The Paramount-Warner Brothers merger was hit with a temporary restraining order

Paramount SkydanceProposed acquisition of Warner Bros. Discovery It hit its first official roadblock when a judge issued a temporary restraining order on the merger as part of a lawsuit brought by state attorneys general.

California District Judge Araceli Martinez Olguin signed the order Monday after hearing arguments from both sides in an Oakland courtroom on Friday. The order places a 14-day pause on anything moving forward with the merger.

Last week, a group of state attorneys general led by Rob Bonta of California filed a lawsuit seeking to block the $110 billion takeover over antitrust concerns. The proposed deal would unite Paramount and Warner Bros.’ iconic film studios, the CBS broadcast network, a sprawling group of pay-TV networks that includes CNN, TNT, MTV and BET, and the Paramount+ and HBO Max streaming services, under one roof.

In a statement Monday, a Paramount spokesperson said the company is “confident that the evidence will demonstrate that the state’s antitrust arguments are without merit because its purported markets and anticompetitive effects claims have no basis in modern market realities.”

“This merger is legal, pro-competitive and will benefit consumers, creators, workers and the entertainment industry. We will continue to vigorously defend the deal and look forward to hearings on the substance of the action taken by the State Attorney’s Office,” according to the statement.

Warner Bros. declined to comment.

The lawsuit said the proposed deal violates the Clayton Antitrust Act — a more than 100-year-old law that prohibits anticompetitive mergers and acquisitions. The lawsuit was filed by a group of states that also includes Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington.

In Monday’s order, Martinez Olguin said a coalition of state attorneys general presented “compelling evidence that the combined company resulting from the transaction will own a significant market share in the large-scale theatrical distribution market.”

The TRO was filed after Paramount signaled its intent to close the deal as early as July 22, when the company expects to have all regulatory approvals, Jeffrey Kessler, Paramount’s lead trial lawyer, said on CNBC last week.

During Friday’s hearing, Paramount’s lawyers offered to delay the closing of the deal until mid-August to avoid a temporary restraining order.

In a statement Monday, Paramount said it was “grateful for the court’s expedited order,” adding that similar to its offer to delay the deal during Friday’s hearing, the order “maintains the status quo while the court considers the antitrust issues at hand.”

However, states could seek another temporary restraining order after 14 days, or a preliminary injunction, which would further delay the deal.

Another proposed media deal is a $6.2 billion deal between the owners of a broadcast station group Nexstar Media Group and Tegna – were temporarily suspended after a similar lawsuit and preliminary injunction issued by a US court. The lawsuit, which Bonta is also leading, is scheduled to begin trial in mid-2027.

The Paramount-WBD deal was under review by the European Union and the United Kingdom, which set a new tentative deadline of July 22.

The US Department of Justice’s antitrust division signed off on the partnership in June, clearing it of federal concerns. It has also received approval from several global jurisdictions.

Paramount said it is on track to close the deal by the end of September.

If the deal is delayed beyond then, Paramount could face additional costs, so-called visa fees, that kick in if it doesn’t close after September 30. The fee will be an additional 25 cents paid to WBD shareholders each quarter until closing – equivalent to approximately $650 million in cash value per quarter.

Paramount also agreed to a $7 billion breakup fee if the deal doesn’t go ahead due to regulatory concerns.

Bonta called the merger illegal and said it would “result in higher prices, lower quality, and less content for cinema and television, hurting movie theaters, primary cable distributors, and, ultimately, audiences on every couch and movie theater seat in the United States.”

The states suing against the deal said they believed the combined entity would control roughly a third of the films and nearly a third of the basic cable television programming.

Paramount defended the deal as “pro-competitive.”

In court papers filed Thursday, Paramount said the temporary restraining order “represents one of the weakest merger challenges in modern antitrust history.”

The company said the deal “will produce more high-quality content for consumers; will stimulate investment in job-creating film production; will stabilize basic cable television (which seriously threatens cord cuts); and will increase production of theatrical releases in a challenging entertainment landscape.”

— CNBC Sarah Whitten and Stephen DeSaulnier Contribute to this article.

Correction: Jeffrey Kessler, Paramount’s lead trial lawyer, spoke on CNBC last week. An earlier version made a mistake in the time element. Paramount agreed to a $7 billion breakup fee if the deal does not move forward due to regulatory concerns. An earlier version misstated the drawings.