Justice Department Investigates Netflix’s Potential Antitrust Issues

Recent reports indicate that the Justice Department is examining whether Netflix may have participated in anticompetitive behavior concerning its proposed partnership with Warner Bros. Discovery.

The issued subpoena implies that not only could the deal face antitrust scrutiny, but Netflix itself might undergo an investigation regarding its overall business practices, which some perceive as monopolistic.

In a civil subpoena addressed to an unnamed entertainment entity, the Justice Department inquired about any potentially exclusionary actions by Netflix that might solidify its market or monopoly power. This information was highlighted by a report from a major news outlet.

Netflix’s agreement from December involves a cash buyout of $27.75 per share for Warner Bros. Discovery’s studio and streaming operations, culminating in a deal valued around $72 billion. This could forge a significant player in Hollywood, uniting franchises like “Stranger Things” and the “Harry Potter” series under one umbrella.

In response to Netflix’s moves, Paramount launched a $77.9 billion hostile takeover bid for the entire company, including WBD’s cable networks like CNN and TNT, critiquing Netflix’s valuation as insufficient.

The probe by the Justice Department is also considering Paramount’s bid, although Warner Bros. has advised shareholders to dismiss it. The Justice Department has asked whether Netflix’s arrangement with Paramount could threaten industry competition.

Authorities are seeking insights into how former studio mergers have influenced competitive dynamics and how talent agreements differ across studios.

If applicable evidence of monopolistic behavior surfaces during the investigation, there could be grounds for legal action against the Warner deal. However, these investigations often stretch over a year, compounded by potential delays from international regulators.

Stephen Sunshine, Netflix’s lawyer, stated that the company views the Justice Department’s examination as a routine review connected to the acquisition of WBD’s assets.

A spokesperson for Netflix confirmed they hadn’t been informed of any separate investigation beyond the standard merger review process and emphasized their collaborative approach with the Department of Justice.

Concerns surrounding a possible investigation reminiscent of those faced by Amazon and Google regarding monopolistic practices seem to be impacting Netflix’s stock value, which has plummeted by over $160 billion in the last six months.

Makan Delrahim, who holds the position of chief legal officer at Paramount, previously led the Justice Department’s antitrust division under President Trump, overseeing investigations like that into a significant Visa deal.

Delrahim suggested that a similar analytical framework could apply to the Netflix contract scrutiny. With Netflix and HBO Max combined, they would command roughly 30% of the U.S. subscription services market, as noted in a report.

Netflix contends that a large portion of HBO Max subscribers also maintain their Netflix accounts, although the relevance of that statistic has been debated due to overlapping subscriptions.

In a recent interview, President Trump stated he would not intervene in the deal, clarifying that the Justice Department would manage the process.

As of now, neither the Justice Department, Paramount, nor Warner Bros. Discovery has released comments regarding inquiries made by the media.