After months of jabs and feints, the white gloves may have truly come off in Netflix and Paramount‘s multibillion-dollar battle for control of Warner Bros. Discovery.
With just 24 hours left to go on the WBD board’s weeklong talks with the David Ellison-owned company and its “best and final offer” in the $108 billion hostile takeover bid over rival Netflix, the Ted Sarandos and Greg Peters-run streamer now finds itself in the Department of Justice‘s antitrust grip.
Specifically, adding months and months to any final deal for either side, Attorney General Pam Bondi‘s crew want to know exactly how much real leverage Netflix has over the industry.
“This civil investigative demand is issued pursuant to the Antitrust Civil Process Act …in the course of an antitrust investigation to determine whether there is, has been, or may be a violation of the antitrust laws by conduct, activities, or proposed action of the following nature: the proposed acquisition of Warner Bros. Discovery, Inc. by Netflix Inc, that 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 DOJ’s Antitrust Division’s acting boss Omeed Assefi (who just over a week ago replaced the suddenly exiting Abigail Slater) declared in a salvo sent out over the past 48 hours to filmmakers and producers all over town.
Recipients of the DOJ CID have until March 23 to provide documents and sworn responses to the feds.
Tellingly, as Paramount continues to pursue legal action over the merger, that date will come three days after the March 20 special meeting of WBD shareholders to vote on David Zaslav and other board members’ recommendation to embrace Netflix’s $83 billion acquisition of WB’s studio and streaming crown jewels.
“This is going nuclear stuff, though not surprising, ” a producer who received the CID for “documentary material and written interrogatories” tells Deadline. “Netflix’s going to get a lot bigger with Warner. Trump himself said that out loud. So c’mon, what did anyone expect?”
On the red carpet today in London for the BAFTAs, Sarandos blasted Paramount: “Just put a better deal on the table and see if you can win.’”
For the record, Section 2 of the Sherman Act states: “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.”
While the CID itself was sent out on February 20, the probe itself has been underway for about three weeks, well-positioned sources say.
That would put the DOJ antitrust investigation starting around the time an anti-Netflix report by a Heritage Foundation spin-off was sent to GOP senators and MAGA loyalists early this month. The timing would also set the Justice Department action kicking off as a heavily-grilled Sarandos testified in D.C. on February 3 before the subcommittee chaired by a combative Sen. Mike Lee (R-UT) on the WB merger.
“Netflix operates in an extremely competitive market,” is the official word this weekend from David Hyman, Netflix’s top legal beagle. “Any claim that it is a monopolist, or seeking to monopolize, is unfounded,” the streamer’s Chief Legal Officer said late Saturday as news of the DOJ CID was first confirmed by Bloomberg. “Our success stems from innovation and investment that benefit consumers. We neither hold monopoly power nor engage in exclusionary conduct and we’ll gladly cooperate, as we always do, with regulators on any concerns they may have.”
Reps for the DOJ, WB and Paramount did not respond to Deadline’s requests for comment on the CID. Behind the scenes at Netflix, execs aren’t sweating the probe that much, I hear. Taking it on the chin as a routine part of the regulatory and political process, they anticipated such a third party info accumulation as part of the requirements of the DOJ’s 2023 Merger Guidelines initiative.
Sarandos himself has insisted over and over publicly the past few months that even with HBO Max’s 128 million subscribers in its arsenal, the streamer would be “nowhere near a monopoly.”
Facing accusations of “promoting DEI and wokeness,” slings and more culture war arrows from Republican senators on the antitrust subcommittee at a February 3 hearing with WBD, the co-CEO, alongside WBD Chief Revenue Officer Bruce Campbell, stated he had “confidence in this case on the merits and that it will be run by the Department of Justice.” Already the most subscribed streamer on the planet with 325 million paying customers, Netflix has also denied that it is under any Sherman Act probe in its pursuit of WB and its dust-ups with Paramount.
In fact, late Saturday they were still publicly saying they hadn’t seen any DOJ CID paperwork.
“We have not been given any notice or seen any other sign that the DOJ is conducting a monopolization investigation,” asserted the wonderfully named Steve Sunshine, Netflix’s outside counsel and the head of law firm Skadden’s Global Antitrust/Competition Group.
The wild card in all this is, as with almost everything in America and on Planet Earth nowadays, Donald Trump.
POTUS has been sending even more mixed signals publicly than usual in the fight for Warner Bros.
In a pre-Super Bowl interview, Trump told NBC’s Tom Llamas he “shouldn’t be involved” in deciding who gets WBD (and hence, the fate of CNN).
The former Apprentice host has also praised and distanced himself from his “friends” and as “big supporters of mine” David Ellison and his Oracle founder father Larry Ellison. Trump has met repeatedly with the Ellisons at the White House over the past few months and, this weekend, raged against Netflix board member and ex-Obama staffer Susan Rice. Yet, Trump has also lathered Sarandos as a game changer and “great person.” Sarandos, who has been very complimentary to Trump of late, sat down with POTUS on November 24, just before the WBD board accepted Netflix’s offer for most of their company.
Now, with the DOJ’s civil investigative demand, the realpolitik of this merger battle has been unsheathed.