The justices on Friday heard arguments from a coalition of states seeking an injunction to suspend the merger between Paramount and Warner Bros. Discovery, and said they would issue a ruling by next Wednesday.
Judge Araceli Martínez Holguín at one point suggested that Paramount would not be harmed if it was granted a temporary restraining order suspending the merger for up to 28 days.
Twelve states, led by California, are seeking to block the merger on the grounds that it would hurt competition in the theater and basic cable markets. Jeffrey Kessler, Paramount’s lead attorney, argued that the states failed to make the necessary argument that the deal was anticompetitive. He argued that the success of recent productions such as Apple’s “F1” and Amazon/MGM Studios’ “Project Hail Mary” shows that the theater business is open to new entrants.
“Talent is completely fluid in this industry,” Kessler asserted. “So actors, writers and directors move from studio to studio.”
James Weingarten, arguing on behalf of the state, pointed out that “F1” was actually distributed by Warner Bros., underscoring the stable role of established players in a mature market.
“That’s the power of the five majors,” Weingarten argued. “Apple isn’t in the movie business. They’re in the cell phone and laptop business.”
Martinez-Holguin seems willing to acknowledge that the market concentration issue is at least arguable enough to warrant a restraining order. She asked Kessler, citing evidence submitted by Paramount. “Why is there no support for the conclusion that there are serious questions as to the legality of the merger?”
He also called on the parties to take on the challenge of “unscrambling the egg,” highlighting the difficulty of canceling a merger if it is allowed to proceed and is later determined to be illegal.
Kessler said the company’s primary focus is on obtaining a preliminary injunction by early September. He proposed stipulating that the deal would not close within the next 30 days if the parties agree to a hearing on the injunction motion in late August.
Starting Sept. 30, Paramount will be obligated to pay investors $7 million per day if the deal doesn’t go through, a key deadline in the case. Paramount had previously promised not to complete the deal until July 22nd.
