As Netflix co-CEO faced a Senate subcommittee over its proposed acquisition of Warner Bros., lawmakers in both parties pressed serious concerns over the combination, citing in particular the streaming giant’s dominance.
The chair of the Senate Judiciary antitrust subcommittee, Sen. Mike Lee (R-UT), said that the transaction was “extraordinary in both in scale and potential consequence” and that it “raises serious antitrust concerns that warrant scrutiny.”
While Lee warned of the consolidation of streaming platforms, he also expressed concern of what it would do to the labor market, in that Netflix and WB compete for creative talent.
“Consolidating two major employers in the same market inevitably have an impact on the competition for that labor,” Lee said.
He also raised issues with “vertical foreclosure,” in that the merged firm would have the “incentive to put rivals at a disadvantage.”
“it could withhold marquee titles, it could raises licensing fees, it could favor its own content with recommendations on a platform of Netflix’s size and reach.”
Lee also expressed concerns that the merger would impact theatrical distribution and over Netflix’s data trove.
Sen. Cory Booker, the top Democrat on the subcommittee, said that he invited Paramount CEO David Ellison to the hearing, but he declined. Paramount is making a rival bid for all of Warner Bros. Discovery.
He expressed concerns about Netflix and Paramount taking control of the fabled studio.
“With a merger like this, I have real concerns about art, about culture, about the voices of Americans, about the moral imagination of a nation,” Booker said. He warned of the combination of Netflix as a dominant streaming platform. “I have concerns about Netflix getting more power over consumers and leaving fewer alternatives and streaming platforms,” he said.
Also testifying at the hearing was Bruce Campbell, chief revenue and strategy officer of Warner Bros. Discovery.
Since the $82.7 billion mega deal was announced in December, Netflix executives have discussed the transaction with the Justice Department Antitrust Division, European Union authorities and some state attorneys general.
But the wild card has been President Donald Trump, who has said that he would be involved in the regulatory process. While has offered words of praise for Sarandos, he’s also done so for Paramount’s new management. Ellison’s father, Larry, is one of Trump’s longtime supporters, while the company’s chief legal officer, Makan Delrahim, served as DOJ antitrust chief in the first Trump term.
More recently, the president posted a video warning against the Netflix transaction, while he told Deadline last week that he had concerns about a monopoly, although he was not clear about which of the rivals for Warner Bros. he was talking about.
At the hearing, Booker blasted Trump for “using government power to reward allies, punish perceivec enemies and enable private enrichment in ways we have not seen before.”
On Capitol Hill, some lawmakers have lined up behind Netflix and others behind Paramount, while other figures, like Sen. Elizabeth Warren (D-MA) are warning about either transaction. The possibility that Trump will try to influence the process — defying decades of norms — also is a worry, albeit some Democrats have hopes that Abigail Slater, the current Justice Department Antitrust Division chief, will maintain her independence.
The DOJ would have to sue to block the merger, and Netflix has signaled a willingness to challenge such a move in court. That carries with it significant risks, albeit the company is said to be confident that they have legal precedent on their side.
The company has been pitching the transaction as “pro-competitive” and “pro-consumer,” which are pretty boilerplate for major mergers facing regulatory scrutiny.
The most challenging part for Netflix appears to be in streaming, where would be acquiring HBO Max, a rival in premium subscription content. Netflix sees the competitive landscape as including a robust number of competitors, including Disney/Hulu/ESPN, Amazon Prime and YouTube, the latter of which draws a larger share of TV screen time. The company also argues that 80% of HBO Max subscribers also have Netflix, and those choices will continue post-acquisition, with the option for a cheaper bundle.
Netflix also is casting its acquisition of Warner Bros. as largely a vertical merger, a contrast to the combination of Paramount with all of Warner Bros. Discovery, which would combine two of Hollywood’s legacy studios.
Delrahim has dismissed Netflix’s argument that its competitive landscape includes YouTube. In a letter to lawmakers last month, Delrahim wrote that the broader market definition was “tortured and absurd” and something that “no serious regulator would ever accept.”
He wrote, “It asserts, for example, that free, user-generated videos on YouTube and TikTok should be considered an adequate substitute for premium produced content available on Netflix or HBO Max. This is what some call ‘psychedelic antitrust’ — it has no ground in market or legal reality.”
Delrahim also argued that Netflix had previously dismissed the idea that YouTube was a rival. pointing to securities filings in which “it compared itself to actual competitors in streaming video on demand.”
Last week Heritage Foundation spinoff the Oversight Project put out a report slamming Netflix “as holding an outsized role in socially engineering millions of Americans into a predisposition to accept preferred leftwing ideological dogma.” Having handed the Fedflix document to the White House and Sen. Lee’s office, Oversight Project boss Mike Howell bluntly told Deadline that “I don’t want Netflix to get bigger at all. I want it to have less influence.”
Howell added: “This seemed like an opportune moment to raise this issue in the context of Netflix’s ambition plan to build the biggest political and ideology messaging machine in human history.”