Paramount–WBD merger on pause as judge issues temporary restraining order

By Brian Stelter, CNN

(CNN) — A federal judge has granted a temporary restraining order pausing Paramount’s takeover of Warner Bros. Discovery, CNN’s parent company.

Judge Araceli Martínez-Olguín’s Monday ruling puts the media mega-merger on hold for two weeks while she considers a broader antitrust legal challenge brought by a coalition of 12 state attorneys general, led by California AG Rob Bonta.

The judge may choose to extend the order for two more weeks. She said she will hold a hearing on August 3 to consider the states’ request for a preliminary injunction. If granted, the injunction would freeze the merger in place for months and pose a major setback for Paramount.

“This is a critical first win in our case to ensure this megamerger never sees the light of day,” Bonta said in a Monday statement. “We have a full tank of gas, the law on our side, and look forward to continuing to make our case.”

Paramount said it would vigorously defend the deal and fight the states AGs’ high-profile lawsuit.

“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,” a company spokesperson said Monday. “This merger is lawful, pro-competitive, and will benefit consumers, creators, workers, and the entertainment industry.”

As CNN previously reported, executives at Paramount and WBD had expected Martínez-Olguín to grant the states’ motion for a temporary restraining order, which is a judicial pause button at the preliminary stage of a legal battle.

The companies are focused on the upcoming preliminary injunction fight. Injunction hearings involve extensive legal arguments and evidence presented by both sides. Companies often abandon merger plans altogether — rather than proceed to a lengthy and unpredictable trial — when a judge grants a preliminary injunction.

Conversely, when a judge rejects a motion for an injunction, companies can move to complete a takeover deal quickly.

The timing is significant because Paramount is on the verge of taking over WBD, including CNN.

If the coalition of state attorneys general had not filed an antitrust lawsuit on July 13, Paramount appeared ready to complete the merger this week.

Regulatory bodies around the world have already supplied the necessary approvals. But the companies knew for months about the likelihood of a lawsuit by Democratic state attorneys general alleging that the merger would harm Hollywood and ultimately hurt consumers.

Paramount urged Martínez-Olguín to set a speedy timetable for the much more impactful preliminary injunction stage. That’s because the company has been determined to take control of WBD by September 30.

A deal-sweetener known as a “ticking fee” kicks in on October 1, adding 25 cents per WBD share per quarter to the cost of the deal until completion. The so-called “ticking fee” could cost Paramount hundreds of millions of dollars.

Monday’s ruling signals that the legal battle will play out relatively quickly.

Martínez-Olguín wrote that the states presented “compelling evidence” that Paramount–WBD would “possess substantial market share in the wide-release theatrical distribution market.”

The states, she wrote, “make a strong showing that the transaction will substantially lessen competition” in the wide-release market.

Paramount’s lead trial attorney, Daniel Kessler, said in court last week that the defendants “will dispute” the state attorneys general’s “market definitions, arguing that the states are improperly depicting the marketplaces for film distribution and cable channel licensing.

Market definitions are at the heart of the case because the states argue that the combined Paramount–WBD would have too much concentrated power in those markets.

The companies argue that the entertainment industry is rapidly evolving, with intense competition from tech giants and even individual content creators.

But Bonta says the streaming marketplace is a separate matter from the film and cable sectors that his lawsuit highlights.

“They’re multimillion-dollar markets, and this merger impacts them in a way that’s illegal,” Bonta told CNN in an interview last week.

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