Paramount Skydance agreed to a longer-term delay of its $111 billion acquisition of Warner Bros. Discovery, preventing the companies from combining until after a judge rules on the merits of a case in which a dozen states challenged the legality of the merger.
Under a stipulation filed in court today, the states and companies agreed that the merger will not be completed and the firms will not integrate their operations until "five days after the merits determination in these matters," or on June 1, 2027, whichever is earlier. The delay was also agreed to by the Writers Guild of America, which filed its own lawsuit to block the merger. If there is no merits determination by June 1, the plaintiffs could seek a preliminary injunction to keep blocking the deal.
The agreement amounts to "a months-long halt" to the merger, New York Attorney General Letitia James' office said. "Halting this merger while our case proceeds is a critical victory in our efforts to uphold the law and protect the film and television industries," James said.
Paramount also claimed victory, telling media outlets that "the result is exactly what we have sought from the outset: a direct path to a trial based on the evidence. This is the fastest and clearest way to prove that this transaction is good for competition, good for consumers, and good for creators, a conclusion dozens of competition authorities around the world have already reached."
Led by California, 12 states sued Paramount and WBD and won a temporary restraining order against the merger on Monday. Judge Araceli Martínez-Olguín at US District Court for the Northern District of California found that the deal is likely to reduce competition substantially and violate antitrust laws.
The states sued after the merger was greenlit by the Trump administration. The US approval reportedly surprised US Department of Justice staff lawyers who led the agency's investigation into the deal and were leaning toward recommending a lawsuit to block it.
States say the merger will eliminate competition by combining two of the five major Hollywood movie studios and two of the five major owners of basic cable TV channels. "We are eager to continue to make our case in court and celebrate another tremendous win in our effort to ensure this unlawful merger never sees the light of day," California Attorney General Rob Bonta said today.
Moving to the merits
While the temporary restraining order was originally set to expire after 14 days, the judge was likely to grant a preliminary injunction that would continue to block the merger while litigation continues. Preliminary injunctions can be issued when a plaintiff convinces a judge that it is likely to succeed on the merits, and Martínez-Olguín already seemed convinced by the states' arguments.
By agreeing to a merger delay, the sides will skip the preliminary-injunction phase of district court litigation. In an order yesterday, the judge extended the temporary restraining order for another two weeks in preparation for preliminary-injunction proceedings. Given today's agreement, there won't be any need for the sides to file briefs or argue at a hearing over whether the merger should be delayed during litigation.
"Paramount and Warner Bros. Discovery today agreed to what the state Attorneys General and the WGA both sought from the court: the merger will be put on hold pending the outcome of the states' and the WGA's cases or until June 1, 2027, whichever comes first," the Writers Guild of America said today.
Paramount could have tried to get a preliminary injunction overturned in the US Court of Appeals for the 9th Circuit. But that wouldn't be Paramount's only chance to appeal an adverse ruling. Either side could appeal in the 9th Circuit appeals court after getting a decision on the merits from Martínez-Olguín.
Media advocacy group Free Press described today's agreement as a win for the plaintiffs, and said Paramount is only pretending to have gotten what it wanted.
"Instead of fighting against an injunction and possibly losing now, Paramount's lawyers have resigned themselves to waiting for a full antitrust trial in federal court," Free Press co-CEO Craig Aaron said. "Paramount can pretend all it wants that it looks forward to that test, but that's just more bluster from company mouthpieces trying to spin a major setback. Now this deal will face its day in court, and we are confident the evidence will show this mega-merger should be blocked."
Jon Brodkin Senior IT Reporter
Jon is a Senior IT Reporter for Ars Technica. He covers the telecom industry, Federal Communications Commission rulemakings, broadband consumer affairs, court cases, and government regulation of the tech industry.
