Judge grants a 14-day restraining order as a multistate antitrust lawsuit against the $110 billion transaction moves forward.
A federal judge has temporarily blocked the proposed Paramount-Warner Bros. merger, granting a 14-day restraining order while a coalition of 12 states argues the deal would violate federal antitrust law.
U.S. District Judge Araceli Martínez-Olguín issued the temporary restraining order Monday after hearing arguments from both sides. The ruling prevents Paramount Skydance Corporation and Warner Bros. Discovery from closing the transaction or taking steps to consolidate their operations while the court considers whether a longer preliminary injunction should be granted.
The proposed transaction carries an estimated value of approximately $110 billion, including Warner Bros. Discovery’s debt. Paramount agreed to acquire the company's outstanding shares for $31 each, representing an equity value of approximately $80.9 billion when the agreement was signed.
In her decision, Martínez-Olguín found that the states had raised substantial concerns about the merger's potential effect on competition.
“Plaintiff States’ showing at least demonstrates that serious questions going to the merits remain, weighing in favor of preliminary injunctive relief,” Martínez-Olguín wrote.
The court focused its initial analysis on wide-release theatrical film distribution. The states presented evidence projecting that the combined company would control approximately 27% of that market, a level the judge said was sufficient at this stage to support a presumption that the merger could violate antitrust law.
The judge also found that allowing the companies to begin integrating their operations could cause harm that would be difficult to reverse, including the sharing of sensitive business information and the possible reassignment or termination of employees.
Martínez-Olguín noted that the companies had acknowledged they would not begin incurring costs related to a delayed closing until the end of September.
“Paramount and Warner Bros. will continue to operate as separate, viable companies competing in the marketplace while they wait for the Court to adjudicate this case,” she wrote. “The balance of equities, combined with the public’s vital interest in antitrust enforcement, therefore tips sharply in favor of the requested injunctive relief.”
The temporary restraining order will remain in effect for 14 days. It may be extended if the parties agree to a later hearing date and allow the order to remain in place until that hearing.
The court has scheduled a hearing for Aug. 3 at 3:00 p.m. in Oakland to consider the states’ request for a preliminary injunction. If granted, the injunction would prevent the companies from completing the merger while the broader antitrust lawsuit proceeds.
California Attorney General Rob Bonta, whose office is leading the multistate lawsuit, praised the ruling.
“This is a critical first win in our case to ensure this megamerger never sees the light of day,” Bonta said.
“History tells the tale of what happens when a few people have great power over markets that are central to Americans’ lives: fewer opportunities for more people, worse products and services for all people,” he added. “With our lawsuit, we’re fighting for a free and fair market and a thriving film and television industry that serves creatives and audiences alike. We have a full tank of gas, the law on our side, and look forward to continuing to make our case.”
The lawsuit was filed by California, Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, and Washington.
The states argue that the merger would combine two of Hollywood’s five major film distributors and two of the nation’s largest basic cable programmers, reducing competition and consumer choice. According to the complaint, the combined company could control nearly one-third of theatrical motion-picture distribution and basic cable programming in the United States.
Paramount said it remains confident that the transaction will withstand the legal challenge.
“Like the timing agreement to which we were willing to stipulate, this TRO preserves the status quo while the Court considers the antitrust issues presented,” a Paramount spokesperson said.
The company argued that the states’ claims do not reflect current conditions in the entertainment industry.
“We are confident the evidence will demonstrate that the State AGs’ antitrust arguments are without merit as their alleged markets and claims of anticompetitive effects are without any basis in modern market realities,” the spokesperson said. “This merger is lawful, pro-competitive, and will benefit consumers, creators, workers, and the entertainment industry. We will continue to vigorously defend the transaction and will look forward to the hearings on the substance of the State AGs’ action.”
Paramount has argued that theatrical distribution has become more competitive with the growth of companies including A24 and Amazon MGM Studios. The states maintain that Paramount, Warner Bros., Disney, Universal, and Sony still account for most major theatrical releases.
The company has also argued that combining Paramount+ with HBO Max and Discovery+ would create a stronger streaming competitor to Netflix and Amazon. Martínez-Olguín rejected that argument as a defense to the states’ allegations concerning theatrical distribution.
“The Court notes separately that it cannot accept Defendants’ argument that the Transaction will produce efficiencies in the streaming market,” she wrote. “Courts have expressly and repeatedly rejected the defense that a challenged merger will result in economic efficiencies ancillary to competition in the relevant market.”
The Aug. 3 hearing could determine whether the companies can complete the transaction before the broader lawsuit is resolved. If the court denies the preliminary injunction, Paramount and Warner Bros. could seek to move forward with the merger. If the injunction is granted, the transaction would remain blocked while the litigation continues.
Timing is becoming increasingly important. Under the merger agreement, Warner Bros. Discovery shareholders are entitled to additional consideration for each day the transaction remains unfinished after Sept. 30. The payment amounts to approximately $7 million per day and would be paid when the merger closes.
ABOUT THE AUTHOR
