Federal judge puts Paramount-Warner Bros. merger on ice

OAKLAND, Calif. (CN) — A federal judge in California on Monday granted a coalition of states’ request to put the planned merger between Paramount and Warner Bros. on hold while antitrust and anticompetition claims are hashed out.

U.S. District Judge Araceli Martínez-Olguín granted California and 11 other states an expedited temporary restraining order against the $110 billion merger of Paramount Skydance Corporation and Warner Bros. Discovery, after hearing oral arguments Friday. The merger was scheduled to be inked on July 22.

Martínez-Olguín said the states supported their Clayton Antitrust Act claims with expert evidence on the effects the merger would have on wide-release theatrical films, the distribution of anticipated top-grossing theatrical films, and licensing of basic cable channels to distributors. But she focused her order on the market for distribution of wide-release theatrical films.

“Demonstrating that a merger would result in ‘a significant increase in the concentration of firms in that market’ establishes a presumption that the merger will substantially lessen competition,” the Joe Biden appointee wrote.

“Here, plaintiffs present compelling evidence that the combined firm resulting from the transaction will possess substantial market share in the wide-release theatrical distribution market, (anticipating 27% market share for wide-release theatrical distribution market). On this combined firm market share alone, the court is persuaded that it can presume the proposed merger is likely to violate antitrust laws,” she wrote.

The combined company would control more than 50 basic cable channels, HBO and Showtime premium cable channels, three streaming services, three television production studios, including CBS Studios, and two of the largest film studios in Hollywood — Paramount Pictures and Warner Bros. Pictures.

In a statement, California Attorney General Rob Bonta said the early victory was necessary while the court considers a preliminary injunction.

“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,” Bonta said.

“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.”

Martínez-Olguín noted the entertainment giants “will suffer no apparent harm in the near term” if briefly stopped from closing the deal, and the companies conceded they will not begin to incur carrying costs for a delay until the end of September.

At Friday’s hearing, Paramount attorney Jeffrey Kessler argued the film studio market is expanding, noting large streaming companies such as Amazon and Apple that are breaking into film production, and said independent outfits such as A24 are now competitors.

“Amazon Prime went from making two to 15 movies this year,” he said. “Talent is completely mobile, actors and writers go from studio to studio,” he said.

The temporary restraining order lasts 14 days, with a preliminary injunction hearing scheduled for Aug. 3 in the Northern District of California courthouse in Oakland.

States joining California in the lawsuit include Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington state.

A similar lawsuit claiming the merger’s anticompetitive effects on film industry employees was filed on July 14 by the Writers Guild of America, both east and west divisions, and ruled a related case under Martínez-Olguín.

Attorneys representing Paramount and Warner Bros. did not immediately respond to requests for comment.