A federal judge has issued a temporary restraining order, halting the proposed $110 billion merger between Paramount and Warner Bros. Discovery. The order comes after 12 U.S. states filed a lawsuit arguing that the acquisition would violate the Clayton Antitrust Act of 1914 by reducing competition.
The legal challenge specifically targets the potential impact on film distribution, the market for anticipated blockbuster films, and the licensing of cable television channels. The 14-day hold allows the court to further consider a preliminary injunction that would block the merger while the litigation proceeds.
California Attorney General Rob Bonta stated that the emergency order is a significant victory in their effort to prevent the merger. He emphasized concerns that consolidated market power in the hands of a few entities can lead to reduced opportunities, inferior products, and services for consumers.
Paramount had agreed to acquire Warner Bros. in February, following a failed acquisition attempt by Netflix. The merger would consolidate significant assets, including streaming services HBO Max and Paramount Plus, numerous television networks, and multiple game studios. As part of the deal, Paramount would assume a $2.8 billion termination fee Warner Bros. owed Netflix and has raised its own potential termination fee for regulatory non-approval to $7 billion. The offer also includes $29 billion in debt, which is expected to lead to cost-saving measures within the combined entity.
The proposed deal had faced opposition from various industry figures, including directors, producers, and actors, who had urged regulators to intervene. In contrast, the U.S. Department of Justice's Antitrust Division had previously indicated that the transaction was unlikely to harm competition or consumers, suggesting that the combination of Paramount Plus and HBO Max could offer a stronger competitor to major streaming services like Amazon and Netflix.