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Netflix faces an antitrust review from the US government into its nearly $83 billion deal to buy Warner Bros. Discovery, as Paramount pursues a rival bid for the Hollywood media giant.
Antitrust enforcers at the U.S. Justice Department are asking industry participants whether Netflix could potentially exercise monopoly power, according to a person familiar with the matter, as part of efforts to assess competition risks from Netflix’s acquisition of WBD’s studio and streaming business.
Netflix said it was “not aware of any investigation of our business outside 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 are confident that the Netflix transaction will meet all regulatory conditions.”
The DoJ is basing its review on Section 2 of the Sherman Act, which prevents illegal monopolies, as well as Section 7 of the Clayton Act, which prohibits transactions that would substantially lessen competition and is often used by promoters assessing proposed deals, the person said.
Enforcement of Section 2 has historically been rare, but antitrust enforcers have resumed using it in recent years.
The Justice Department declined to comment on the review, which was first reported by the Wall Street Journal. Such reviews cannot lead to an enforcement case. Paramount’s proposed proposal could face a similar antitrust investigation.
Despite Netflix’s victory so far over Paramount in the bidding war for WBD, Paramount, backed by Oracle billionaire Larry Ellison, is pursuing a deal with WBD, launching a hostile bid and last month threatening to launch a proxy fight to overhaul WBD’s board.
Netflix accused Paramount of “misrepresenting” the regulatory review process. “We expect they will continue to focus on optics more than results,” Netflix said in a statement.
Netflix lawyer Steven Sunshine said the company “has not been given any notice or seen any other indication that the DoJ is conducting a separate antitrust investigation”.
Netflix co-Chief Executive Ted Sarandos appeared before a Senate panel this week, where he defended the proposed merger, but lawmakers were skeptical of the streaming giant’s claims that it would not reduce 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 less choices and streaming platforms.”
The proposed deal has been opposed by some in Hollywood, including the Writers Guild of America. The union 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., although the company’s board has repeatedly rejected its bids.
President Donald Trump has repeatedly commented about the Warner Bros. fight, saying in December that Netflix has “a huge market share and when they have Warner Bros. that share goes up a lot,” adding that “that could be a problem”.
But in an interview with NBC this week he said: “I’ve decided I don’t want to get involved in this. The Justice Department will handle it.”
