49]. But the Act reaches only decrees proposed by the United States [50], and the Justice Department proposed none. It instead cleared the transaction, without any divestitures, behavioral remedies, or concessions, an outcome which was anticipated given Paramount’s political connections [51].
The states thus became the sole enforcers, and the court’s review of their decree became the only judicial check on the merger. The states’ lead enforcer had indicated that the states would accept only robust structural remedies, yet the decree they accepted was predominantly behavioral [52]. Courts already have the authority to ask for structural remedies of state settlements, and they should. The Ninth Circuit’s requirement that a decree be “adequate” gives them the footing, and the Tunney Act supplies the content of what adequacy means for a merger remedy: whether it restores the competition lost, and whether a structural alternative was considered [53]. Such review would give the courts principled grounds to press for stronger terms before approval, and it would strengthen the hand of enforcers who might otherwise settle for less.
This proposal invites two objections. The first is that Congress’s silence is a choice: by extending public-interest review only to decrees the United States proposes, the Tunney Act suggests that courts should not demand more of state settlements. But the inference runs the other way. The Act reflects Congress’s view that just a fairness test is not enough for merger decrees, and that view holds no matter who proposes the decree. Nothing in the Act prevents courts from drawing on it when applying the general standard to a state attorney general, who, like the Justice Department, settles on behalf of the public.
The second objection is practical. Courts defer to settlements to encourage them, and a court that rejects a decree sends the states back to a trial they might lose, possibly leaving the public with virtually no remedy. While that risk is real, it is smaller than it appears. Closer review would not ask courts to rewrite decrees, only to withhold approval until the parties explain why a structural alternative was not adopted, which improves the states’ position at the bargaining table. In this case, the states’ evidence was strong — strong enough that the court itself had found at the temporary restraining order stage that Paramount’s market share alone supported the presumption that the merger was unlawful [54].
Conclusion
The Paramount–Warner Bros. settlement shows how difficult it is to apply Section 7 to modern media consolidation. The court reviewed a negotiated decree under a deferential standard and accepted behavioral commitments that may regulate Paramount’s conduct, yet those commitments left the company in control of the assets that created the competitive concern. Section 7 permits courts to act before competitive harm becomes irreversible, and a structural remedy would have served that preventive purpose better. A settlement that leaves both studios under one owner relies on monitoring and later enforcement to do the work that preserving competition would have done.
Footnotes
[1] Steve Kopack, “Judge Allows Paramount to Close $110 Billion Takeover of Warner Bros. Discovery,” NBC News, September 30, 2026, https://www.nbcnews.com/business/media/judge-allows-paramount-close-110-billion-takeover-warner-bros-discover-rcna600780.
[2] California v. Paramount Skydance Corp., No. 4:26-cv-07116-AMO (N.D. Cal. filed July 13, 2026), Complaint, https://oag.ca.gov/system/files/attachments/press-docs/Redacted%20Paramount%20Warner%20complaint%20%20-%20file%20stamped.pdf.
[3] Writers Guild of America, “Block the Merger,” accessed October 5, 2026, https://www.wga.org/the-guild/advocacy/politics-public-policy-pac/block-the-merger.
[4] Wyatte Grantham-Philips, “Judge Says Paramount and Warner Must Halt Merger for at Least Two Weeks, Granting States’ Request,” Associated Press, July 20, 2026, https://apnews.com/article/warner-bros-paramount-injunction-361fa669019e0053cf6d4513e6e275e3.
[5] “Paramount Agrees to Delay Closing Its Warner Bros Buyout for Months While Judge Considers Challenge,” ABC7 New York, July 24, 2026, https://abc7ny.com/story/paramount-agrees-delay-closing-warner-bros-buyout-months-judge-considers-challenge/19570365/.
[6] Blake Jones and Daniel Miller, “Bonta Defends Paramount Settlement: ‘Resolves the Antitrust Concerns,’” Politico, September 21, 2026, https://www.politico.com/news/2026/09/21/paramount-states-to-settle-antitrust-litigation-01086145.
[7] Payton Turkeltau, “WGA Settles Antitrust Lawsuit with Paramount over Warner Bros. Discovery Merger,” Variety, September 22, 2026, https://variety.com/2026/film/news/wga-settles-lawsuit-paramount-skydance-warner-bros-merger-1236871354/.
[8] Wyatte Grantham-Philips, “Judge Approves Paramount’s Settlement with States over Warner Buyout, Allowing Merger to Soon Close,” Associated Press, September 30, 2026, https://apnews.com/article/f30a8a9a4d26393177bc1af5bff1e990.
[9] Clayton Act § 7, 15 U.S.C. § 18; California v. Paramount Skydance Corp., Complaint.
[10] California v. Paramount Skydance Corp., No. 4:26-cv-07116-AMO, Joint Motion to Enter Consent Decree and Dissolve Stipulation and Order Not to Close, ECF No. 243 (N.D. Cal. Sept. 21, 2026), https://oag.ca.gov/system/files/attachments/press-docs/ecf-243-joint-motion-enter-consent-decree-and-dissolve-stipulation-and-order-not-close-re-170-order.pdf.
