Paramount Skydance’s planned takeover of Warner Bros. Discovery just hit a major legal roadblock.
U.S. District Judge Araceli Martínez-Olguín issued a temporary restraining order on Monday that prevents the companies from making progress to close the deal for 14 days.
The ruling comes one week after a coalition of 12 states filed a lawsuit in federal court in California seeking to block the merger, arguing it would harm movie theaters, cable providers, and consumers.
The lawsuit makes the case that the merged company would hold “enormous bargaining power” over movie theaters and cable companies while reducing competition. The states say that could result in higher prices for movie tickets and cable packages, as well as lower-quality services and fewer overall movies and television shows.
Although the Trump administration’s Justice Department cleared the merger last month, the states are now asking the court to prevent the companies from closing the deal until this lawsuit is settled.
Paramount and Warner Bros. Discovery agreed to the roughly $110 billion takeover earlier this year after Paramount fought off a competing bid from Netflix. The deal follows Skydance’s takeover of Paramount last year.
Monday’s ruling does not mean the judge has concluded that the merger is illegal. But it is an early win for the states.
The ruling particularly highlights the lawsuit’s claim that the combined company would control 27% of the market for wide-release theatrical films.
“On this combined firm market share alone, the Court is persuaded that it can presume the proposed merger is likely to violate antitrust laws,” wrote Judge Martínez-Olguín in the ruling.
The two-week pause is meant to give the court time to consider a preliminary injunction that could keep the merger on hold for much longer while the lawsuit moves forward. A hearing is scheduled for August 3.
The judge also agreed with the states that allowing the deal to close could create changes that would be extremely difficult to reverse later. The companies could begin consolidating operations, sharing sensitive business information, and cutting or reassigning jobs before the court reaches a final decision.
The judge also agreed that if the merger were allowed to move forward, it could eventually become impossible to undo as the companies begin cutting or reassigning jobs, sharing sensitive business information, and consolidating their operations.
The states also argued that the merger would have a major impact on the cable TV industry. Together, the companies would control more than 50 basic cable channels, according to the lawsuit.
Cord-cutters wouldn’t be immune to the effects of the deal, either. Paramount CEO David Ellison, the son of Oracle billionaire and Trump ally Larry Ellison, has said the company plans to combine Warner Bros. Discovery’s HBO Max with Paramount+ to better compete with Netflix.
For Paramount and Ellison, there is also a major financial motive to get this lawsuit resolved quickly. The merger deal includes a “ticking fee” that would make the merger more expensive for Ellison and Paramount if it doesn’t close by September 30.
Paramount and Warner Bros. Discovery did not immediately respond to requests for comment.
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