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A federal judge has approved a bid from a coalition of 12 states to temporarily block Paramount from finalizing its $111 billion acquisition of Warner Bros. Discovery.
U.S. District Judge Araceli Martinez Olguin on Monday issued a temporary restraining order after the states filed a lawsuit last week. The emergency proposal sought to prevent the studio from moving forward with the merger for 14 days.
“Ultimately the court finds that the public interest favors their TRO request to continue the merger process in the interim period,” Martinez Olguin wrote in the order.
In a statement, California Attorney General Rob Bonta called the decision “a critical first victory in our case to ensure this massive merger never sees the light of day.”
“History tells the story of what happens when a few people have too much power over the markets that are essential to Americans’ lives: fewer opportunities for more people, and worse products and services for all people,” Bonta said. “With our lawsuit, we are fighting for a free and fair market and a thriving film and television industry that serves creators and audiences alike. We have a full tank of gas, the law is on our side, and we look forward to continuing to make our case.”
Paramount stressed in a statement that it is “confident that the evidence will demonstrate that the public state’s antitrust arguments are baseless because its alleged markets and claims of anticompetitive effects have no basis in modern market realities.”
“This merger is legal, pro-competitive and will benefit consumers, creators, workers and the entertainment industry,” she added. “We will continue to vigorously defend the deal and look forward to hearings on the substance of the action taken by the State Attorney’s Office.”
The lawsuit filed in the states alleged that the acquisition would significantly stifle competition in the higher-grossing broadband theatrical distribution and cable licensing in violation of antitrust laws.
Monday’s decision swayed Paramount’s projected 27 percent market share in wide theatrical distribution. On this front, the court found that it could “assume that the proposed merger is likely to violate the antitrust laws” because it might “substantially lessen competition.”
“It will also be difficult, if not impossible, to close the transaction if it is allowed to go forward given the expected consolidation of operations, the sharing of business-sensitive information, and the potential for termination or reassignment of employees,” Martinez Olguin wrote.
Another consideration: The studio acknowledged that it would not suffer any harm if the deal was put on hold for a short period.
That damage will start to show on September 30, after which Warners shareholders will be owed approximately $650 million per quarter or $6.9 million per day if the deal does not close.
For Paramount, the deadline is a major issue. It has offered to hold off on the acquisition for up to a month if the court agrees to schedule preliminary injunction proceedings at the end of August in order to issue a decision before the visa fees take effect. The states asked the court to begin those procedures next year.
In the lead-up to last week’s oral arguments on the emergency proposal, Paramount maintained that the states’ understanding and calculations of the markets involved in this case were flawed.
A hearing on whether the court should issue a preliminary injunction, which would prevent Paramount from closing until the case is decided, is scheduled for August 3. If the proposal is not approved, the studio is in a position to terminate the deal.
