Court ruling freezes Paramount-Warner Bros. merger for now

Paramount's owners were planning to have secured firm control of Hollywood rival Warner Bros. Discovery by the end of this week in a blockbuster deal that has the blessing of President Trump's Justice Department. A federal judge has instead ground the process to a halt, at least for now. In the ruling, U.S. District Judge Araceli Martinez-Olguin granted a 14-day temporary restraining order to pause the acquisition. The Democratic attorneys general allege that Paramount's purchase of Warner Bros. would reduce competition, hurting filmgoers along with TV and news consumers and especially those who create entertainment programming and the news content that the public relies on. The $111 billion deal would put under the same corporate roof Paramount's and Warner's movie and television studios, streamers Paramount+ and HBO Max, Paramount's CBS (the nation's most watched broadcast outlet), and 50 cable TV channels, not to mention both CBS News and CNN. 'This is a critical first win in our case to ensure this megamerger never sees the light of day,' California Attorney General Rob Bonta said in a statement issued to the press. '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,' said Bonta. Paramount released a statement late Monday insisting it would prevail in the end. 'We are confident the evidence will demonstrate that the State AG's antitrust arguments are without merit,' Paramount said in a statement. 'This merger is lawful, pro-competitive and will benefit consumers, creators, workers and the entertainment industry.' Paramount had hoped to complete the deal by Wednesday, July 22. In an episode of the Hollywood-industry podcast The Town released Monday hours before the ruling, Paramount Chief Legal Officer Makan Delrahim fought back against Bonta's claims that the consolidation would hurt consumers or producers. 'You have to stick your head in the sand' to vast changes in consumer behavior in order to swallow the states' arguments, Delrahim said. Paramount contends in its public statements and legal filings that competition in entertainment plays out not only among the five traditional Hollywood studios but also among tech giants Netflix, Apple and Amazon. In her ruling, Judge Martinez-Olguin focused solely on the merger's consolidation of two of the remaining five major Hollywood studios. 'Plaintiffs present compelling evidence that the combined firm resulting from the transaction will possess substantial market share in the wide-release theatrical distribution market,' the judge wrote. 'On this combined firm market share alone, the Court is persuaded that it can presume the proposed merger is likely to violate antitrust laws.' A longer delay would have huge financial costs for Paramount. Starting Oct. 1, Paramount has to pay Warner shareholders a 'ticking consideration' of roughly $650 million for every 90 days the deal is set back. If the deal is not consummated by June 4, 2027, Paramount will have to pay Warner $7 billion. Martinez-Olguin proposed a schedule that would have a full hearing on the preliminary injunction on Aug. 3. The proposed deal has gotten a lot of scrutiny outside Hollywood for the relationship between Paramount's controlling family and President Trump - especially because two major newsrooms would be under that family's control. The deal is largely bankrolled by Oracle co-founder Larry Ellison, the father of Paramount CEO David Ellison and a close ally of Trump. Trump has long accused CNN of being 'fake news' and has publicly mused about what he'd like to do to the cable news giant. While the U.S. Department of Justice's antitrust regulators have signed off on the deal - Paramount's Delrahim used to run that division during Trump's first term in office - the Federal Communications Commission has not yet given its approval. The FCC's approval is needed because Paramount holds licenses granted by the agency to use the public airwaves for 28 local television stations. The merger anticipates a huge jump in foreign ownership of the new combined company. About 49% of the new Paramount-Warner would be held by Middle Eastern sovereign wealth funds in nonvoting shares.