States including New York, Arizona and Minnesota argued the deal would harm theaters and television distributors, raising prices for consumers and making wages less competitive for workers.
"After this merger, for every dollar generated by wide-release theatrical films and basic cable channels in this country, the combined company will pocket more than a quarter," the states said in the lawsuit, adding, "This merger, in short, would create a media behemoth."
Paramount said the lawsuit distorts settled antitrust law and is based on a misrepresentation of competition in the entertainment industry.
The Paramount deal is no different. Hollywood workers slammed the deal, fearing it would hurt jobs. Theater owners opposed it, worrying it would result in fewer films.
If allowed to move forward with the deal, Paramount would control 27% of the distribution market for films that appear on screens across America, 30% of blockbuster film distribution and 27% of the market for basic cable channels, the states said.
Paramount and Warner Bros compete for the best release dates and screens at thousands of movie theaters across the country, the states said. Without that competition, theaters and moviegoers could face higher prices, the states argued.
Similarly, pay TV distributors and their subscribers rely on competition between the two companies, which together would control major channels such as CNN, MTV, HGTV, Cartoon Network and Nickelodeon.
Paramount has said the deal will allow it to produce more, not less, after it cuts $6 billion in redundant infrastructure, marketing and corporate jobs. Ellison has vowed that the combined film studios would release 30 movies a year.
The states called that commitment unenforceable, and said that even if the company stuck to that promise, it would still be in a position to raise prices and decrease quality after the merger. They said the merger would ripple through the states' economies, harming tens of thousands of writers, actors, film crews and others.
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