A federal judge blocked Paramount Skydance Corp.’s $110 billion purchase of Warner Brothers Discovery Inc. on Monday, temporarily freezing a deal that would place two of Hollywood’s five major studios under one owner while a dozen states press an antitrust challenge.
Judge Araceli Martínez-Olguín of the US District Court for the Northern District of California temporarily restrained Paramount from closing the acquisition or consolidating operations. The judge found the states had raised serious questions under Section 7 of the Clayton Act, a federal law barring mergers that may substantially lessen competition.
The order is not a finding that the states will win. Under a standard set by the Ninth US Circuit Court of Appeals, which oversees federal courts in California and eight other western states, a judge can pause a deal without deciding it is illegal, so long as the challenge raises serious questions and the balance of hardships tips sharply toward the challengers. The order stopped short of completing the antitrust burden-shifting analysis, citing the absence of a full evidentiary record.
On market concentration, the states’ expert projected the combined firm would hold 27 percent of the market for distributing wide-release theatrical films and estimated the deal would raise the Herfindahl-Hirschman Index by 359 points, to a post-merger level of 2,074. The defendants disputed the states’ market definitions but assumed them for purposes of the motion, offering a competing expert and arguing that low entry barriers undercut the concentration figures. The court found that evidence created factual disputes rather than defeating the claim.
Citing Ninth Circuit precedent that a lessening of competition constitutes irreparable injury, the court said the transaction would be difficult or impossible to unwind after consolidation of operations and sharing of sensitive business information.
California Attorney General Rob Bonta, who led the coalition that brought the suit earlier this month, called the order a critical first win. “History tells the tale of what happens when a few people have great power over markets that are central to Americans’ lives: fewer opportunities for more people, worse products and services for all people. With our lawsuit, we’re fighting for a free and fair market and a thriving film and television industry that serves creatives and audiences alike. We have a full tank of gas, the law on our side, and look forward to continuing to make our case,” Bonta said in a statement.
The order lasts 14 days. A hearing on a preliminary injunction is set for Aug. 3 in Oakland.
