Judge Araceli Martínez-Olguín will decide on whether to issue a temporary restraining order against the pending $110 billion Paramount-Warner Bros. Discovery merger by July 22.
The update comes after lawyers for a group of 12 state attorneys general, Paramount and WBD made their arguments during a Friday court hearing.
The state AGs sued to blocked the merger on Monday, arguing it 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. Lawyers for the group have warned that 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.
In response, Paramount has argued that the AGs’ case is “one of the weakest” in modern history, ignoring the intense competition from both established and emerging studios. It added that the combined company’s cable networks are largely complementary, as opposed to being direct substitutes, making them unlikely to reduce competition. More fundamentally, the company noted, the continuing decline of pay TV has weakened every programmer’s negotiating position.
The July 22 deadline for the decision on the temporary restraining order coincides with European regulators’ deadline to decide whether to clear the merger or refer it for a more in-depth Phase 2 investigation. The TRO can be extended up to 28 days, which would peg the earliest hearing for a preliminary injunction to mid or late August.
Paramount’s attorney Jeffrey Kessler argued that a preliminary injunction hearing prior to Sept. 30 is needed in order to prevent the media giant from suffering “very severe harm” due to a 25 cent per share ticking fee for every quarter until closing, translating to around $7 million per day and $650 million per quarter.
Kessler pledged Paramount wouldn’t complete the merger for 28 days to avoid a TRO. But James Weingarten, the attorney for the group of state attorneys general, argues that setting a hearing in August to “suit the defendant’s needs to avoid a payment they negotiated to make is beyond the pale.”
“It’s unprecedented, it’s unfair, and frankly, it’s completely unhelpful to the court as the court decides what to do with this ‘industry-transforming’ merger,” he added.
Instead, the state AGs have proposed holding a hearing in April 2027 in order to give them more time to gather evidence and allow the court to hear from witnesses.
“The witnesses you need to hear from are not just defendants’ handpicked witnesses. You need to hear from other people at the defense company. You also need to hear from the competitors and the customers. These are the folks who tell courts what really goes on in the marketplace,” Weingarten added. “We need a reasonable schedule that fits well within the timelines that other courts have put to bring forward our evidence that we need on the final merits decision of a permanent injunction.”
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.
In addition to Europe’s ongoing review, 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.
The Writers Guild of America, a Paramount shareholder and a group of consumers have all filed separate lawsuits to block the merger, though the latter was denied a preliminary injunction after the judge ruled that they failed to show irreparable harm or that their case would have a likelihood of success.
In the event that the deal does not close at all due to regulatory matters, Paramount will pay WBD a $7 billion termination fee.
