A federal judge has ordered Paramount Skydance and Warner Bros. Discovery to halt their $111 billion merger, citing concerns over the potential reduction of competition in the film industry.
The ruling granted a temporary restraining order, which can be extended or converted into a preliminary injunction that would prevent the merger from being completed until the case is resolved.
A group of 12 states led by California sued the companies last week in an attempt to block the deal, which had been approved by the Trump administration. The case is in US District Court for the Northern District of California.
The merged company would have a significant market share and could potentially lead to anticompetitive effects. US District Judge Araceli Martínez-Olguín wrote that the states “make a strong showing that the Transaction will substantially lessen competition” in the theatrical-film market.
Judge Martínez-Olguín pointed to a sharp rise in concentration as measured by the Herfindahl-Hirschman Index (HHI), saying the HHI increase for Paramount/WBD exceeds the level necessary to show the merger is likely to enhance market power.
The temporary restraining order can be extended past the 14-day period if more time is needed to rule on a preliminary injunction. A hearing on a preliminary injunction has been scheduled for August 3. Paramount can challenge the district court’s rulings in the US Court of Appeals for the 9th Circuit.
The judge noted that the states do not need to provide elaborate proof of market structure or probable anticompetitive effects to obtain a restraining order, as the merger poses potential harms to the public.
“Defendants will suffer no apparent harm in the near term if enjoined from consummating the Transaction—they concede that they will not begin to incur carrying costs for a delayed merger until the end of September 2026,” the order said. “Even if Defendants argued that they would suffer economic harm as a result of delaying the merger, the equities do not weigh in their favor when contrasted with the potential public harms that would result from consummation of the Transaction, including the loss of competition.”
The legal standard for issuing a temporary restraining order is the same as the one for issuing a preliminary injunction. Parties seeking either kind of preliminary relief must show a likelihood of success on the merits, a likelihood of irreparable harm in the absence of a court order, and that the order would be in the public interest.
The merged company is expected to have a 27 percent share of the wide-release theatrical distribution market, which courts have presumed can lead to antitrust issues. The ruling is seen as a win for US states, who had been pushing against the merger on antitrust grounds.
Source: Original article