Judge Weighs Bid to Temporarily Halt Paramount-Warner Bros. Discovery Merger

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Jul 19

A federal judge is expected to rule next week on whether to temporarily pause the proposed Paramount-Warner Bros. Discovery merger as a coalition of 12 states argues the deal would significantly reduce competition across Hollywood.

A federal judge is expected to decide by next Wednesday whether to temporarily halt the proposed merger between Paramount and Warner Bros. Discovery, after hearing arguments Friday from a coalition of 12 states seeking to block the deal.

Led by California, the states are asking the court to issue a temporary restraining order that would delay the merger for up to 28 days while broader legal challenges move forward. They argue the transaction would substantially reduce competition in both the theatrical distribution and basic cable markets, ultimately leading to higher prices, less consumer choice and fewer opportunities for competitors.

During Friday’s roughly 75-minute hearing, U.S. District Judge Araceli Martinez-Olguin appeared to question whether allowing the merger to proceed before the legal challenges are resolved could create irreversible consequences.

At one point, the judge suggested Paramount had effectively acknowledged it would not suffer immediate harm if the merger were temporarily paused, while repeatedly raising concerns over the difficulty of “unscrambling the egg” should the transaction later be ruled unlawful after already closing.

The states contend that the combined company would wield enormous influence over Hollywood’s theatrical business. According to their complaint, the merged studio would control roughly 30% of the market for anticipated top-grossing films while significantly strengthening its negotiating leverage across cable television.

Paramount pushed back, arguing that today’s entertainment landscape is far more competitive than regulators suggest.

Attorney Jeffrey Kessler pointed to recent theatrical successes like Apple’s F1 and Amazon MGM Studios’ Project Hail Mary as evidence that new entrants can still compete with traditional Hollywood studios.

“In this industry, talent is completely mobile,” Kessler argued, noting that actors, writers and directors routinely move between studios.

But attorneys representing the states countered that those examples actually reinforce the dominance of legacy distributors.

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James Weingarten noted that while Apple financed F1, Warner Bros. ultimately handled its theatrical release, underscoring the continued importance of major Hollywood distributors.

“That’s the power of the five majors,” Weingarten argued. “Apple is not in the movie business. They’re in the cellphone and laptop business.”

The states also challenged Paramount’s characterization of the cable television market as one in decline.

Although traditional cable subscriptions continue to shrink, Weingarten argued that approximately 67 million Americans still subscribe to cable television and that no new national basic cable network has launched since 2020.

“These are not dying industries,” he told the court.

The legal battle has become increasingly time-sensitive.

While Paramount has already committed not to close the merger before July 22, the company is facing mounting financial pressure to complete the transaction. Beginning Sept. 30, Paramount could owe investors approximately $7 million per day if the merger has not closed, making an early September ruling on a preliminary injunction especially significant.

Rather than focusing solely on the temporary restraining order, Paramount urged the court to move quickly toward deciding the broader preliminary injunction request, offering not to close the transaction over the next month if an expedited hearing is scheduled for late August.

Judge Martinez-Olguin did not indicate how she intends to rule, though her questioning suggested she believes the states have raised sufficiently serious legal questions to warrant careful review before one of Hollywood’s most consequential mergers moves forward.

A decision on the temporary restraining order is expected by Wednesday.