Federal Judge Temporarily Blocks Paramount-Warner Bros. Merger

The $110 billion merger between Paramount Skydance and Warner Bros. Discovery is on hold after a California judge issued a temporary restraining order over concerns that the deal would significantly limit competition. Earlier this year, WBD agreed to Paramount’s acquisition offer, which, if finalized, would put two major Hollywood studios, Paramount Pictures and Warner Bros. Pictures, under one roof, along with major cable networks and streaming services, such as Paramount+ and HBO Max. The deal would also put CNN and CBS News under the same parent company. The deal has been approved by the Justice Department and several foreign regulators.However, a group of 12 Democratic state attorneys general filed a lawsuit in California challenging the merger, arguing the deal would limit competition in wide-release theatrical film distribution, anticipated top-grossing movie distribution, and distributing basic cable channels. In a ruling on Monday, a federal district court judge, Araceli Martínez-Olguín, a Biden appointee, granted a 14-day temporary restraining order, which could be extended for another 14 days. Judge Martínez-Olguín said the plaintiffs presented “compelling evidence that the combined firm resulting from the transaction will possess substantial market share in the wide-release theatrical distribution market.” She also said that the deal may violate antitrust laws.“The Transaction would also be difficult, if not impossible, to unwind if permitted to proceed given the anticipated consolidation of operations, sharing of business-sensitive information, and potential termination or reassignment of employees. The Plaintiff States have sufficiently established that irreparable harm would result in the absence of a TRO,” Judge Martínez-Olguín wrote. The decision comes after a hearing on Friday in which Paramount’s attorneys assailed the lawsuit as “one of the weakest” in modern history and said the combined company would face competition from other studios. Paramount’s attorneys also argued that the cable networks are complementary and not direct substitutes, and therefore less likely to limit competition. During the hearing, Paramount’s lawyers asked that a preliminary injunction hearing be scheduled before September 30 to avoid “very severe harm” as there is a “ticking fee” of 25 cents a share per quarter if the deal is not finalized by that date. That means the company could face a penalty of up to $600 million per quarter.Judge Martínez-Olguín wrote that “even if Defendants argued that they would suffer economic harm as a result of delaying the merger, the equities do not weigh in their favor when contrasted with the potential public harms that would result from consummation of the Transaction, including the loss of competition.” She scheduled a preliminary injunction hearing for August 3. In a statement, California’s attorney general, Rob Bonta, called the ruling a “critical first win in our case to ensure this megamerger never sees the light of day.”“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,” Mr. Bonta said. “With our lawsuit, we’re fighting for a free and fair market and a thriving film and television industry that serves creatives and audiences alike.”Paramount said that it will “vigorously defend the transaction and demonstrate that this challenge is inconsistent with sound competition policy and the competitive realities of the media marketplace.”While the Democratic attorneys general focused their complaint on concerns about the consolidation of the entertainment giants, Democrats have also expressed concern about the future of CBS News and CNN. The CEO of Paramount, David Ellison, is the son of an Oracle co-founder and Trump supporter, Larry Ellison. The connection between the Ellisons and President Trump has led to concerns that executives seek to make major changes at CNN to shift the network to the right. Under the younger Ellison’s direction, executives at CBS News have made several changes aimed at addressing conservatives’ longstanding complaints of bias at the broadcast network. Earlier this year, CBS News fired the executive producer of “60 Minutes,” Tanya Simon, and three correspondents, Cecilia Vega, Sharyn Alfonsi, and Scott Pelley. The newsmagazine program has frequently produced stories that are critical of Mr. Trump and his administration. Ms. Alfonsi, Ms. Vega, and Mr. Pelley have all accused network executives of trying to inject political bias into their stories, a claim the network denies. The three remaining correspondents, Lesley Stahl, Jon Wertheim, and Bill Whitaker, said in June that they were upset by the firings but had decided to stay on because they “don’t want to see ‘60 Minutes’ die.” The trio said they were “working to build trust” with the new executive producer, Nick Bilton. Mr. Ellison has said that CNN would maintain its independence if the WBD deal goes through. Paramount is also facing an antitrust lawsuit from the Writers Guild of America, which expressed concern that the WBD deal would limit the number of jobs available.

Federal Judge Temporarily Blocks Paramount-Warner Bros. Merger

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