Faceoff brewing over Paramount-Warner Bros. merger

OAKLAND, Calif. (CN) — A federal judge on Friday grilled a Paramount attorney over the planned merger between it and Warner Bros. over whether the takeover should be temporarily blocked on antitrust grounds.

U.S. District Judge Araceli Martínez-Olguín declined to rule from the bench during an emergency hearing for a temporary restraining order and would instead rule before the inking of the $110 billion merger scheduled for July 22.

Twelve states filed a lawsuit in the Northern District of California federal court on July 13, saying the merger violated the Clayton Antitrust Act.

During oral argument on the restraining order Friday, James Weingarten, an attorney representing California and speaking for all the plaintiff states, said it was clear the states showed sufficient evidence of the anticompetitive effects the merger between two of the big five Hollywood film studios would have on the movie and cable industries.

“I’ll use one of the defendant’s own quotes and say it will be the largest merger ever in Hollywood. It is an industry-transforming merger,” said Weingarten. “For every dollar produced at the box office, this combined company is going to pocket more than a quarter.”

Weingarten said Paramount’s evidence rebutting the states’ arguments about the merger’s anticompetitive effects did not definitively disprove the merger will harm competition and the companies’ customers, including cable providers that package channels. Weingarten said if the combined company controls 50 channels, it would increase bargaining leverage and could potentially raise prices.

Paramount Skydance attorney Jeffrey Kessler conceded an order delaying the merger for 30 days wouldn’t substantially harm the companies and would allow both parties to continue briefing the court for argument on a preliminary injunction. He said a ruling on a preliminary injunction is preferable before September, when Paramount starts incurring penalties for the delay.

Martínez-Olguín, a Joe Biden appointee, pointedly asked Kessler why the presumption that the merger would create unlawful market concentration is wrong.

Kessler said the states relied on incomplete evidence that didn’t match “real-world economics.”

“It’s not simply enough to put in an expert declaration, that is not the ticket,” he said. “They have to show there is at least a probability that it will bring anticompetitive behavior.”

Kessler said the states’ expert witness who analyzed the film industry market did not include streaming services as competitors in market share statistics. He said one of the biggest movies last year, “F1: The Movie” starring Brad Pitt, was made by Apple Studios — not one of the big five film studios. He argued the market producing and releasing money-making films is also expanding through independent studios like A24 Films.

“Amazon Prime went from making two to 15 movies this year,” he said. “Talent is completely mobile, actors and writers go from studio to studio.”

Weingarten noted Warner Bros. distributed “F1: The Movie,” and films made by smaller companies typically still go through one of the major distributors to be released widely in theaters.

Martínez-Olguín took the arguments under submission and said she would rule before the July 22 deadline.

States joining California in the lawsuit include Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington state.

A similar lawsuit claiming the merger’s anticompetitive effects on film industry employees was filed on Tuesday by the Writers Guild of America, both east and west divisions, and ruled a related case under Martínez-Olguín.