Paramount Faces Drawn-Out Battle With State AGs

Recently, the antitrust challenge by several states against the Paramount-Warner Bros. merger seemed minor, like a mere speed bump.

Now, it has escalated to a much larger issue, with Paramount agreeing to pause its $111 million merger for several months. This decision indicates Paramount’s legal team acknowledges the difficulty of winning an upcoming injunction battle, opting instead to contest the states in court.

“I think they saw the writing on the wall,” California Attorney General Rob Bonta mentioned to Variety on Friday. “The outcome of a motion for a preliminary injunction was certain. They were going to lose. Otherwise, why not challenge it?”

David Ellison, the chairman and CEO of Paramount Skydance, had aimed for a ruling against the injunction by mid-September to finalize the deal and avoid daily financial penalties to Warner Bros. shareholders. His legal team sought a three-day evidentiary hearing in late August to challenge the states’ expert economist and refute claims that the merger would lead to illegal market concentration.

However, on Thursday, Judge Araceli Martinez-Olguin rejected Paramount’s request to expedite the briefing, indicating reluctance to allow a multi-day hearing. The judge had already issued a 28-day restraining order, citing a strong case from the states that the merger might harm competition, aligning with the standards for an injunction.

Paramount could have awaited the ruling and then proceeded with an appeal to the 9th Circuit. But a prior case involving Nexstar’s merger with Tegna, which was also enjoined, remains unresolved. Paramount faced a similar risk of delay, potentially extending any appellate resolution into early 2027.

What’s next?

A trial is the next step, where Paramount is confident it holds an advantage against what it calls “one of the weakest merger challenges in modern antitrust history.” The company aims to commence the trial before the end of 2026.

Regardless of when the trial occurs, it will not be soon enough to avoid daily penalties of $7 million to Warner Bros. Discovery shareholders, beginning September 30. Paramount must bear these costs to complete the deal.

A coalition of 12 states is advocating for a later trial date, citing the need for additional preparation time.

“We believe 2027 is fitting,” Bonta said. “If the judge set it for April 2027, we wouldn’t contest that.”

Paramount has agreed not to finalize the merger until five days post-trial ruling or June 1, 2027, whichever is sooner. Bonta suggests Paramount’s desire for a quick trial stems from “business factors” rather than procedural fairness.

“I’m sure they want a quick trial,” he remarked. “That’s due to reasons beyond what’s suitable for a case of this scale.”

The states seek additional time to conduct thorough discovery, including obtaining documents and depositions not previously acquired during their investigation.

“Paramount and Warner Bros. delayed, not providing all requested information,” Bonta stated. “If they wanted a faster trial, they could have shared the requested pre-litigation discovery information.”

The trial will occur in Judge Martinez-Olguin’s courtroom in Oakland, California, potentially lasting two to three weeks or more.

In the interim, Paramount might resume settlement discussions with the states. Bonta noted the company has not proposed structural solutions, like divesting cable or film distribution assets, necessary for an agreement.

Bonta has consistently expressed disinterest in “behavioral” remedies, such as a consent decree ensuring a minimum number of film releases or 45-day theatrical windows, arguing past ineffectiveness.

“We’ve never received anything close to addressing our concerns,” Bonta said. “We’re focused on litigation and are eager to carry our momentum into trial.”

Paramount, in its statement, argued that pausing the merger was the fastest way to reach a decision on the deal’s merits.

“This is the quickest and most straightforward way to demonstrate that this transaction benefits competition, consumers, and creators, a conclusion agreed upon by numerous competition authorities globally,” the company stated.

Bonta disagreed, asserting that the challenges are more than just minor hurdles.

“If this merger proceeds, it will negatively impact Americans and Californians,” he said. “It will increase their costs. Enjoying your favorite show shouldn’t be financially burdensome.”