EU Clears Paramount-Warner Bros. Merger While U.S. State Lawsuit Still Blocks the Deal

Brussels says yes. California says not yet.

The European Commission cleared Paramount Skydance's proposed $110 billion acquisition of Warner Bros. Discovery on Wednesday, according to CNBC. The approval came with strings attached, and it lands in the middle of a U.S. legal fight that's already paused the deal domestically.

Paramount agreed to divest its stake in United International Pictures, its film distribution joint venture with Universal Pictures in Europe, and to avoid any joint film distribution arrangement with Universal in the European Economic Area for the next 10 years, according to the European Commission's release, cited by both CNBC and TheWrap. Paramount will have 13 months to unwind the UIP stake, TheWrap reported.

The EC's investigation looked at four things: theatrical film production and distribution, AV content licensing, wholesale TV channel supply, and retail AV services, according to TheWrap. Regulators concluded there's still plenty of competition at the studio level in Europe, naming Disney, NBCUniversal, Sony, Amazon MGM Studios, A24, Lionsgate and various European studios as active competitors, per TheWrap's reporting on the EC findings.

Where the EC did find a problem was in film distribution. Without concessions, the combined Paramount-WBD would have funneled Warner's films through UIP alongside Universal's, which regulators said would have led to worse rental and distribution terms for cinema operators, according to TheWrap. The commitments Paramount made are meant to keep that from happening.

65 jurisdictions down, one very stubborn holdout

Paramount wasted no time framing this as vindication. In a release cited by CNBC, the company said clearances from bodies and governments representing 65 jurisdictions have now either approved the deal or declined to challenge it on competition or foreign investment grounds. Paramount's own investor relations statement lists prior clearances from the U.S., Australia, Brazil, Canada, China, South Korea, South Africa, and a dozen other countries and regulatory bodies.

Paramount didn't stop at listing approvals. The company argued the EC's findings directly undercut the U.S. lawsuit trying to block the deal, saying in its release that the Commission's conclusions "directly refute key assumptions that underpin the state AGs' complaint." Paramount's statement specifically points to the EC's rejection of the idea that high-budget "blockbuster" films constitute their own separate market, and its finding that streaming platforms compete directly with linear TV.

That's Paramount's argument to make. A body of European regulators with no financial stake in the outcome looked hard at the same industry dynamics California is now litigating and didn't find the market too concentrated to allow the deal.

But it doesn't settle the American case, and Forbes' reporting makes clear why. A coalition of state attorneys general led by California's Rob Bonta sued to block the merger, arguing it could accelerate the "decline of theatrical exhibition of films" in the U.S. specifically. U.S. District Judge Araceli Martinez-Olguin granted a temporary restraining order on Monday, ruling the states had raised "serious questions" about whether the deal violates American antitrust law, according to Forbes. That's a 14-day pause, and Martinez-Olguin has scheduled a hearing for Aug. 3 that could extend the freeze indefinitely, Forbes reported.

European market conditions and American market conditions aren't identical. The EC evaluated competitive pressure in the EEA. Bonta's coalition is arguing about theatrical exhibition and consumer prices specifically in the U.S. Those are different legal questions under different bodies of law, whatever overlap exists in the underlying economics.

The other lawsuits piling up

The state AG suit isn't the only legal headache. Forbes reported that Paramount+ subscribers have separately sued over the deal, arguing it could raise their subscription prices. The Writers Guild of America also sued, claiming the merger would reduce competition in a way that harms film and TV writers.

The Justice Department's Antitrust Division already cleared the deal back in June, concluding it was "not likely to result in harm to competition or American consumers," according to Forbes. That clearance from Trump's DOJ is exactly what Washington state Attorney General Nick Brown is now separately suing to challenge, arguing the federal approval was flawed. So the DOJ and a coalition of state AGs are on opposite sides of the same transaction, which is not a small legal wrinkle.

Money is on the line regardless of who wins. Forbes reported Paramount agreed to pay $7 million a day, roughly $650 million a quarter, if the deal doesn't close by Sept. 30. If it collapses entirely over regulatory issues, Paramount owes a $7 billion termination fee.

The U.K.'s Competition and Markets Authority is still running its own preliminary probe and is expected to wrap that up by Aug. 7, according to Forbes, just days after Martinez-Olguin's Aug. 3 hearing. Paramount has said it's targeting a deal close by the end of September. Whether that timeline survives now depends less on Brussels and more on what happens in a California courtroom over the next two weeks.