UPDATE July 23: The restraining order against the merger of Paramount and Warner Bros. has been extended another two weeks, meaning the merger can’t close until August 18 at the earliest. A hearing for preliminary injunction, which would potentially block the merger indefinitely until litigation is concluded, is scheduled for August 3.
Original Story July 20: A judge has granted a temporary restraining order on the merger between Paramount and Warner Bros. Discovery after a coalition of 12 states sued for violation of antitrust laws. The deal will be paused for 2 weeks, or 14 days, while the state attorneys general who brought the lawsuit seek injunctive relief. It puts a hold on what would be a seismic shift in Hollywood.
Judge Araceli Martínez-Olguín in a hearing on Friday, July 17 questioned both sides about competition, market concentration, and the impact of allowing the merger to proceed without a restraining order while litigation is ongoing. The states’ lawyers argued that “once the competition is lost, the harms begin” as to why the merger should be paused in the short term, while Paramount’s lawyer Jeffrey Kessler argued that the merger would “not be impossible to unscramble” (via WSJ’s Joe Flint).
“My office and attorneys general nationwide have secured an emergency order blocking the unlawful merger of Warner Bros. and Paramount. This is a critical first win in our case to ensure this megamerger never sees the light of day,” said California Attorney General Rob Bonta. “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. 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.”
“We are grateful for the Court’s swift order on the motion for a TRO. 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,” Paramount said in a statement. “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. 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.”
There was word that Paramount expected to close its transaction by July 22, but that will now have to wait. Paramount has a ticking clock set for September 30 for which it will have to pay a fee to shareholders for each quarter beyond that date the transaction hasn’t closed. This also came after the Department of Justice said it would not challenge the merger, and lawyers for the company have indicated it would be prepared to take the fight to the Supreme Court in order to get the deal through should this go to a costly and lengthy litigation.
On Monday, July 13, the group of states as led by California District Attorney Rob Bonta wrote in a suit that a Paramount-WBD merger would “extinguish competition between Paramount and Warner Bros. and inflict substantial harm on movie theatres, basic cable distributors, and, ultimately, audiences nationwide.” The suit focused on three areas of competition that it argued would be impacted, including wide-release theatrical films, high-grossing tentpole theatrical films, and cable channels. The states made the argument that by controlling as much as a third of the cable market, the combined company would be able to influence pricing terms for cable providers, in turn making prices more expensive for consumers.
Paramount in response at the time said the states’ lawsuit defied evidence and only served to benefit Big Tech companies like Netflix. It argued that delaying the closing only benefits Big Tech and harms consumers and Hollywood talent. Paramount believes it has been very clear about the transaction’s benefits to workers, creators, and theaters.
A day after the states’ lawsuit, the Writers Guild of America also sued to block the merger, arguing that it would eliminate a major form of competition for writers to sell scripts and would harm terms for writers. In addition, the same judge already denied injunctive relief in a consumer lawsuit against the merger, and Paramount also now faces an fourth lawsuit from shareholders who allege that CEO David Ellison and his father, tech billionaire Larry Ellison, made a side deal with President Trump promising overhauls of CNN, though Paramount has adamantly denied any such agreement.
Paramount is set to absorb the entirety of Warner Bros. Discovery in a $110 billion transaction, making it the largest media merger in history. Paramount made a push to acquire the whole of WBD after Netflix originally won the right to purchase just the studio side of WBD, leaving behind the cable channels. Now though the combined Paramount-WBD will bring together two legacy film studios with Paramount and Warner Bros., two major streamers with Paramount+ and HBO Max, two news networks with CBS News and CNN, and a massive portfolio of cable channels including HBO, MTV, HGTV, Food Network, Comedy Central, TNT, TBS, and many more.
Paramount executives have repeatedly promised to release 30 films theatrically each year between the two studios, a means of reassuring theater owners and the rest of the industry about the overall output of films should the two companies combine. Bonta’s suit argued that this promise is not only unenforceable, it’s also unrealistic. Paramount has also said it would not be significantly cutting jobs or eliminating both of the studio lots in both Hollywood and Burbank, but the company will combine with roughly $80 billion in debt upon forming.
Leading up to this hearing, Bonta has repeatedly denied rumors that Paramount divesting CNN from the transaction would be acceptable and would alleviate any legal concerns, despite it being a popular hope for those on the left. Paramount also faces some hurdles from the UK before it can formally close, and as a result, Paramount has pushed for an aggressive timeline for which to resolve the states’ injunction request.
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