[11] Clayton Antitrust Act, ch. 323, 38 Stat. 730 (1914).
[12] Celler–Kefauver Act, ch. 1184, 64 Stat. 1125 (1950).
[13] Brown Shoe Co. v. United States, 370 U.S. 294, 317–18, 346 (1962).
[14] 15 U.S.C. § 18.
[15] 370 U.S. 294, 323 (1962).
[16] Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104 (1986).
[17] U.S. Department of Justice and Federal Trade Commission, Merger Guidelines, December 18, 2023, https://www.justice.gov/atr/2023-merger-guidelines.
[18] California v. Paramount Skydance Corp., ECF No. 243.
[19] Turkeltau, “WGA Settles Antitrust Lawsuit with Paramount.”
[20] California v. Paramount Skydance Corp., Complaint.
[21] Ibid.
[22] Rachel Reed, “Will 12 States Block the $111B Paramount-Warner Bros. Merger?,” Harvard Law Today, Harvard Law School, July 23, 2026, https://hls.harvard.edu/today/will-12-states-block-the-111b-paramount-warner-bros-merger/.
[23] David Ellison, “In Defense of the Paramount-Warner Deal,” New York Times, August 4, 2026, https://www.nytimes.com/2026/08/04/opinion/david-ellison-paramount-warner-deal.html.
[24] Jill Goldsmith, “David Ellison Set for Cash, Stock Awards Valued at $150 Million after Close of Paramount-WBD Deal,” Deadline, May 8, 2026, https://deadline.com/2026/05/david-ellison-cash-stock-award-paramount-warner-bros-merger-1236887811/.
[25] James Faris, “California AG Says Paramount’s Netflix Defense Misses the Point,” Business Insider, July 14, 2026, https://www.businessinsider.com/rob-bonta-interview-paramount-wbd-lawsuit-movie-theaters-cable-tv-2026-7.
[26] Ibid.
[27] 15 U.S.C. § 18.
[28] California v. Paramount Skydance Corp., Complaint.
[29] 370 U.S. 294, 323 (1962).
[30] California v. Paramount Skydance Corp., Complaint.
[31] Ibid.
[32] United States v. Philadelphia National Bank, 374 U.S. 321, 363–64 (1963).
[33] U.S. Department of Justice and Federal Trade Commission, Merger Guidelines.
[34] Politico, “Bonta Says Paramount Litigation Isn’t ‘Anti-Trump,’” Yahoo News, July 20, 2026, https://www.yahoo.com/news/politics/articles/bonta-says-paramount-litigation-isn-021200955.html.
[35] California v. Paramount Skydance Corp., ECF No. 243.
[36] U.S. Department of Justice and Federal Trade Commission, Merger Guidelines.
[37] Grantham-Philips, “Judge Approves Paramount’s Settlement.”
[38] California v. Paramount Skydance Corp., ECF No. 243.
[39] Sierra Club, Inc. v. Electronic Controls Design, Inc., 909 F.2d 1350, 1355 (9th Cir. 1990); United States v. Oregon, 913 F.2d 576, 580–81 (9th Cir. 1990).
[40] 909 F.2d 1350, 1355 (9th Cir. 1990).
[41] Grantham-Philips, “Judge Approves Paramount’s Settlement.”
[42] Ibid.
[43] California v. Paramount Skydance Corp., ECF No. 243.
[44] Ibid.
[45] Ibid.
[46] Ibid.
[47] Turkeltau, “WGA Settles Antitrust Lawsuit with Paramount.”
[48] 913 F.2d 576, 580–81 (9th Cir. 1990).
[49] Tunney Act, 15 U.S.C. § 16.
[50] Ibid.
[51] Reuters, “US Justice Department Clears Paramount’s Acquisition of Warner Bros, Politico Reports,” GV Wire, June 12, 2026, https://gvwire.com/2026/06/12/us-justice-department-clears-paramounts-acquisition-of-warner-bros-politico-reports/; Reuters, “US Justice Department Clears Paramount’s Acquisition of Warner Bros, Politico Reports,” Detroit News, June 12, 2026, https://www.detroitnews.com/story/business/2026/06/12/us-justice-department-clears-paramounts-acquisition-of-warner-bros-politico-reports/90530606007/; The Hill, “Justice Department Approves Paramount Bid to Acquire Warner Bros.,” June 12, 2026, https://thehill.com/media/5922500-doj-clears-paramount-warner-deal/.
[52] Brian Stelter, “Judge Approves Paramount’s Settlement”; CNN, “California AG Rob Bonta Says a CNN Spin-Off Wouldn’t Resolve Paramount–WBD Lawsuit,” Associated Press, July 17, 2026, https://www.cnn.com/2026/07/17/media/rob-bonta-cnn-paramount-wbd-interview.
[53] 913 F.2d 576, 580–81 (9th Cir. 1990); Tunney Act, 15 U.S.C. § 16.
[54] Politico, “Bonta Says Paramount Litigation Isn’t ‘Anti-Trump.’”