A federal judge last week issued a temporary restraining order that effectively pauses Paramount’s $111 billion acquisition of Warner Bros Discovery (WBD) while she weighs the possibility of issuing a preliminary injunction after several states sued to block the deal on antitrust grounds.
Late last week, U.S. District Judge Araceli Martínez-Olguín heard approximately 80 minutes of arguments Friday in Oakland over the states’ request for a temporary restraining order. The proposed order would prevent the companies from closing for up to 28 days while the court prepares to consider a longer preliminary injunction.
Jeffrey Kessler, an attorney representing Paramount, told the judge the transaction would not close before July 22 and offered to voluntarily delay completion for 28 days. Paramount wants the court to hold preliminary injunction proceedings by the end of August and issue a decision before September 30.
The timing carries significant financial consequences for Paramount: Under its current agreement with WBD, shareholders of that company are entitled to a missed deadline fee if the transaction does not close by September 30. The payments would total approximately $650 million per quarter, or nearly $7 million per day.
California Attorney General Rob Bonta and attorneys general from 11 other states filed their lawsuit last Monday. Their complaint alleges the deal would substantially reduce competition in wide-release theatrical films, anticipated blockbuster releases and basic cable channel licensing.
The plaintiffs say a combination of Paramount and WBD will account for approximately 27 percent of the domestic box office and more than 30 percent of large-budget wide-release films. The combined company would also control more than one-quarter of basic cable revenue through networks including CNN, TNT, Cartoon Network, MTV, Discovery Channel, Animal Planet, BET and Nickelodeon.
James Weingarten, an attorney representing the suing states, said allowing the companies to close would immediately end competition between them and begin a difficult-to-reverse integration process involving management decisions, confidential information and potential layoffs.
Paramount disputed the states’ market calculations, with attorneys saying they fail to account adequately for streaming services, smaller distributors and the impact of deep-pocketed technology companies on the movie theater industry. Kessler pointed to films released by companies such as Apple and Amazon’s MGM Studios as evidence that competition extends beyond Hollywood’s traditional studios.
Paramount has also pledged to increase theatrical output to 30 movies per year after the merger. Attorneys for the suing states have rejected that offer, saying merger conditions could be difficult to enforce once the deal closes and warning a giant company the size of Paramount after it absorbs WBD might decide to break those commitments down the road.
The judge overseeing the case did not offer any insight into how she might rule. Some of the states participating in the antitrust lawsuit against Paramount are also fighting a similar merger between Nexstar Media Group and TEGNA, which is being heard in a federal courthouse about two hours away.
In that case, a federal judge issued a temporary restraining order, and then a preliminary injunction, after hearing arguments from both sides over the effectiveness on the merger in the broadcast TV marketplace. The suing states said the deal would concentrate too much power within a single broadcast entity, allowing Nexstar to raise fees that trickle down to cable and satellite customers and deprive communities of diverse viewpoints by consolidating newsrooms.
Nexstar has appealed the injunction. The company says combining with TEGNA is necessary to thwart the effects of streaming service owned by major technology companies, and that the best way to financially bankroll local journalism is to scale its operations. Nexstar is running TEGNA as a wholly-owned subsidiary business that is otherwise independent of its core operation while the case works through the court.
