A federal judge on Monday temporarily blocked
Paramount from completing its $110 billion acquisition of Warner Brothers Discovery.
The restraining order, issued by U.S. District Court Judge Araceli Martinez-Olguin in the Northern District
of California, will expire in 14 days.
Martinez-Olguin has scheduled a hearing for August 3, after which she will decide whether to issue a preliminary injunction that would block the merger
for a longer period.
She handed down the
order at the request of a California-led 12-state
coalition, which
claimed in a lawsuit filed last week that
the merger would violate the Clayton antitrust act.
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That law prohibits mergers that could substantially reduce competition.
Martinez-Olguin said in a written ruling that she was granting
the temporary restraining order because the states raised "serious questions" regarding the merits of their antitrust claim, and because the "balance of equities and public interest" weighed in favor
of a short-term pause.
"Because the plaintiff states demonstrate at least serious questions regarding the merits of their antitrust claim, the public equities of preserving competition and
ensuring a practical remedy remains available weigh in favor of granting preliminary injunctive relief," Martinez-Olguin wrote in her 10-page ruling.
She also said Paramount will not be harmed
if the merger is temporarily blocked because the company won't incur costs related to a delay until the end of September.
The judge added that even if Paramount would have been financially
harmed by a delay, the equities still would favor temporary block due to the "potential public harms that would result from consummation of the transaction, including the loss of competition."
The states argued in their written filings that the merger would leave the country with just four major film distributors, and that a combined Paramount-Warner Bros. would control more than 30% of
"anticipated blockbusters" -- meaning big-budget films likely to earn more than $100 million in box-office revenue.
The attorneys general also said the merger would leave the combined company
in control of more than 50 basic cable channels, giving it more leverage with distributors.
Paramount disputed that the merger will substantially lessen competition. The company raised several
arguments, including that it faces competition in the movie business from streaming studios like Netflix as well as "smaller players" such as A24.
"The tumultuous market
environment of recent years has created opportunities for both large, established studios and once-smaller distributors to expand, and the merging parties face unprecedented competition," Paramount
argued in court papers filed Thursday.
A Paramount spokesperson said Monday the company 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."
"This merger is lawful, pro-competitive, and will benefit
consumers, creators, workers, and the entertainment industry," the spokesperson added.