The Justice Department has launched a sweeping review of Netflix’s operations, opening up a monopoly probe as the streaming giant attempts a $73 billion tie-up with Warner Bros. Discovery, The Post has learned.
According to two people with knowledge of the matter, the DOJ isn’t just doing a standard review of Netflix’s planned acquisition of WBD’s No. 3 streamer, HBO Max, and the market impact of layering it on top of Netflix’s own No. 1 streaming service.
It has also launched a broad-based probe based on Section 2 of the Sherman Act, the bedrock federal law guiding antitrust, over whether the company as a whole operates as a monopoly with significant pricing power in what’s known as a “relevant market” for consumers.
The Post first reported last month the possibility of a broader probe into Netflix’s business operations. The Trump administration has been growing wary of Netflix’s market clout, with its more than 80 million subscribers in the US and over 300 million worldwide.
“We have not been given any notice or seen any other sign that the DOJ is conducting a monopolization investigation,” Netflix’s outside counsel Steve Sunshine said through a spokesperson.
“Netflix is constructively engaging with the Department of Justice as part of the standard review of our proposed acquisition of Warner Bros.,” Netflix said in a statement. “We are not aware of any investigation into our business outside of the standard merger review process.”
A DOJ antitrust rep had no immediate comment.
That broader probe began last week, according to two people with direct knowledge of the matter, just on the heels of Netflix CEO Ted Sarandos giving testimony to the Senate Judiciary Subcommittee on Antitrust, where he was grilled on the potential antitrust implications of the WBD deal.
GOP senators were not only concerned about Netflix’s ability to rise prices of its streaming service, but also how its market clout could force feed the American public a steady diet of progressive and woke programming that conservatives have complained about for years.
Sarandos and lawyers for Netflix countered that there is 80% overlap between their customers and WBD’s, and competition from social media sites like YouTube make the antitrust concerns moot. But lawmakers on both sides of the aisle remained skeptical, as were senior members of the DOJ antitrust division who were already concerned about the streaming giant’s market prowess.
One person with close ties to the Trump administration’s regulatory apparatus said he has heard the DOJ is “planning a monopolization case” against Netflix if the WBD goes through.
A recently issued civil subpoena reportedly questions how Netflix competes with rivals.
“Describe any other exclusionary conduct on the part of Netflix that would reasonably appear capable of entrenching market or monopoly power,” the agency asked in the subpoena sent to another unnamed entertainment firm, The Wall Street Journal reported.
The department also reportedly asked whether the competition would be hurt if WBD got sold to either Netflix or Paramount Skydance, which made a $77.9 billion hostile bid for the entire company.
Officials asked for details on how past studio mergers had impacted competition and information on how talent contracts differ across studios, too.
Netflix in December agreed to pay $27.75 a share in cash in a deal worth $72 billion to acquire WBD’s studio and streaming business – potentially creating a Hollywood mammoth that owns everything from “Stranger Things” to the “Harry Potter” franchise.
Paramount has blasted Netflix’s offer, arguing its deal provides better value and regulatory certainty since there is minimal overall between its operations and WBD’s.
The Department of Justice is reviewing Paramount’s proposed deal, which Warner Bros. has urged shareholders to reject.
The Netflix investigation could ultimately give the DOJ a legal argument against the Warner deal if it finds evidence of monopolistic control, though it is unlikely to wrap up the probe anytime soon. The antitrust review process often takes as long as a year, and the deal is likely to be held up by regulators overseas, too.
This story originally appeared on NYPost
