US judge halts Warner Bros. takeover by Paramount for two weeks

A U.S. judge has put a temporary hold on Paramount's proposed acquisition of Warner Bros. Discovery, a deal valued at over $100 billion. The decision by Judge Araceli Martínez-Olguín in Oakland, California, suspends the merger for two weeks, during which time a longer-term injunction will be debated.

The move comes after twelve U.S. states filed a lawsuit to block the deal. Their primary argument is that the consolidation would warp competition in the market for popular films, ultimately harming cinemas. The judge acknowledged that the states had demonstrated a plausible case that Paramount and Warner together hold a significant market share, making the merger potentially anti-competitive.

This delay could prove costly for Paramount. To appease Warner's shareholders during the extended process, Paramount promised additional payments for each quarter after September 30 until the deal closes, a commitment that could amount to approximately $650 million per quarter.

A key factor in the states' success will be whether they can convince the court to adopt a narrow market definition, focusing specifically on blockbusters earning over $100 million. They argue these films are vital for cinema survival, and increased market power by a single entity in this segment would be detrimental. Paramount, however, contends this segmentation is unrealistic. Notably, the U.S. Justice Department had previously approved the deal without conditions, concluding it would not harm competition or consumers.

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They showed at least that Paramount and Warner together would have a significant market share in this business. Therefore, it is likely that the acquisition will be classified as anti-competitive. This justifies a temporary suspension of the merger.