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 the Paramount–Warner Bros. Discovery merger.

Judge Araceli Martínez-Olguín’s Monday ruling puts the deal 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 move quickly to consider the states’ request for a preliminary injunction, which could freeze the merger in place for months and pose a major setback for Paramount.

Martínez-Olguín will hold a hearing on August 3 to consider imposing the injunction. Lawyers for Paramount say they will present evidence refuting the states’ argument that the deal violates antitrust law.

The early August 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.

Executives at Paramount and WBD expected the judge to grant the states’ motion for a temporary restraining order, which is a judicial pause button at the preliminary stage of a legal battle.

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.”

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, the California attorney general, 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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