Judge puts temporary pause on Paramount-Warner Bros. merger

Paramount Skydance’s takeover of Warner Bros. Discovery hit a roadblock Monday after a federal judge temporarily paused the proposed merger, granting a request from a coalition of 12 state attorneys general who sued to thwart the $110 billion deal.

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U.S. District Judge Araceli Martínez-Olguín of the Northern District of California issued a temporary restraining order barring Paramount from closing the transaction, a corporate tie-up that would unite two movie studios, two streaming platforms and two news organizations under the control of David Ellison, the son of billionaire technology tycoon Larry Ellison.

Martínez-Olguín’s order said the restraining order will remain in effect for 14 days. The judge, who is presiding over the case, scheduled an Aug. 3 hearing on the states’ motion for a preliminary injunction, which would freeze the transaction while the legal process plays out.

The plaintiffs, led by California Attorney General Rob Bonta, sued to block the merger July 13 , arguing in a 38-page complaint that it would “extinguish competition” in Hollywood.

“The unlawful merger of these two entertainment behemoths 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.,” Bonta said in a statement accompanying the court filing.

Bonta and his fellow Democratic attorneys general contend that the transaction violates Section 7 of the Clayton Antitrust Act of 1914 , a federal law that bars mergers likely to substantially lessen competition.

Paramount-Warner merger could impact entertainment options

The states argue the deal would reduce competition in three areas: wide-release theatrical film distribution, anticipated top-grossing movie distribution, and the market for distributing basic cable channels to cable and satellite providers.

Paramount has forcefully pushed back on those claims, arguing that the states’ crusade is “wrong on both the facts and the law” and blasting the restraining order bid as “one of the weakest merger challenges in modern antitrust history.”

In response to a request for comment on the temporary restraining order, a Paramount spokesperson said in part: “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.”

The company has already received regulatory clearance from the Justice Department, and it has touted similar approvals from other countries, including Australia and China.

“We will vigorously defend the transaction and demonstrate that this challenge is inconsistent with sound competition policy and the competitive realities of the media marketplace,” Paramount said in a statement.

Paramount executives are motivated to close the deal soon. That’s partly because the company agreed to pay Warner Bros. shareholders a “ticking fee” of 25 cents a share each quarter if the transaction isn’t wrapped up by Sept. 30.

The potential penalty is worth more than $600 million per quarter.

Paramount owns a 114-year-old film studio, the Paramount+ streaming service, the CBS broadcast network, and a suite of cable assets that includes MTV and Nickelodeon. Warner Bros. owns a 116-year-old film studio, the cable brands CNN and HBO, and popular intellectual property such as the Batman and Superman franchises.

The state-driven lawsuit is the most significant threat to the deal since it was inked, though it is not the only hurdle standing in Paramount’s way. The European Union’s antitrust arm is reviewing the transaction, and the British culture secretary recently said she was “minded to intervene” in the deal, citing concerns about concentrated ownership of media enterprises.

The merger has also drawn opposition from organized labor and a group of consumers.

The Writers Guild of America filed its own antitrust suit, arguing that the deal would suppress members’ wages and shrink the number of available jobs. Separately, a group of consumers filed an antitrust suit focused on the harms of combining Paramount+ and HBO Max. (Martínez-Olguín denied the consumer plaintiffs’ request for a preliminary injunction to freeze the merger.)

In the states’ antitrust case, California’s Bonta was joined by the attorneys general of Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico and Oregon. New York Attorney General Letitia James has said the merger “threatens to raise costs for consumers and put jobs and businesses nationwide at risk.”

The proposed deal has a political dimension. Oracle co-founder Larry Ellison is an ally of President Donald Trump. Trump has praised the Ellison family and publicly called for new ownership of CNN. “We’re trying to have CNN go in a normal path,” Trump recently told the network’s Jake Tapper in an on-air phone interview.

The younger Ellison has already embarked on sweeping changes at CBS News, hiring opinion journalist Bari Weiss to overhaul “60 Minutes” and the network’s evening news broadcast.