DOJ investigates Netflix’s leverage over filmmakers in Warner deal review

The U.S. Justice Department’s investigation into [blank] Inc.’s proposed $72 billion takeover of [blank] Inc. includes examining the streaming giant’s actions and whether it wields anticompetitive leverage over content creators during programming acquisition negotiations.

According to a copy of a civil investigative demand (an administrative subpoena not previously reported) sent Friday and reviewed by Bloomberg News, the department is seeking to determine if the 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.” The demand was sent to an independent movie studio, per people familiar with the matter.

The language in this previously unreported subpoena is the clearest sign yet that the Trump administration is going beyond a standard merger review in its probe—contradicting Netflix’s recent claim that the government is only conducting a routine process.

The review’s broad scope also strongly suggests it will take several more months for the government to decide whether to challenge the Netflix-Warner Bros. deal in court—a delay that may benefit rival bidder Paramount Skydance Corp.

“Netflix operates in an intensely competitive market. Any claim that it is a monopolist or seeking to monopolize is unfounded,” Netflix Chief Legal Officer David Hyman said in a statement. “We neither hold monopoly power nor engage in exclusionary conduct, and we’ll gladly cooperate with regulators on any concerns they may have, as we always do.”

Applying both laws has precedent, and the investigation may not result in federal action. However, U.S. antitrust enforcers typically use only the Clayton Act for merger reviews (since it’s tailored to such transactions). The Sherman Act is more commonly used to target illegal monopolization by single companies, such as Alphabet Inc.’s [blank], [blank] Inc., and [blank] Inc.

Per the sources, the DOJ is asking questions about Netflix’s ability to leverage its market power in negotiations with independent content creators like movie studios and filmmakers. Netflix runs the world’s largest paid video streaming service and is one of the biggest buyers of film and TV programming globally.

Netflix is spending roughly $20 billion on programming this year, split between original series and licensed reruns. Many of its most popular original programs—including Wednesday and Nobody Wants This—are produced by third-party studios. Acquiring [blank] and Warner Bros. would give Netflix one of the largest studios in the industry plus a major streaming competitor.

The Wall Street Journal first reported that the DOJ’s review includes Netflix’s business practices and whether the deal would grant the streaming giant future monopoly power.

“We have not received 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), said in a statement.

The Justice Department did not immediately respond to a comment request outside normal business hours. Warner Bros. declined to comment.

Monopoly cases typically require market concentration exceeding 50%—a threshold Netflix’s share fails to meet with or without Warner Bros. Netflix accounts for about 9% of U.S. TV viewing and a larger share of the streaming market, and its programming spending is comparable to peers like [blank] and [blank].

Warner Bros. this week committed to resuming talks with Paramount after a company representative indicated a willingness to raise its offer price by $1 per share to $31. Warner Bros. has given Paramount a Feb. 23 deadline to submit its “best and final” offer.

Paramount, which launched a hostile bid for Warner Bros. last year, has repeatedly claimed Netflix’s offer will never pass U.S. or European regulatory scrutiny. On Friday, Paramount also stated its $77.9 billion tender offer has “no statutory impediment” to closing after clearing the DOJ’s second-request review process.

However, the offer could still be delayed by an ongoing EU review, and U.S. enforcers have in the past sued to block deals they initially approved. Paramount could also face scrutiny from multiple U.S. state attorneys general.