The US Department of Justice (DOJ) investigation into Netflix’s proposed $72 million takeover of Warner Bros Discovery is scrutinizing whether the streaming platform wields anticompetitive leverage over filmmakers and creators in negotiations for acquiring programming.
According to a report by Bloomberg, which cited a a copy of a civil investigative demand, the DOJ probe by the Donald Trump administration is seeking to determine whether the proposed Netflix-Warner Bros deal “may substantially lessen competition or tend to create a monopoly in violation of Section 7 of the Clayton Act or Section 2 of the Sherman Act”.
Bloomberg also reported that the language used in the civil investigative demand indicates that the Trump administration is going for a probe that is far broader in scope than a typical deal review.
This approach could prove to be a lengthy one, and indicates that the Trump administration is likely to take many more months before it decides whether to challenge the Netflix-Warner Bros deal in court, a delay that is likely to benefit rival bidder Paramount Skydance Corp.
What is the DOJ looking at?
The two laws under which the DOJ probe is being carried out, the Clayton Act and the Sherman Act, deals with merger investigations and illegal monopolization respectively.
As per The Wall Street Journal, which first reported on the scope of the Trump admin’s probe into Netflix, the DOJ’s review of the deal will scrutinize Netflix’s business practices and seek to determine whether the deal would give the streaming giant monopoly power in the future.
To that end, the DOJ is asking questions about Netflix’s ability to leverage its market power in negotiations with filmmakers and movie studios, Bloomberg reported, citing people with knowledge of the matter.
However, it should be noted, that monopoly cases require firms to have market concentration of more than 50%, a number that is far greater than the current 9% of TV viewing that in the US that Netflix controls. While the streaming giant has a larger share of the streaming market, its control of the market is still far lower than 50%, reported Bloomberg.
What has Netflix said?
Netflix has pushed back against the suggestion that it could be engaged in anticompetitive practices.
“Netflix operates in an extremely competitive market. Any claim that it is a monopolist, or seeking to monopolize, is unfounded. We neither hold monopoly power nor engage in exclusionary conduct and we’ll gladly cooperate, as we always do, with regulators on any concerns they may have,” the streaming giant’s Chief Legal Officer David Hyman was quoted as saying.
The streaming giant also denied having received any formal indication of a monopolization probe by the DOJ.
“We have not been given any notice or seen any other sign that the DOJ is conducting a monopolization investigation,” Steve Sunshine, head of Skadden, Arps, Slate, Meagher & Flom LLP’s global antitrust/competition group representing Netflix, was quoted as saying by Bloomberg.
