The Justice Department has stepped into the legal fight over Paramount’s proposed $111 billion merger with Warner Bros. Discovery, backing Paramount’s push to make a dozen states led by California post a major bond tied to the deal’s delay.
In a statement of interest filed Tuesday, the government urged a federal judge to require the states challenging the transaction to put up a “proper bond” that accounts for potential damages caused by the merger being held up. Paramount has been seeking a $1.88 billion bond from California Attorney General Rob Bonta to cover losses if the company ultimately prevails in the cases over the transaction.
“The bond requirement forces parties to have skin in the game,” the Justice Department said in its filing.
The filing adds a significant federal voice to a high-stakes entertainment industry dispute that has already pushed the transaction beyond the timetable Paramount had been targeting. The merger is currently temporarily halted, and a trial has been scheduled for March — months after CEO David Ellison’s target closing date of late September.
Paramount has argued throughout the litigation that the delay carries substantial costs, citing missed opportunities to increase investment in production and rising financing costs. The company’s $1.88 billion bond request is tied to the financial exposure it says stems from the postponement.
Under the merger agreement, Warner Bros. Discovery shareholders are owed roughly $650 million per quarter, or $6.9 million per day, if the transaction has not closed by Oct. 1. The requested bond represents the maximum payout to investors, along with legal fees.
DOJ Draws a Line Between Federal and State Enforcement
The Justice Department’s filing centers on the legal treatment of state and private parties that challenge mergers. According to the department, those parties — unlike the federal government — must post a bond when an injunction is issued.
The DOJ described the states’ lawsuit as a secondary enforcement mechanism that is subject to limits not imposed on federal antitrust enforcers such as the Justice Department and the Federal Trade Commission.
“Congress provided for complementary antitrust enforcement by the federal government and private parties—but made clear that it was not a system of equals,” the department said.
The government also pushed back against the states’ argument that a bond can only be required after a court finds that an injunction was improperly granted. The Justice Department said that reading of the law would effectively place states in the same position as federal enforcers.
The filing also emphasized that the federal government had already reviewed the merger and concluded that it was not likely to undermine competition. During its investigation, the Justice Department reviewed more than two million documents, as well as extensive data related to streaming, linear TV, and the production and distribution of films for theatrical release, according to Tuesday’s filing.
A Dispute Over Whether There Was an Injunction
One unresolved issue could complicate Paramount’s bond request. The states have argued that the court never technically issued an injunction because Paramount voluntarily agreed not to close the merger under a joint stipulation. If accepted, that position could make Paramount ineligible for a bond.
Paramount has rejected that characterization, calling the argument disingenuous.
Courts have historically been wary of requiring large bonds in merger cases, especially when state or federal competition enforcers are challenging a transaction. In the Nexstar-Tegna merger, for example, the judge issued a $10,000 bond after the TV giant asked for $150 million.
What Happens Next?
The immediate question is whether the federal judge will side with Paramount and the Justice Department on the bond issue. If the court grants the request, the states led by California would be required to post a bond reflecting potential damages from the merger delay.
The broader challenge to the Paramount-Warner Bros. Discovery merger remains headed toward a March trial, leaving the transaction on hold past Paramount’s late-September target and raising the financial stakes with each day the deal remains unclosed after Oct. 1.