Paramount-Warner Bros. merger blocked by judge in new legal snag

Maybe that Hollywood mega-merger won't happen after all

Paramount's $110 billion buyout of Warner Bros. just hit a major legal snag. On Monday, a judge for the U.S. District Court for the Northern District of California granted multiple states' request for a temporary restraining order, halting the merger of Warner Bros. Discovery and Paramount Skydance.

The 14-day hold on the Paramount-Warner Bros. merger lets the court consider a ruling on a preliminary injunction, which would block the merger while litigation plays out. Twelve states' attorneys general, including California's, filed suit earlier this month to stop Paramount's acquisition of Warner Bros., alleging that the merger would violate Section 7 of the Clayton Antitrust Act of 1914. According to the suit, the merger would lessen competition in film distribution, anticipated blockbuster film distribution, and licensing cable TV channels.

“My office and attorneys general nationwide have secured an emergency order blocking the unlawful merger of Warner Bros. and Paramount. This is a critical first win in our case to ensure this megamerger never sees the light of day," said California AG Rob Bonta 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. 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.”

Paramount reached an agreement to buy Warner Bros. in February, after an attempt by Netflix to acquire Warner Bros. failed. The proposed merger would bring together two major movie studios, streaming services HBO Max and Paramount Plus, dozens of television networks, and multiple game studios.

As part of the proposed deal, Paramount is on the hook for a $2.8 billion termination fee that Warner Bros. owed Netflix for backing out of their deal; and Paramount raised a separate termination fee it would have to pay if the deal failed to secure regulatory approval to $7 billion, up from $5.8 billion. Paramount's offer to buy out Warner Bros. includes a staggering $29 billion in debt, which will ultimately mean cost-saving cuts at the combined Paramount Skydance Warner Bros. Discovery, should everything work out.

The proposed deal was blasted by directors, producers, actors, and other industry players in April, who derided Paramount’s attempt to acquire Warner Bros. and called on regulators to do something about it for the sake of the industry.

Paramount's acquisition of Warner Bros. sailed through the Antitrust Division of the U.S. Department of Justice in June, which said, "the transaction is not likely to result in harm to competition or American consumers." On the contrary, the DOJ said, the combination of Paramount Plus and HBO Max "is likely to increase competition by offering consumers a more robust competitive alternative to the larger SVOD offerings" including rivals like Amazon and Netflix.