A federal judge, Araceli Martinez-Olguin, has issued a temporary restraining order halting Paramount Skydance’s merger with Warner Bros. Discovery. The $110 billion deal faces legal challenges from a coalition of 12 Democratic state attorneys general, who argue it could significantly reduce competition in the entertainment industry. The judge’s decision pauses the merger for two weeks and suggests she may extend or make the halt indefinite as the antitrust litigation proceeds. Although no final ruling on the merger’s legality has been made, the judge expressed serious doubts about the deal’s competitive impact.

Paramount risks significant financial penalties if the merger is delayed or blocked. According to the merger agreement, it must pay a $0.25 daily “ticking fee” per share to Warner Bros. shareholders if the transaction does not close by September 30, translating to roughly $7 million per day or $650 million quarterly. Moreover, if regulatory issues cause the deal to fall apart, Paramount could owe a $7 billion termination fee. The company emphasized confidence that it can prove the states’ antitrust claims lack merit, pledging to vigorously defend the merger.

The merger, which was announced in February after Netflix withdrew its bid for Warner Bros., has faced multiple lawsuits besides the state AGs’ challenge. Paramount+ subscribers and the Writers Guild of America have filed lawsuits, expressing concerns that the deal would reduce competition, raise prices, and negatively affect writers’ job security and pay. Paramount defends the merger as pro-competitive, arguing the combined entity would be better equipped to compete against major players like Netflix, Apple, and Disney.

The states moved to block the merger despite clearance from the U.S. Justice Department, which concluded the deal was unlikely to harm competition or consumers. Paramount CEO David Ellison, who has ties to former President Trump, and his father Larry Ellison are also embroiled in a lawsuit alleging behind-the-scenes dealings to secure approval. This legal battle adds complexity and risk to the merger’s completion, with a hearing scheduled for August 3 to consider whether the halt should be extended. If blocked or delayed long-term, Paramount faces billions in losses and strategic setbacks.