Judge Pauses Paramount-Warner Bros. Merger

Paramount Skydance’s takeover of Warner Bros. Discovery hit a roadblock Monday after a federal judge temporarily paused the proposed merger, granting a request from a coalition of 12 state attorneys general who sued to thwart the $110 billion deal.

via: Variety

A judge ordered a temporary halt to the Paramount-Warner Bros. merger on Monday, as a state coalition argues it would violate federal antitrust law, leading to higher prices and fewer movies and TV shows.

Judge Araceli Martinez-Olguin granted a 14-day restraining order after hearing argument from both sides on Friday morning. Paramount had previously agreed not to close the transaction before July 22.

“Plaintiff States’ showing at least demonstrates that serious questions going to the merits remain, weighing in favor of preliminary injunctive relief,” the judge wrote, adding that Paramount has acknowledged it will not be harmed by the delay until the end of September. “Paramount and Warner Bros. will continue to operate as separate, viable companies competing in the marketplace while they wait for the Court to adjudicate this case. The balance of equities, combined with the public’s vital interest in antitrust enforcement, therefore tips sharply in favor of the requested injunctive relief.”

The 12-state coalition, led by California, brought a motion for the temporary restraining order. The states are also seeking a preliminary injunction, which would block the merger until the judge rules on the merits of the states’ lawsuit.

The 14-day restraining order could be extended to as long as 28 days. Martinez-Olguin also set a hearing on the preliminary injunction for Aug. 3, though that date, too, could be delayed if the parties agree.

Rob Bonta, the attorney general of California, hailed the judge’s ruling as a “critical first win in our case to ensure this megamerger never sees the light of day.”

“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,” Bonta added. “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.”

In antitrust cases, the injunction is often the whole ballgame. If it is not granted, the deal is allowed to close and it becomes almost impossible to unwind later on. But if it is granted, the deal tends to fall apart before the underlying case can go to trial.

Paramount has pushed for a hearing on the injunction with live witnesses. The company hopes to get a ruling on the injunction by early September. If the deal has not closed by Sept. 30, Paramount will start to owe millions of dollars a day to Warner Bros. investors.

At the hearing on Friday, Martinez-Olguin telegraphed the outcome of the ruling, suggesting that Paramount had conceded it would not be harmed by a temporary pause. Jeffrey Kessler, arguing for Paramount, offered to stipulate that the transaction would not close for up to 30 days pending a hearing on the injunction motion.

The states allege that the merger will harm competition in the basic cable and theatrical markets by combining two of the top three cable programmers and two of the top five film distributors. Paramount has pointed to the success of new entrants — A24, Amazon MGM, and others — to argue that the theatrical market is more competitive and dynamic than the state case makes it appear.

Paramount also argues that the cable market is in decline, and that the court should thus not rely on the states’ estimates of market concentration.

Paramount has also argued that the merger is pro-competitive because it will create a stronger rival in the streaming marketplace to dominant players like Netflix and Amazon. But in a footnote, the judge stated that she could not accept the idea that efficiencies in one market offset competitive harms in another.

“The Court notes separately that it cannot accept Defendants’ argument that the Transaction will produce efficiencies in the streaming market,” she wrote. “Courts have expressly and repeatedly rejected the defense that a challenged merger will result in economic efficiencies ancillary to competition in the relevant market.”

*****

All T, all shade, but I'm glad this is happening to the criminals running Paramount into the ground. Based on the situation, this case could expand over a year. What people may not realize is that if the Paramount-Warner merger doesn't go through by the end of October they will have to pay a $650 million dollar penalty every three months.

The Clayton Antitrust Act of 1914: The Clayton Antitrust Act of 1914 (Pub. L. 63–212, 38 Stat. 730, enacted October 15, 1914, codified at 15 U.S.C. §§ 12–27, 29 U.S.C. §§ 52–53) is a part of United States antitrust law with the goal of adding further substance to the U.S. antitrust law regime; the Clayton Act seeks to prevent anticompetitive practices in their incipiency.[12]

That regime began with the Sherman Antitrust Act of 1890, the first Federal law outlawing practices that were harmful to consumers (monopolies, cartels, and trusts). The Clayton Act specified prohibited conduct, the three-level enforcement scheme, the exemptions, and the remedial measures. Like the Sherman Act, much of the substance of the Clayton Act has been developed and animated by the U.S. courts, particularly the Supreme Court.

The Clayton Act made both substantive and procedural modifications to federal antitrust law. Substantively, the act seeks to capture anticompetitive practices in their incipiency by prohibiting particular types of conduct not deemed in the best interest of a competitive market. There are 4 sections of the bill that proposed substantive changes in the antitrust laws by way of supplementing the Sherman Antitrust Act of 1890. In those sections, the Act thoroughly discusses the following four principles of economic trade and business:

price discrimination between different purchasers if such a discrimination substantially lessens competition or tends to create a monopoly in any line of commerce (Act Section 2, codified at 15 U.S.C. § 13);

sales on the condition that (A) the buyer or lessee not deal with the competitors of the seller or lessor ("exclusive dealings") or (B) the buyer also purchase another different product ("tying") but only when these acts substantially lessen competition (Act Section 3, codified at 15 U.S.C. § 14);

mergers and acquisitions where the effect may substantially lessen competition (Act Section 7, codified at 15 U.S.C. § 18) or where the voting securities and assets threshold is met (Act Section 7a, codified at 15 U.S.C. § 18a);

any person from being a director of two or more competing corporations, if those corporations would violate the antitrust criteria by merging (Act Section 8; codified 1200 at 15 U.S.C. § 19).