Netflix’s Warner Bros Purchase Faces Justice Department Scrutiny

Is the mega-deal between Netflix and Warner Bros Discovery in jeopardy? The U.S. Department of Justice (DOJ) might have the final word. Read on for the details of the new antitrust review of the proposed acquisition.

Netflix's Acquisition of Warner Bros Under Scrutiny by the Justice Department

The DOJ has launched an antitrust review of Netflix's plans to purchase Warner Bros for a price of $83 billion. The review comes as Paramount continues to push forward with a rival bid to acquire the media giant, including adding more value to their proposal on Tuesday.

Antitrust enforcers working with the DOJ are in the process of asking industry participants and experts whether Netflix could gain a monopoly status if it succeeds in taking over Warner Bros. Netflix is aiming to acquire both the studio arm and the streaming business under the Warner Bros umbrella.

Netflix said that it was "not aware of any investigation into our business outside of the standard merger review process." The streaming leader also said that it was "constructively engaging" with the DOJ as it goes through the acquisition steps. Meanwhile, a spokesperson for Warner Bros said that it was confident that the "transaction will satisfy all regulatory conditions." The Wall Street Journal was the first to report on the review; however, the DOJ has declined to comment on its plans.

On the legal front, the DOJ is conducting the review around the parameters laid out in Section 2 of the Sherman Act. This piece of legislation bans illegal monopoly practices. The DOJ is also taking into account Section 7 of the Clayton Act. This act bans transactions that would significantly lessen competition.

It is not unusual for DOJ enforcers to lean on the Clayton Act when investigating the legality of proposed acquisitions. Conversely, Section 2 of the Sherman Act is not used as often.

While Paramount is still holding out hope that it could slide into the deal and boot out Netflix, its offer would also face the same antitrust inspections. Paramount has been able to reach into the deep pockets of Oracle billionaire Larry Ellison in its hostile bid. The media company has also threatened to instigate a proxy fight to displace the board of directors at Warner Bros.

Netflix has responded to Paramount's hostile bid by accusing the company of "mischaracterizing" the review process. A statement from Netflix went on to say that they expect Paramount to place more emphasis on the optics of the situation rather than the outcomes.

Steven Sunshine, an attorney for Netflix, said that the company has not been tipped off that the DOJ is conducting its own separate investigation. Experts say that it is not unusual for the DOJ to be tight-lipped about the review process.

Congress Looks Into Monopoly Concerns

Earlier in the week, Netflix co-chief executive Ted Sarandos appeared in front of a Senate panel defending the proposed merger. Members of Congress seemed skeptical of Netflix's assertions that it would not become a monopoly should the merger pass through the legal hurdles. Paramount's chief executive, David Ellison, was invited to be present at the Senate hearing; however, he declined the invitation.

Sen. Cory Booker was one of the legislators who expressed concern about the deal. The Democrat from New Jersey said that he was worried that Netflix would gain even more power, leaving fewer streaming platforms for consumers.

The DOJ is also reportedly reviewing Paramount's bid to buy Warner Bros. The board at Warner Bros. has rejected all other bids thus far. On Tuesday, Paramount attempted to sway the board further by offering a "ticking fee" to Warner shareholders if the deal does not go through by the end of 2026. Ellison said that the additional benefits highlight Paramount's commitment to providing Warner Bros shareholders with the full value of their investment. Paramount also extended the tender offer deadline to March 2.

Congress is not the only entity expressing skepticism over the legalities of the acquisition. Several leaders in Hollywood are also vocally opposing the deal. This includes the Writers Guild of America, a union that said that the acquisition needs to be blocked.

President Donald Trump has frequently inserted himself into the ongoing fight to acquire Warner Bros. In December, the president said that it "could be a problem" if Warner Bros' market share goes up too much following the acquisition. In a more recent interview, Trump said that he decided that he should not be involved in the review process, stating that he is going to leave it to the DOJ to handle.

While the outcome is still in the air, how the DOJ investigation plays out could have a noticeable impact on the Hollywood landscape, particularly as it relates to the streaming industry.

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