Judge pauses Paramount-Warner Bros. Discovery merger

A federal judge temporarily blocked Paramount Skydance’s planned acquisition of Warner Bros. Discovery on Monday, giving a coalition of 12 states an early win in its antitrust challenge to the $110 billion media merger.

U.S. District Judge Araceli Martínez-Olguín issued a temporary restraining order that will remain in effect for 14 days. A hearing is scheduled for Aug. 3, and Al Jazeera reported that it could take months before the court issues a final ruling.

The lawsuit, led by California Attorney General Rob Bonta and joined by attorneys general including New York’s Letitia James, argues that the merger would harm competition in the movie industry, reduce consumer choice and hurt entertainment workers. The states filed the case last week in federal court in California.

The states’ lawsuit “presented compelling evidence that the combined firm resulting from the transaction will possess substantial market share in the wide-release theatrical distribution market,” Martínez-Olguín wrote in her ruling. “On this combined firm market share alone, the Court is persuaded that it can presume the proposed merger is likely to violate antitrust laws.”

“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 added.

The states allege the deal would violate the Clayton Act of 1914, which bars mergers that may substantially reduce competition or create a monopoly. Bonta’s office said the merger would unite two of the nation’s leading media companies, giving the combined company control of nearly a third of cable programming and more than a third of blockbuster films.

Bonta called the ruling “a critical first win in our case to ensure this megamerger never sees the light of day.” He said the states are “fighting for a free and fair market and a thriving film and television industry that serves creatives and audiences alike.”

James said, “Today’s decision is an important victory for all those who would be hurt by this merger, and I look forward to continuing to fight this case.”

Paramount Skydance rejected the states’ arguments. A company spokesperson called the antitrust claims “without merit.”

“This merger is lawful, pro-competitive, and will benefit consumers, creators, workers, and the entertainment industry,” the company said Monday. “We will continue to vigorously defend the transaction and will look forward to the hearings on the substance of the State AGs’ action.” Warner Bros. referred CBS News to Paramount for comment.

Paramount has argued that combining with Warner Bros. would allow it to create more series and films and increase employment opportunities for industry professionals.

Al Jazeera reported that the states’ lawsuit also says the merger would reduce the amount of content available to consumers and lead to mass layoffs. The outlet reported that the deal has drawn scrutiny in Hollywood and Washington over concerns it could reduce production jobs, limit consumer options and affect the news landscape by bringing CBS News and CNN under one corporate roof.

The delay could carry major financial costs for Paramount. Under the merger agreement, Al Jazeera reported, Paramount would owe $650 million per quarter beginning Sept. 30 if the deal is delayed, along with a 25-cent-per-share fee totaling about $7 million per day.

The Writers Guild of America also filed a lawsuit last week seeking to block the merger, according to Al Jazeera. WGA West President Michele Mulroney said the deal would “eliminate competition in an already consolidated industry, threatening the livelihoods of entertainment workers and the creative diversity of TV and film.”

Paramount Skydance shares fell after news of the pause but rebounded to trade roughly flat by midday, while Warner Bros. Discovery shares remained down 3.8% in midday trading, Al Jazeera reported.