Deadline has reported that Paramount and Warner Bros. Discovery merger has officially been put on pause. A federal judge issued restraining order after a coalition of 12 states led by California brought a lawsuit last week. U.S. District Judge Araceli Martínez-Olguín granted the motion for 14 days.
“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. With our lawsuit, we’re fighting for a free and fair market and a thriving film and television industry that serves creatives and audiences alike. We have a full tank of gas, the law on our side, and look forward to continuing to make our case,” California Attorney General Rob Bonta said per Deadline.
He expressed confidence in the future proceedings of the case, calling the decision “critical first win in our case to ensure this megamerger never sees the light of day,” he said according to Deadline.
According to Deadline, Paramount retorted that it is “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.”
The company believes that it will not only win the case but also that the merger will be beneficial for the streaming market, “This merger is lawful, pro-competitive, and will benefit consumers, creators, workers, and the entertainment industry,” it added. “We will continue to vigorously defend the transaction and will look forward to the hearings on the substance of the State AGs’ action,” the company statement said via Deadline.
In the decision Judge Martínez-Olguín wrote, “The Court ultimately finds the public interest favors their requested TRO to stay the merger in the interim,” per Deadline.
This decision is the first step in what will likely be a lengthy legal battle and by no means does it indicate the scales are tilting towards the states. The merger has already passed several bench marked including approvals from both the federal government and foreign nations. The studio has admitted that a short pause to deal proceedings would not cause harm to the company. September 30th is date which Paramount believes they would begin to face financial hardship. A fourteen day stoppage for the merger to be further examined is proper due diligence. After this deadline Paramount would owe significant compensation to the shareholders.
The coalition of states has alleged that the merger would harm competition in core markets including theatrical distribution and cable licensing. The pause hinged on the fact that Paramount currently owns 27 percent of wide theatrical distribution, and the merger would push their market share into violation of antitrust laws. The court said it can “presume the proposed merger is likely to violate antitrust laws,” per Deadline.
Judge Judge Martínez-Olguín continued, “The Transaction would also be difficult, if not impossible, to unwind if permitted to proceed given the anticipated consolidation of operations, sharing of business-sensitive information, and potential termination or reassignment of employees,” according to Deadline.
Prior to arguments on the motion Paramount asserted that the state had miscalculated market share. The next hearing is currently in set for August 3rd where it will be decided whether the merger will have to pause until the court case has resolved.