A federal judge today ordered Paramount Skydance and Warner Bros. Discovery to halt their $111 billion merger, handing an early win to states that sued to block the deal. The ruling granted a temporary restraining order prohibiting the firms from completing the merger and from consolidating their operations.
The temporary order is only in effect for 14 days, but it can be converted into a preliminary injunction that would prevent the merger from being completed until the case is resolved. The temporary restraining order can be extended past the 14-day period if more time is needed to rule on a preliminary injunction.
A group of 12 states led by California sued the companies last week in an attempt to block the deal, which had been approved by the Trump administration. The states say the merger will eliminate competition by combining two of the five major Hollywood movie studios, and two of the five major owners of basic cable TV channels.
“My office and attorneys general nationwide have secured an emergency order blocking the unlawful merger of Warner Bros. and Paramount,” California Attorney General Rob Bonta said today. “This is a critical first win in our case to ensure this megamerger never sees the light of day.”
The case is in US District Court for the Northern District of California. US District Judge Araceli Martínez-Olguín wrote in today’s order that the states “make a strong showing that the Transaction will substantially lessen competition” in the theatrical-film market, and that “the Court is persuaded that it can presume the proposed merger is likely to violate antitrust laws.”
Judge cites presumption of illegality
The merged company is expected to have a 27 percent share of the wide-release theatrical distribution market, the judge wrote. Courts have presumed that a merger resulting in a share of 30 percent or more is likely to violate antitrust law, but 30 percent is not the lowest market share that can pose a threat, she wrote.
The judge also pointed to a sharp rise in concentration as measured in the Herfindahl-Hirschman Index (HHI), saying the HHI increase for Paramount/WBD exceeds the level necessary to show the merger is likely to enhance market power.
“Where plaintiffs demonstrate a presumption of illegality by way of undue market concentration, they need not offer ‘elaborate proof of market structure, market behavior, or probable anticompetitive effects’” to obtain a restraining order, Martínez-Olguín wrote.
The legal standard for issuing a temporary restraining order is the same as the one for issuing a preliminary injunction. Parties seeking either kind of preliminary relief must show a likelihood of success on the merits, a likelihood of irreparable harm in the absence of a court order, and that the order would be in the public interest.
Martínez-Olguín said the merger poses potential harms to the public, and that Paramount and WBD would not suffer any harm from having to wait a few months.
“Defendants will suffer no apparent harm in the near term if enjoined from consummating the Transaction—they concede that they will not begin to incur carrying costs for a delayed merger until the end of September 2026,” the order said. “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.”
Martínez-Olguín set a schedule for the sides to submit briefs and scheduled a hearing on a preliminary injunction for August 3. Paramount can challenge the district court’s rulings in the US Court of Appeals for the 9th Circuit. It is likely to do so if Martínez-Olguín maintains that the merger cannot be completed until after a trial.
