Judge Araceli Martínez-Olguín denied on Thursday a group of Paramount subscribers a preliminary injunction after they sued to block the David Ellison-led media giant’s pending $110 billion merger with Warner Bros. Discovery.
The lawsuit, which was filed in April, alleged that the deal, if completed, would strengthen the combined company’s “ability and incentive to raise prices, reduce output, narrow slates, reduce quality and worsen consumer-facing terms, including through control of distribution, exclusivity, windowing and licensing.” They also claimed it would leave moviegoers with “fewer theatrical titles, less genre and budget variety, and fewer meaningful alternatives at local theaters.”
Meanwhile, Paramount argued that the plaintiffs do not have standing and that “no injury was identified,” noting that a price increase cannot be attributed to the merger because it hasn’t happened yet.
“A preliminary injunction is an extraordinary remedy that may only be awarded upon a clear showing the plaintiff is entitled to such relief,” Martínez-Olguín said during a Thursday hearing. “Here, plaintiffs fail to meet that standard. Plaintiffs have not offered any evidence and have not made a clear showing of a likelihood of success, nor do they make a clear showing of irreparable harm.”
While the ruling marks a win for Paramount, it still faces three separate lawsuits from a group of 12 state attorneys general, the Writers Guild of America and a Paramount shareholder. The state AG case was reassigned to Martínez-Olguín after Paramount’s lawyers asked that Judge P. Casey Pitts be recused to avoid an “appearance of bias” given his prior experience as “long standing labor counsel” for the WGA.
The state AGs argue that the Paramount-Warner Bros. merger would create an entertainment giant that would control 27% of the wide-release theatrical distribution market, 30% of the submarket comprising “anticipated blockbuster films” and 27% of the basic cable bundle. They warn the deal’s approval could give the combined company increased leverage over movie theaters and cable distributors, lead to an increase in consumer prices and reduce content output.
Meanwhile, the Paramount shareholder is alleging that the Ellisons entered into an undisclosed agreement to overhaul CNN to better align with the Trump administration’s views on news media in exchange for political support for the transaction. The suit characterized the alleged arrangement as a “corrupt” side deal that was never disclosed to investors, exposes the company to legal and financial risks and breaches fiduciary duties owed to shareholders.
As for the WGA, their lawsuit states that the merger would eliminate competition and give the combined entity “both the incentive and the ability to lower costs by suppressing writers’ wages and reducing output.”
A hearing on the state AGs’ request for a temporary restraining order is set for Friday morning.
Paramount has said the Warner Bros. deal remains on track to close by the end of the third quarter. It has already received approval from the U.S. Department of Justice and Warner Bros. shareholders.
Other countries where the deal has received clearance or where relevant waiting periods have expired include Australia, Austria, Canada, China, Kuwait, Saudi Arabia, Serbia, South Africa, Ukraine, Montenegro, New Zealand and North Macedonia. Foreign direct investment authorities in Spain, Germany, Slovenia, Belgium, Czechia, Italy, France and Romania have also signed off.
Meanwhile, the European Commission’s review period on the foreign investment in the Paramount-Warner Bros. deal expired on Tuesday. However, the EC is still examining the deal’s impact on competition and will decide whether to clear it or refer it for a more in-depth Phase 2 investigation by July 22.
The United Kingdom’s Secretary of Culture, Media and Sport Lisa Nandy has also informed Paramount and WBD that she feels “minded to intervene,” with a decision on whether the regulator will clear the merger or move to a Phase 2 investigation expected by Aug. 7.
In the event the transaction does not close by Sept. 30, WBD shareholders will receive a 25 cent per share “ticking fee” for each quarter until closing. In the event that the deal does not close at all due to regulatory matters, Paramount will pay WBD a $7 billion termination fee.
