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Netflix is facing a US government antitrust review into its nearly $83bn deal to buy Warner Bros Discovery, as Paramount continues to pursue a rival bid for the Hollywood media giant.
Antitrust enforcers at the US Department of Justice are asking industry participants whether Netflix could potentially wield monopoly power, as part of efforts to assess the competition risks from Netflix’s takeover of WBD’s studio and streaming business, according to a person familiar with the matter.
Netflix said it “is not aware of any investigation into our business outside of the standard merger review process,” adding that it is “constructively engaging” with the DoJ in its review of the proposed deal.
A Warner spokesperson said: “We have the utmost confidence the Netflix transaction will satisfy all regulatory conditions.”
The DoJ is basing its review on Section 2 in the Sherman Act, which bars illegal monopolisation, as well as Section 7 of the Clayton Act, which prohibits transactions that would substantially lessen competition and is often used by enforcers assessing proposed deals, the person said.
The enforcement of Section 2 has historically been infrequent, but antitrust enforcers have revived their use of it in recent years.
The justice department declined to comment on the review, which was first reported by The Wall Street Journal. Such reviews may not lead to an enforcement case. Paramount’s proposed offer is likely to face similar antitrust checks.
Despite Netflix triumphing thus far over Paramount in a bidding war for WBD, Paramount, backed by Oracle billionaire Larry Ellison, has continued to pursue a deal with WBD, launching a hostile bid and last month threatening to mount a proxy fight to overhaul WBD’s board.
Netflix accused Paramount of “mischaracterising” the regulatory review process. “We expect them to continue focusing on optics over outcomes,” Netflix said in a statement.
Steven Sunshine, a lawyer for Netflix, added the company “has not been given any notice or seen any other sign that the DoJ is conducting a separate monopolisation investigation”.
This week Ted Sarandos, Netflix co-chief executive, appeared before a Senate panel where he defended the proposed merger, but lawmakers appeared sceptical of the streaming giant’s claims that it would not have outsized market power.
During the hearing, Cory Booker, a Democratic senator from New Jersey, said he was concerned about Netflix “getting more power over consumers and leaving fewer alternatives and streaming platforms”.
The proposed deal also has opposition from some in Hollywood, including the Writers Guild of America. The union has said the deal “must be blocked”.
Paramount’s chief executive, David Ellison, was invited to attend the same hearing but declined. The DoJ is also reviewing Paramount’s proposal to buy Warner Bros, though the company’s board has repeatedly rejected its bids.
President Donald Trump has commented frequently about the battle for Warner Bros, saying in December that Netflix has a “very big market share and when they have Warner Brothers that share goes up a lot,” adding that “it could be a problem”.
But in an interview with NBC this week he said: “I’ve decided I shouldn’t be involved. The justice department will handle it.”
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