Paramount-Warner Bros. Discovery merger, the court puts the brakes on

District Judge Araceli Martínez-Olguín ruled that, based on the market share that would arise from the merger, there are sufficient reasons to assume a possible violation of antitrust laws. The decision also highlights the risk of “irreparable damage” if the operation is finalized before the conclusion of the legal proceedings.

The lawsuit was filed last week by the states of California, Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington. According to authorities, the birth of a new entertainment giant would reduce competition in the sector and allow the two companies to quickly launch initiatives that are difficult to reverse, such as layoffs, internal reorganizations and sharing of sensitive information.

The measure issued by the court provides for a restraining order lasting 14 days. In the meantime, a hearing has been set for August 3 to determine whether to grant a preliminary injunction capable of prolonging the blockade of the operation.

The matter also takes on particular importance from an economic point of view. The agreement between Paramount and Warner Bros. Discovery provides that, if the merger is not completed by September 30, Paramount will have to pay Warner Bros. Discovery investors a penalty that will increase over time. A clause inserted during the negotiation that allowed Warner Bros. Discovery to prevail over the 83 billion dollar offer presented by Netflix.

California Attorney General Rob Bonta reiterated that any costs resulting from the delays are a consequence of the terms voluntarily agreed to by the two companies when signing the agreement. Bonta also downplayed speculation that Paramount would move out of California and said that a possible CNN spin-off would not be enough to resolve the claims raised by the states.