The merger between Paramount and Warner Bros. temporarily suspended by the courts

A federal judge temporarily blocks the contested transaction for harming competition.

New twist in the merger project between Paramount and Warner Bros.

A US federal judge on Monday ordered the temporary suspension of the operation, saying that the arguments put forward by several US states against this mega-merger deserved to be examined in more depth.

Judge Araceli Martinez-Olguin of Northern California federal court granted a 14-day restraining order, preventing the two groups from finalizing their merger. This decision comes as a coalition of twelve American states, led by California, believes that the merger would violate antitrust laws by reducing competition, resulting in higher prices for consumers and a less rich offering of films and series.

In her decision, the magistrate considers that the plaintiffs raised “serious questions on the merits of the case“, justifying a temporary freeze of the operation while the court rules. It also emphasizes that Paramount recognized that postponing the merger until the end of September would not cause it major harm.

The procedure is far from over. A hearing devoted to a possible longer-term suspension is already scheduled for August 3. If this preliminary injunction is granted, the merger could remain blocked until the courts finally rule on the case.

California Attorney General Rob Bonta welcomed this first victory:

“This is a crucial first victory in our fight to ensure this mega-merger never happens. History shows what happens when a small number of actors concentrate immense power in essential markets: fewer opportunities, lower quality products and services. We want to preserve a free and fair market and a film and television industry that benefits creators and audiences alike.“

For its part, Paramount is confident and believes that the accusations of the American states will not stand up to examination of the facts:

“This decision simply maintains the status quo while the courts consider competition law issues. We are convinced that the attorneys general’s arguments are without merit. This merger is legal, pro-competition and will benefit consumers, creators, employees and the entire entertainment industry.”

The stakes are considerable. In this type of case, whether or not a preliminary injunction is obtained is often decisive. If it is refused, the merger could be finalized and it would then be extremely difficult to go back. Conversely, if granted, this type of operation often ends up being abandoned before a trial even begins.

The schedule also works against the two studios. If the merger is not completed before September 30, Paramount will have to start paying several million dollars per day to Warner Bros. investors, in accordance with the terms of their agreement.