Paramount Skydance's proposed $110 billion acquisition of Warner Bros. Discovery received a temporary restraining order on Monday when California District Judge Araceli Martínez-Olguín signed off on a 14-day pause following a Friday hearing in Oakland. The order stems from an antitrust lawsuit filed last week by state attorneys general led by California's Rob Bonta, alleging the merger would violate the Clayton Antitrust Act. The lawsuit claims the combined entity would control nearly one-third of films and basic cable programming, uniting Paramount and Warner Bros. studios, CBS broadcast network, pay TV networks including CNN, TNT, MTV and BET, and streaming services Paramount+ and HBO Max under one roof.
Judge Grants 14-Day Pause on Merger
In Monday's order, Martínez-Olguín stated the coalition of state attorneys general presented "compelling evidence that the combined firm resulting from the transaction will possess substantial market share in the wide-release theatrical distribution market." The order puts a 14-day pause on anything moving forward with the merger. Paramount didn't immediately return a request for comment on Monday, while Warner Bros. declined to comment.
State Attorneys General File Clayton Act Lawsuit
Last week, a group of state attorneys general led by California's Rob Bonta filed a lawsuit seeking to block the $110 billion acquisition due to antitrust concerns. The lawsuit alleges the proposed deal would violate the Clayton Antitrust Act, a more than 100-year-old law that prohibits anticompetitive mergers and acquisitions. The lawsuit was brought by a coalition of states including Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington. Bonta called the merger unlawful and said it would "lead to higher prices, lower quality, and less content for film and television, harming movie theaters, basic cable distributors, and ultimately, audiences on every sofa and movie theater seat in the U.S."
Paramount Offers Mid-August Delay Proposal
Paramount's lead trial counsel Jeffrey Kessler said on CNBC earlier this week that the TRO was filed after Paramount indicated its intention to close the deal as early as July 22, when the company expects to have all regulatory clearances. During Friday's hearing, Paramount attorneys offered to delay the deal closing until mid-August to sidestep a temporary restraining order. The states could seek another temporary restraining order after the 14 days, or a preliminary injunction, which would further delay the deal.
In court papers filed on Thursday, Paramount said the temporary restraining order "presents one of the weakest merger challenges in modern antitrust history." The company said the deal would "produce more high-quality content for consumers; it will incentivize investment in job-creating film production; it will stabilize basic cable television (which is gravely threatened by cord cutting); and it will increase the output of theatrical releases in a challenged entertainment landscape." Paramount has defended the deal as "pro-competitive."
DOJ Approves Deal While State Challenge Proceeds
The Antitrust Division of the U.S. Department of Justice signed off on the tie-up in June, clearing it of federal concerns. The deal has also won approval from several global jurisdictions. The Paramount-WBD deal has been under review by the European Union and the U.K., which provided a new provisional deadline of July 22.
Another proposed media deal, the $6.2 billion tie up of broadcast station group owners Nexstar Media Group and Tegna, has been put on pause following a similar lawsuit and preliminary injunction granted by a U.S. court. A trial for that lawsuit, also being led by Bonta, is set to begin in mid-2027.
Financial Penalties Tied to September Deadline
Paramount has said it's on track to close the deal by the end of September. If the deal were to be delayed beyond then, Paramount could face additional costs, namely a so-called ticking fee that kicks in if it's not closed after Sept. 30. The fee would be an additional 25 cents paid to WBD shareholders per quarter until closing, which would equal about $650 million in cash value per quarter. Paramount also agreed to a $7 billion breakup fee if the deal does not move forward due to regulatory concerns.
FAQ
What action did the judge take on the Paramount-Warner Bros. merger on Monday?
California District Judge Araceli Martínez-Olguín signed off on a temporary restraining order on Monday that puts a 14-day pause on anything moving forward with the merger between Paramount Skydance and Warner Bros. Discovery.
Why did state attorneys general file a lawsuit against the merger?
The coalition of state attorneys general led by California's Rob Bonta filed the lawsuit last week alleging the proposed $110 billion deal would violate the Clayton Antitrust Act. The lawsuit claims the combined entity would control nearly one-third of films and basic cable TV programming, potentially leading to higher prices, lower quality, and less content for consumers.
What financial penalties does Paramount face if the deal is delayed past September?
If the deal is not closed after Sept. 30, Paramount faces a ticking fee of an additional 25 cents paid to WBD shareholders per quarter until closing, equaling about $650 million in cash value per quarter. Paramount also agreed to a $7 billion breakup fee if the deal does not move forward due to regulatory concerns.
