Hollywood’s biggest deal in decades is on hold.
On Monday, a federal judge temporarily blocked Paramount Skydance’s efforts to complete its purchase of Warner Bros. Discovery, ruling that the proposed $111-billion merger “raises serious questions” about whether the combination violates U.S. antitrust law.
District Judge Araceli Martínez-Olguín, based in Oakland, granted a request for a temporary restraining order from a coalition of 12 state attorneys general, led by California Atty. Gen. Rob Bonta, to freeze the deal while the court delves more closely into its impact on markets.
The order pauses the deal for 14 days. Martínez-Olguín’s ruling sets up a showdown for Aug. 3, when she considers a motion for a preliminary injunction — which, if granted, could tie up the deal for months in advance of a trial.
“This is a critical first win in our case to ensure this megamerger never sees the light of day,” Bonta said in a statement. “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.”
Two century-old film studios — with rights to Harry Potter, Batman, Scooby-Doo, “Top Gun,” “Ted Lasso” and “Game of Thrones” — would be combined, and HBO, CNN and HGTV would come under new ownership.
“The judge basically said, ‘Look, let’s not race to the finish line here,’” Eric Talley, a Columbia Law School professor, said in an interview. “At the end of the day, maybe this thing gets signed off on, but I think the AGs are going to be given a fair chance to bring their claims forward.”
The ruling dealt a blow to tech scion David Ellison’s efforts to quickly finalize his massive merger, which has the support of President Trump. Ellison wants to complete the deal by September to avoid a higher payout to Warner Bros. Discovery shareholders.
Paramount, in a statement, said the restraining order simply preserves the status quo, which Paramount had already pledged to do in court papers last week that offered to hold off on finalizing the transaction.
“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,” Paramount said in the statement.
Larry Ellison, co-founder of software giant Oracle, is bankrolling his son’s ambitions to acquire a second major entertainment company in less than a year. The Ellison family acquired the smaller Paramount in August.
The Democratic state attorneys general, including from New York, New Mexico, Nevada, Oregon and Washington, filed their lawsuit a week ago.
The 37-page lawsuit alleges that Paramount’s proposed takeover — the largest Hollywood deal in decades — would violate the U.S. Clayton Antitrust Act, a century-old law to prevent mergers that weaken competition and raise costs for consumers.
The lawsuit represents the stiffest challenge to a deal that had been swiftly clearing its various regulatory hurdles. Nearly two dozen regulators from around the globe, including Australia, Austria and Saudi Arabia, have already signed off.
The U.S. Justice Department last month approved the merger, saying the combination would probably bolster competition — not harm it. That decision wasn’t a surprise because Trump has been rooting for a CNN shakeup. The president told the network’s Jake Tapper earlier this month: “We’re trying to have CNN go on a normal path.”
“This merger is lawful, pro-competitive, and will benefit consumers, creators, workers, and the entertainment industry,” Paramount said. “We will continue to vigorously defend the transaction and will look forward to the hearings on the substance of the State AGs’ action.”
Paramount shares slid 2% to $8.57 on Monday. Warner shares tumbled nearly 4% to $25.86 — the stock’s lowest mark this year.
Martínez-Olguín’s order came after a hearing in Oakland on Friday that represented an opening salvo between the two sides in the fight over a merger that would dramatically reshape the entertainment industry.
“In many ways this case is a poster child for a much larger set of questions — some of which are specific to the entertainment industry but many are more specific to our regulatory state in general,” Talley said.
Because of the case’s expedited status, the judge said she looked closely at only one of the three markets where the plaintiff states allege the merger could bring anticompetitive harms — wide-release Hollywood films.
“Plaintiffs present compelling evidence that the combined firm resulting from the transaction will possess substantial market share in the wide-release theatrical distribution market,” Martínez-Olguín wrote in her 10-page order.
If allowed to merge, Paramount-Warner Bros. would control about 27% of the market of films that are initially released into more than 3,000 theaters.
“On this combined firm market share alone, the Court is persuaded that it can presume the proposed merger is likely to violate antitrust laws,” the judge wrote.
The ruling doesn’t signal that the states will win but, Talley said: “This is an important mark in the road that suggests that, in the eyes of the judge, at least one of their allegations has the seeds of a valid case.”
Paramount and Warner Bros. Discovery are “temporarily enjoined and restrained from closing or consummating the transaction or taking any steps, directly or indirectly, to integrate or consolidate their operations pursuant to the transaction,” the judge wrote.
The order extends to all officers, attorneys, and “other persons who are in active concert or participation with Defendants,” Martínez-Olguín wrote.
The merger is far from dead, Emarketer senior analyst Ross Benes said in a statement after the ruling.
“The order is likely to be a speed bump,” Benes wrote. “Thanks to the company’s symbiotic relationship with Trump, most challenges ahead that could stop the deal will be steamrolled.”
