A temporary restraining order has halted the merger between Paramount and Warner Bros. just one day before its completion.

      A California judge issued a 14-day temporary restraining order on the $110 billion merger between Paramount and Warner Bros. Discovery after 12 state attorneys general filed a lawsuit. Paramount was aiming to finalize the deal by July 22. However, starting in October, a ticking fee of $650 million per quarter will activate.

      On Monday, California District Judge Araceli Martínez-Olguín temporarily halted the merger, following the lawsuit led by California's Attorney General Rob Bonta, which claimed the acquisition violated the Clayton Antitrust Act. The judge noted the states provided “compelling evidence” that the merged company would hold significant market share in the theatrical distribution sector.

      Paramount had intended to close the merger by July 22, believing all necessary regulatory approvals would have been secured by then. Although the US Department of Justice approved the merger in June, the state lawsuit created additional barriers. The merger would combine Paramount and Warner Bros. film studios with networks such as CBS, CNN, TNT, MTV, and BET, along with streaming services Paramount+ and HBO Max. The states contend that the consolidated company would dominate nearly one-third of US films and basic cable content.

      The stakes are high. If the merger isn't completed by September 30, a ticking fee of 25 cents per share per quarter will begin, equating to approximately $650 million in cash each quarter for WBD shareholders. Additionally, Paramount has agreed to a $7 billion breakup fee should the deal fall through due to regulatory issues. The states could seek another temporary restraining order after the initial 14 days or pursue a preliminary injunction, potentially leading to further delays. Last week, TNW reported that Paramount indicated it would take the merger to the Supreme Court if states are successful in blocking it.

      Paramount described the restraining order as “one of the weakest merger challenges in modern antitrust history,” contending that the deal would stabilize basic cable television, enhance theatrical releases, and generate jobs in film production. Bonta asserted the acquisition is unlawful. Meanwhile, Netflix's recent $587 million investment in an AI filmmaking startup and its use of AI across 300 productions highlight the competitive pressures that both Paramount and WBD argue necessitate consolidation. Whether the judge will concur will hinge on whether the 14-day period extends to 14 months.