The U.S. Department of Justice (DOJ) is investigating Netflix’s proposed $72 billion takeover of Warner Bros. Discovery. The probe is looking into whether the streaming giant uses unfair power over creators when negotiating for new shows and movies.
Regulators are trying to determine if this deal would “substantially lessen competition” or create a monopoly, which would violate federal antitrust laws. This information comes from a civil investigative demand recently reviewed by Bloomberg News.
A Deeper Investigation
The language used in the government’s demand suggests the Trump administration is going beyond a standard merger review. This contradicts recent claims from Netflix that the investigation is just a routine process.
The broad scope of this review means it could take many more months before the government decides whether to challenge the deal in court. This delay may give an advantage to a rival bidder, Paramount Skydance Corp.
Netflix Chief Legal Officer David Hyman defended the company, stating, “Netflix operates in an extremely competitive market. Any claim that it is a monopolist is unfounded.” He added that the company does not engage in unfair conduct and will cooperate with regulators.
Applying Antitrust Laws
Most merger reviews are handled under the Clayton Act. However, the DOJ is also using the Sherman Act for this case. This law is typically used to target existing monopolies, such as recent cases involving Google and Visa.
The DOJ is specifically asking questions about Netflix’s leverage during negotiations with independent studios and filmmakers. As the world’s largest paid streaming service, Netflix is one of the biggest buyers of TV and film content globally.
Market Impact and Production
Netflix plans to spend about $20 billion on programming this year. This budget is split between its own original series and licensed shows. Many of its hits, like Wednesday, are actually produced by outside studios. By buying Warner Bros. and HBO, Netflix would own one of the world’s largest production studios and eliminate a major streaming competitor.
While some reports suggest the DOJ is looking at whether the deal creates future monopoly power, Netflix’s legal team says they have received no official notice of a monopolization probe.
Competition and Market Share
Proving a monopoly usually requires a company to control more than 50% of a market. Currently, Netflix accounts for about 9% of total TV viewing in the U.S. While its streaming share is higher, its spending on content is similar to rivals like Disney and Comcast.
Meanwhile, Warner Bros. has agreed to resume talks with Paramount. Paramount recently signaled it might raise its offer to $31 per share. Warner Bros. has set a deadline of February 23 for Paramount to submit its final bid. Paramount has argued that Netflix’s deal will never be approved by regulators and claims its own $77.9 billion bid is already clearing government hurdles.
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