The Paramount–WBD legal battle: What happens next?

(CNN) — A legal battle over Paramount’s takeover of Warner Bros. Discovery, CNN’s parent company, is underway.

A coalition of 12 state attorneys general has filed an antitrust lawsuit and laid out their arguments; Paramount executives have pushed back hard, calling the suit “wrong on both the facts and the law.”

Now the states are asking for a temporary restraining order — a TRO, for short — and a preliminary injunction to freeze Paramount in place.

Here are some — partial, tentative, caveated! — answers to all the pressing questions about the deal.

What’s the current status of the merger?

It’s in the proverbial end zone. Regulators all around the world have signed off on the deal or at least chosen not to stand in the way.

Paramount is waiting on a few final approvals, including from the European Commission, which set a July 22 deadline for a decision. That’s next Wednesday, so Paramount CEO David Ellison is basically ready to take over WBD.

The United Kingdom is also a wildcard. But this state lawsuit is the biggest impediment to the merger. That’s why the Los Angeles Times deemed this lawsuit a “last-ditch effort to derail a deal that would transform Hollywood.”

What would a TRO do?

The order would “make sure that the proposed merger is halted during the pendency of the litigation,” California Attorney General Rob Bonta told CNN’s Kaitlan Collins on Monday evening.

If a judge agrees and imposes a restraining order, Paramount would be blocked from completing the deal for the time being. The states would continue to seek a preliminary injunction, which would freeze Paramount in place. Paramount would appeal that.

Why do the states say a TRO is necessary?

The filing says the states “have an interest in enforcing antitrust laws and their citizens face the risk of profound and irreversible injury in the absence of an injunction… In contrast, there is no cognizable harm to Paramount and Warner Bros. from pausing their merger while the court adjudicates this case.”

Paramount would certainly disagree. The company also said on Monday that delaying the deal would harm entertainment workers.

How soon will a judge weigh in?

Very soon. The filing says that time is of the essence since Paramount “may close the transaction as early as July 22.”

So a judge will analyze the arguments in the lawsuit and weigh whether to grant the TRO. State AG officials tell me to expect a decision within the next week.

What will a judge consider?

To grant a TRO, a judge has to find that the plaintiffs have a “likelihood of success on the merits” and that the transaction would cause “irreparable harm.”

If a judge is unpersuaded by the lawsuit and unwilling to put a restraining order in place, Paramount will move forward with the merger and the states might withdraw the lawsuit.

Has a judge been assigned to the case?

On Tuesday, the case was assigned to Judge P. Casey Pitts, a Biden appointee in 2023 who previously worked at a firm specializing in labor and public-interest litigation.

Some of his rulings have made national news: Earlier this month, Pitts blocked the DOJ from obtaining the identities and medical records of transgender minors treated at Stanford’s children’s hospital; and in June, he barred the federal government from making arrests at immigration court.

Why do ‘scrambled eggs’ keep being invoked?

Because it’s a convenient and delicious corporate metaphor. Once two companies merge, the eggs are scrambled, and every cook knows that’s hard to undo.

In its argument for a TRO on Monday night, the states quoted a decade-old ruling out of Pennsylvania halting a hospital system merger that said it would be “extraordinarily difficult to unscramble the egg” later.

In this case, the states argued, once Paramount–WBD is “consummated,” “layoffs, content cancellations, and harms to competition would commence immediately.”

How long could a TRO delay the deal?

State AG officials tell me the merger would be paused through September at the earliest, and likely through the end of the year, while both sides prepare for trial.

Keep in mind that Paramount has vowed to complete the deal by the end of September, and a “ticking fee” would take effect starting in October.

When a similar coalition of states sued to stop Nexstar from taking over Tegna in March, a judge issued a TRO eight days later, pausing everything. There have been several developments since then, and the merger is still on hold, with a trial date set for July 2027.

But every case is different, and some analysts have speculated that state prosecutors may have a harder time proving antitrust harm in the Paramount–WBD case.

Do the states have a strong case?

Depends on who you ask. The Wall Street Journal’s Dave Michaels and Joe Flint wrote on Tuesday that “the states’ lawsuit offers coherent concerns about the deal’s impact on the film and cable TV marketplaces, but it doesn’t look like a slam dunk, according to antitrust experts.”

Antitrust suits revolve around how the market is defined and how the harm is determined. This one focuses on the market for wide-release films, a submarket of anticipated blockbusters, and the licensing of cable channels.

Abiel Garcia, an antitrust partner with Kesselman Brantly Stockinger, said, “My read is that the two film-distribution markets are stronger arguments than the licensing of basic cable channels, but all three have problematic HHI numbers, meaning under the complaint’s allegations, they are presumed to be anticompetitive combinations that will hurt competition.”

What is Paramount saying?

The company says the lawsuit “distorts settled antitrust law” and misrepresents the state of the media marketplace. It says giants like Netflix have hurt Hollywood — and the combined Paramount–WBD will be better able to compete against Netflix and other “dominant streaming and technology platforms who have harmed the market for theatrical exhibition and jobs.” Here’s the complete Paramount statement.

Is this leading to a settlement?

Possibly. These legal battles involve many twists and turns. Paramount already offered concessions to Bonta to avert a lawsuit, but Bonta and his counterparts clearly wanted more.

At his Monday press conference, Bonta said, “I have often said I prefer, and am very open to, solving problems in the boardroom as opposed to the courtroom.”

Critics of the deal hope that the lawsuit will force Paramount to abandon its merger dreams altogether, though that seems hard to imagine, and would leave WBD in a weak position.

Is CNN a factor in this case?

In the political and PR battle, yes. In the legal battle, no. The lawsuit really focuses on alleged harm to the entertainment industry, not the news industry. But state AG officials are privately concerned about the prospect of Paramount owning CNN and combining it with CBS News.

Bonta cited the expected job losses, saying “this merger will mean fewer journalists informing the electorate” and “it’ll mean fewer documentarians” and filmmakers “shedding light on important stories that too often go untold.”

Prominent conservative voices like Katie Miller and Clay Travis argued Monday that the state AGs are suing because of CNN. “This is a lawsuit to protect CNN for the liberals,” Miller tweeted.

What about the report suggesting Bonta wants Paramount to divest CNN?

Bonta totally dismissed it at his press conference, saying, “I learned about that for the first time in that article” and “I don’t know where it came from.”

Later, Belloni taped a podcast with Bonta and asked if Paramount “agreed to sell CNN, would that be enough for you?” Bonta flatly said: “No.”

“I don’t think I’ve ever said that,” Bonta added. “I don’t think that that is anywhere near sufficient to address the anticompetitive harms that we’ve been talking about.”

Would Paramount really move out of California over this?

Industry experts heaped skepticism on that possibility. Variety’s Todd Spangler wrote that “the logistics and repercussions of diverting Paramount–Warner Bros. film and TV productions out of California would be daunting.”

On Monday night, Bonta told Collins that the Semafor report “seemed like a last-ditch, desperate effort to try to blackmail the regulators, the states, from doing their job” and from filing the suit.

“Their gambit did not work,” Bonta said, “because we’re going to fairly and firmly enforce antitrust law.”

Will the states win or lose? We should know — at least about the status of a TRO — pretty soon.