Twelve states won a temporary block on the merger, arguing it would hurt competition and consumers
Paramount Skydance’s proposed takeover of Warner Bros. Discovery hit a major setback Monday after a federal judge temporarily halted the $110 billion merger, siding with a coalition of 12 state attorneys general who sued to stop the deal.
(1) U.S. District Judge Araceli Martínez Olguín of the Northern District of California issued the restraining order, blocking Paramount from closing a transaction that would combine two major film studios, two streaming platforms and two news organizations under the leadership of David Ellison, son of technology billionaire Larry Ellison.
The order will remain in place for 14 days. Martínez Olguín has scheduled an Aug. 3 hearing to consider the states’ request for a preliminary injunction, which would pause the deal further while litigation continues.
States argue merger would hurt competition
(2) California Attorney General Rob Bonta led the coalition that filed suit July 13, arguing in a 38 page complaint that the merger would eliminate meaningful competition across the entertainment industry. The attorneys general contend the deal violates a provision of the Clayton Antitrust Act that prohibits mergers likely to substantially reduce market competition.
The states argue the merger would weaken competition in three specific areas, including wide release theatrical film distribution, projected top grossing film distribution and the market for delivering basic cable channels to television providers.
Paramount has strongly disputed the states’ claims, describing the legal challenge as one of the weakest antitrust cases brought against a merger in recent memory. The company noted it has already secured approval from the Justice Department, along with regulatory clearance from Australia and China.
Financial pressure mounts on Paramount
Paramount has strong financial incentive to close the deal quickly. The company agreed to pay Warner Bros. shareholders a quarterly fee of 25 cents per share if the merger is not finalized by Sept. 30, a penalty that could exceed $600 million every quarter it remains unresolved.
Paramount’s holdings include a 114 year old film studio, the Paramount+ streaming platform, the CBS broadcast network and cable brands such as MTV and Nickelodeon. Warner Bros. Discovery owns a 116 year old studio, along with CNN, HBO and intellectual property including the Batman and Superman franchises.
Additional legal and political hurdles
The states’ lawsuit represents the most serious threat to the merger since it was announced, though it is not the only obstacle. European Union regulators are separately reviewing the transaction, and Britain’s culture secretary has indicated she may intervene over concerns about media ownership concentration.
Opposition has also emerged from labor groups and consumers. The Writers Guild of America filed its own antitrust lawsuit, claiming the merger would suppress wages and reduce job opportunities. A separate consumer lawsuit focused on the potential harms of merging Paramount+ and HBO Max, though Martínez Olguín denied that group’s request for an injunction.
(3) New York Attorney General Letitia James, who joined the coalition, has said the merger could raise consumer costs and threaten jobs nationwide. Attorneys general from Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico and Oregon also joined the suit.
The case carries political undertones as well. Larry Ellison is a known ally of President Donald Trump, who has previously voiced support for new ownership of CNN. David Ellison has already begun reshaping CBS News, including bringing on opinion journalist Bari Weiss to help overhaul the network’s flagship news programming.
The legal battle is expected to intensify as the August hearing approaches, with the outcome likely to shape the future of one of the entertainment industry’s largest proposed mergers.
Source: This article is based on reporting from NBC News.