DOJ Reviewing Netflix’s $83 Billion Warner Bros. Deal

The Department of Justice’s Antitrust Division is reviewing Netflix’s $83 billion deal for Warner Bros. Discovery’s streaming and studio assets.

In a Tuesday regulatory filing, Warner Bros. said that the 30-day waiting period under the Hart-Scott-Rodino Act started on Dec. 17. Prior to the expiration, WBD and Netflix received second requests from the DOJ’s antitrust division on Jan. 16. As a result, the waiting period has been extended until 11:59 p.m. ET, 30 calendar days after both parties have “certified substantial compliance with such request.”

“WBD and Netflix have begun engaging with competition authorities, including the Antitrust Division and European Commission,” the filing notes. “However, neither WBD nor Netflix can predict the actual date on which the merger will be completed because it is subject to conditions beyond each company’s control.”

The move comes as the DOJ also issued a second request for information on Paramount’s $108.4 billion tender offer.

The initial waiting period for the DOJ’s review was scheduled to expire on Dec. 23 at 11:59 p.m. ET. However, the agency has issued “requests for additional information or documentary material relevant to the offer,” which extended the waiting period deadline to 11:59 p.m. ET 10 calendar days after Paramount “certifies substantial compliance with such request.”

During Netflix’s fourth quarter earnings call, co-CEO Greg Peters said the company is still under 10% of TV time in all major markets where it competes, a core argument as it tries to convince regulators that it’s not a TV giant.

“We’ve got hundreds of millions of households around the world still to sign up,” Peters said. “We’re just about 7% of the addressable market in terms of consumer and ad spend. So tons of room ahead of us.”

Netflix co-CEO Ted Sarandos added that the newly revised Warner Bros. deal will allow the company to significantly expand production capacity in the U.S., keep investing in original content long-term and offer more jobs and opportunities to creative talent.

“It’s got three core businesses that we don’t currently have. So we’re going to need those teams,” he said. “These folks have extensive experience and expertise. We want them to stay on and run those businesses. So we’re expanding content creation, not collapsing it in this transaction. “

Sarandos also pointed to growing competition in the market, from YouTube bidding on the Oscars and the NFL to Amazon owning MGM, Apple competing for the Emmys and Oscars and Instagram “coming next” with plans to bring its Reels offering to TVs.

Paramount Chief Legal Officer Makan Delrahim argued that the Netflix deal is anticompetitive and “presumptively unlawful” in a letter to House lawmakers, saying it would further cement the company’s dominance in streaming.

He noted that Netflix’s regulatory defense is a “tortured and absurd definition of the market that no serious regulator would ever accept” and that comparisons to YouTube and social media have “no grounding in market or legal reality.”

“Netflix itself, until this deal, did not take that argument seriously, as Netflix co-CEO Ted Sarandos referred to YouTube as a ‘farm league’ for content creators, and omitted YouTube entirely from public securities filings in which it compared itself to actual competitors in streaming video on demand,” Delrahim wrote. “Netflix’s only remaining hope is to persuade the public and corporate board members that the Paramount deal is equally risky. That is flatly untrue. The Netflix proposed deal is presumptively unlawful. Paramount’s proposed deal is not.”

Paramount CEO David Ellison has also been traveling overseas, trying to convince European regulators of the risks associated with a Netflix deal.

Netflix has said it expects a deal to close within 12 to 18 months from when its original agreement was announced, while Paramount has said a potential deal would close within a year. 

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