US Judge Pauses Paramount-Warner Bros. Merger — For Now

Paramount-WBD merger halted for at least 14 days

A federal judge on July 20 temporarily paused the proposed merger between Paramount and Warner Bros. Discovery just a week after 12 states sued to block the deal.

U.S. District Judge Araceli Martínez-Olguín granted a temporary restraining order in the case. She wrote in documents that the states raised “serious questions” on the merits of their claim, and that “the balance of equities and public interest tip sharply in favor” of the states.

As a result, Paramount isn’t allowed to take any steps toward completing the merger with WBD.

“This is a critical first win in our case to ensure this megamerger never sees the light of day,” California Attorney General Rob Bonta said in a statement to the Associated Press. “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.”

The pause will last at least two weeks, and could be longer depending on how the legal process unfolds.

Is the Paramount-WBD deal dead?

Not quite. The judge’s temporary restraining order is merely a sidestep in this particular legal process and gives the 12 states suing to block the transaction more time to present their case in court.

The next major hearing in the case is scheduled for August 3 — exactly 14 days from when the judge made her ruling. Both parties could agree to a later hearing date, but that would also mean the merger would be paused longer.

Paramount has significant financial incentive for the proceedings not to drag on. If the merger isn’t closed by September 30, the company would have to pay WBD shareholders nearly $7 million each day until the deal gets done, per court documents filed in a separate, since-dismissed lawsuit trying to end the proposed merger.

Of note: The European Commission approved the merger on July 22 after conducting its own investigation.

Experts weigh in on the pause

Lawyers who spoke to CableTV.com say there isn’t any real danger for the merger to fail as a result of the restraining order. What really matters, they say, is that August 3 hearing.

“That is where the states have to show a likelihood of success on the merits, and that is where this deal’s near-term fate gets decided,” Braden Perry, a litigation, regulatory, and government investigations attorney with Kennyhertz Perry, told me.

The states have to convince Martínez-Olguín that the Department of Justice erred in approving the merger. Perry describes this as an “unusual position” for the states to be in. He also says the restraining order mainly puts time pressure on the deal, particularly with how much money Paramount would owe WBD shareholders if it goes on too long.

“This is a delay risk, not yet an existential one,” Perry says.

Martin Gasparian, owner of Maison Law Modesto, seems most intrigued by Martínez-Olguín’s comments about how the deal would affect theatrical distribution.

“[The states] present 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 the order. “On this combined firm market share alone, the Court is persuaded that it can presume the proposed merger is likely to violate antitrust laws.”

Gasparian says the argument that the merger could make it more difficult for smaller companies to enter the market is “solid.”

“The deal might hit a snag if the two companies fail to come up with a good argument to show they didn’t violate the antitrust laws,” Gasparian told me. “As it stands now, it’s a tall order for them because the 12 states have already shown the deal’s impact and how it trampled on the competition laws.”

Why are people trying to block the Paramount-WBD merger?

The 12 attorneys general argue that merging Paramount and Warner Bros. Discovery would reduce competition in the TV, film, and streaming landscape, and would lead to higher prices and reduced quality for consumers. It would hurt the theater industry especially, they say.

Essentially, because the Paramount-WBD merger would eliminate competition among themselves, it would create a ripple effect across an entire industry that consists of other large, multi-faceted media companies.

The previous lawsuit, brought by five consumers, argued similarly. The Writers Guild of America also recently sued to block the merger, citing anti-competition concerns and reduced opportunities for writers.

Paramount disagrees. It says that a major driving force of the merger is to create a streaming service that can compete with Netflix, Amazon Prime Video, and Disney+.

“Neither Paramount+ nor HBO Max alone has the scale — in terms of subscriber base, revenue, or content library — to compete effectively with the leading platforms,” court documents state.

Paramount argues that, post-merger, the combined company will put even more resources into theatrical releases, promising a 45-day window for films before they head to streaming.

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