California Attorney General Rob Bonta's legal campaign against the proposed merger between Paramount and Warner Bros. is facing considerable headwinds. Despite successfully delaying the deal with an antitrust lawsuit filed in July, recent developments indicate a weakening of his position. The pivotal shift came when major theater operators, including Cinemark, AMC, and Regal, opted to support the merger, prompting the exhibitor trade group Cinema United to advocate for a settlement, rather than pursuing further litigation.
The core of Bonta's lawsuit, supported by 11 other state attorneys general, centers on the argument that combining two of the top five distributors would grant the merged entity excessive market power. This consolidation, they contend, would leave theaters in a disadvantaged negotiating position regarding film distribution windows and revenue-sharing agreements. However, the unexpected alignment of prominent theater chains with Paramount significantly alters the landscape of this legal battle.
Legal experts, such as William Kovacic, a professor of antitrust law at George Washington University Law School, emphasize the critical role of "victims" in antitrust cases. When the very customers supposedly harmed by a merger express their approval, it undermines the plaintiff's narrative of illegality. This sentiment is echoed by the willingness of figures like Adam Aron, CEO of AMC, to testify in favor of the merger, asserting that it would ultimately benefit theaters by strengthening the combined studio and fostering more film production. Cinemark CEO Sean Gamble also expressed satisfaction with Paramount's commitments, which include releasing 30 films annually for three years with guaranteed 45-day theatrical windows.
Despite these setbacks, the case is far from over. Bonta's office possesses subpoenaed documents from Regal and AMC that could reveal internal concerns about the merger, potentially contradicting their public statements. This disparity between public posture and private apprehension is a known phenomenon in antitrust law, as customers may fear retaliation from powerful suppliers if they voice opposition. Therefore, even without the full backing of the largest theater chains, the attorney general may still leverage internal communications and the grievances of smaller independent theaters to demonstrate the merger's potential for anticompetitive effects.
The evolving situation underscores the intricate dynamics of market power and competition in the entertainment sector. While the unified stance of the major theater chains undoubtedly presents a challenge for Bonta, the prosecution's reliance on documentary evidence and the perspectives of potentially more vulnerable smaller exhibitors could yet prove decisive in his quest to prevent the Paramount-Warner Bros. merger.
