Netflix faces consumer lawsuit as Warner Bros. merger scrutiny mounts
Netflix faces a new consumer lawsuit aimed at blocking its planned takeover of Warner bros. Revelation’s studios and streaming assets, including HBO max, as federal antitrust scrutiny of the deal intensifies. Filed in the U.S. District Court for the Eastern District of california by three Netflix subscribers, the complaint argues the merger would entrench Netflix’s dominance in the streaming market, leading to higher prices and diminished service quality, and could allow netflix to withhold Warner’s content from competing platforms.
The suit comes as the Justice Department probes whether the acquisition could create monopoly power in streaming, with subpoenas issued earlier this month. Congress and public officials have also heightened scrutiny: a Senate hearing featured Netflix co-CEO Ted Sarandos facing questions about the deal’s potential anti-competitive effects.Some Netflix investors privately oppose the merger, warning against aggressive expansion, even as others support it as a means to bolster competition through scale.
Separately, Warner Bros. Discovery has opened talks with Paramount Skydance after granting Netflix a limited waiver to explore a rival proposal. Paramount has raised its bid in an effort to sway the boards, while Warner’s board still recommends acceptance of Netflix’s deal. Shareholders are expected to vote next month,as the broader antitrust climate—shaped by leadership changes at the DOJ and ongoing political debate—adds to the deal’s uncertainty.
Netflix faces consumer lawsuit as Warner Bros. merger scrutiny mounts
Netflix is facing a new consumer lawsuit seeking to block its proposed acquisition of Warner Bros. Discovery’s studio and streaming assets, adding to the intensifying legal and political scrutiny of the high-stakes deal.
The complaint, filed late Tuesday in the U.S. District Court for the Eastern District of California by three Netflix subscribers, alleged the transaction would unlawfully consolidate power in the subscription video-on-demand market and harm consumers.
The three plaintiffs are Netflix subscribers who also have memberships with other streaming platforms and claim the merger would “entrench” Netflix’s position in streaming, exposing subscribers to higher prices and reduced service quality if allowed to proceed. They are seeking an injunction to block the deal before it closes.
At the center of the lawsuit is Netflix’s planned acquisition of Warner Bros. Discovery assets, including HBO Max, which the lawsuit describes as a “direct and highly significant competitor” capable of challenging Netflix on price and programming. Eliminating that rivalry, the filing argued, would substantially lessen competition in the U.S. streaming marketplace.
The complaint further contended that bringing Warner Bros. Discovery’s film and television catalog under Netflix’s control could allow the company to restrict licensing to competing platforms, weakening rivals that rely on that content to attract subscribers.
The latest lawsuit marks the second consumer legal threat the media giant has faced since December and comes as the proposed merger already faces federal antitrust review. The Justice Department earlier this month issued subpoenas to industry participants and is examining whether the transaction could entrench monopoly power in streaming, the Wall Street Journal first reported.
Republican lawmakers have been raising alarms about the merger’s possible anticompetitive nature.
During a Feb. 6 Senate hearing with Netflix co-CEO Ted Sarandos, Sen. Eric Schmitt (R-MO) pressed the executive on the company’s size and influence, arguing that regulators must examine whether the deal would become “anti-competitive” given Netflix’s market power.
Schmitt questioned why Congress should “give a seal of approval” to a transaction that could make the company an even larger force in global entertainment.
The merger, announced in December, would transfer Warner Bros. Discovery’s studios and streaming operations to Netflix while leaving behind certain legacy television assets. The companies have argued the combination would expand consumer choice and strengthen their ability to compete with other forms of entertainment, including social media and traditional television.
However, some high-level investors in Netflix have privately signaled opposition to the company’s merger plans, arguing the company should remain focused on bolstering its in-house productions rather than trying to “empire build.”
“I think they’re upset,” one Netflix investor who works in wealth management told the Washington Examiner under the condition of anonymity. “The general market has been up and Netflix has been down tremendously. We’re back to values that we were at in the beginning of 2024.”
Consumer antitrust suits such as those filed in California are permitted under federal law but can be difficult to win, legal experts say.
Still, the public pushback against Netflix comes at a volatile time in the antitrust world. Former Assistant Attorney General for the Antitrust Division Gail Slater left the DOJ last week after internal disagreements about how her office had conducted oversight and enforcement in the year since she began working under the second Trump administration.
The current level of resistance to the merger also prompted Netflix to bolster its antitrust and regulatory policy team in Washington, D.C., and led to hiring prominent antitrust advisers, including Jeffrey Apelbaum, according to lobbying disclosures filed last week.
The deal has triggered a broader bidding battle as well after Netflix granted Warner Bros. a limited waiver to explore a rival proposal.
Paramount Skydance has mounted a competing offer for Warner Bros. Discovery, prompting renewed negotiations this week even as the company’s board continues to recommend that shareholders approve the Netflix agreement. Paramount recently sweetened its bid with financial incentives in an effort to help ease concerns among board members.
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Warner Bros. Discovery shareholders are expected to vote on the Netflix transaction next month.
The Washington Examiner reached out to Netflix for comment.
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