Netflix chief global affairs officer Clete Willems believes a Department of Justice investigation into the streamer’s business practices is “totally ordinary course of business” as the regulator reviews its $83 billion deal to acquire Warner Bros. Discovery’s studio and streaming assets.
In January, the DOJ’s antitrust division issued second requests for information on both the Netflix deal and Paramount’s $108.4 billion hostile takeover bid to acquire the entire company. As a result, the waiting period on both bids has been extended until 11:59 p.m. ET, 30 calendar days after the parties have “certified substantial compliance with such request.”
Second requests typically ask for business documents and data that will inform the agency about the company’s products or services, market conditions where the company does business and the likely competitive effects of the merger. The agency may conduct interviews, either informally or by sworn testimony, with company personnel or others with knowledge about the industry.
On Friday, the Wall Street Journal reported that the DOJ was launching an investigation into whether Netflix’s business practices were monopolistic. It cited a document asking an unnamed entertainment company to describe “exclusionary conduct on the part of Netflix that would reasonably appear capable of entrenching market or monopoly power.”
Willems suggested the move is part of the DOJ’s standard regulatory review rather than a separate investigation.
“The Department of Justice is going to investigate this transaction and make sure that it’s good for our economy and good for our consumers. And my understanding is that they’ve sent similar inquiries about Paramount as well,” he told Fox Business’ “The Claman Countdown” on Monday. “I’m excited for Netflix to have the opportunity to engage with the Department of Justice and engage with policymakers to explain how great this deal is going to be for the U.S. economy and for consumers.”
A representative for the DOJ declined to comment.
In response to the Journal’s reporting, a Netflix spokesperson told TheWrap that the focus remains on the “value Netflix and Warner Bros. can create together” and that it is “constructively engaging” with the DOJ as part of its standard review.
The spokesperson also clarified that the company is “not aware of any investigation into our business outside of the standard merger review process.” Netflix attorney Steven Sunshine added it has “not been given any notice or seen any other sign that the DOJ is conducting a monopolization investigation.”
Netflix also looked to get ahead of Paramount’s hostile takeover bid potentially clearing the DOJ review’s waiting period under the Hart-Scott-Rodino (HSR) Act in the coming weeks.
“Paramount Skydance appears intent on mischaracterizing the regulatory review process. We expect them to continue focusing on optics over outcomes and commitments,” the spokesperson said. “This includes them planning to self-declare they are in substantial compliance and other misleading narratives about how the clearance process operates.”
Even if Paramount’s bid clears the review period, the DOJ can still investigate or challenge a potential deal with Warner Bros. A deal would also hinge on WBD shareholders accepting its tender offer and international regulators giving their stamp of approval.
Paramount had 168.5 million shares, or around 7% of WBD’s total 2.48 billion outstanding shares, validly tendered and not withdrawn as of Jan 21, though shareholders can withdraw at any time before the deadline.
In addition to the Department of Justice, Willems reiterated that Netflix is also engaging with European regulators, as well as with U.S. state attorneys general who could potentially sue to block the deal.
A spokesperson for California Attorney General Rob Bonta previously told TheWrap that “further consolidation in markets that are central to American economic life — whether in the financial, airline, grocery or broadcasting and entertainment markets — does not serve the American economy, consumers or competition well.”
“We have been in touch with them. I’m not aware of anything in terms of questions being raised in the negative towards us, but we’re engaging with them,” Willems told Claman regarding the state attorneys general. “We have nothing to hide here. We think this is going to be great for the U.S. economy. And we film in all 50 states. So I think we’re looking forward to going around the country and talking about those contributions that we’re making to each of those states.”
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Willems also used the interview as an opportunity to rail against Paramount’s hostile takeover bid, calling the Netflix deal “far superior for the American economy. He noted that the David Ellison-owned media giant has cut 3,500 jobs in recent years and identified $6 billion in synergies in a potential Warner Bros. combination, which he said is “code for $6 billion in job cuts.”
“Quite frankly, we think it’s going to be even more than that, because this is going to be the largest leveraged buyout in history. And so they’re going to have to cut, cut, cut,” Willems continued. “Our deal is largely a vertical merger, bringing together complementary assets. Theirs is horizontal. They have what we call the Noah’s Ark problem, which is, if they effectuate this deal, they’re going to have two of everything. They’re going to have two studios. They’re going to have two theatrical businesses. And Hollywood’s going to go from five legacy studios to four. We don’t have that problem.”
When pushed on Netflix’s own target for $2 billion to $3 billion in synergies three years after closing a Warner Bros. deal, Willems argued that the savings would come from licensing fees and other areas rather than job cuts. Those other areas include selling, general and administrative (SG&A) expense efficiencies and removing duplicative back-end tech systems.
Willems also acknowledged the anxiety in Hollywood surrounding the deal and concerns about how it would impact the already struggling theatrical business. He pointed to the Netflix co-CEO Ted Sarandos’ commitment to the 45-day theatrical window and the streamer’s track record of growing its content investment each year as its rivals have pulled back on spend.
“This deal will let creators share their stories with a broader global audience that they haven’t had before. It’s going to give them more opportunities,” he said. “So I get why there’s anxiety, but I think our track record does speak for itself. And we’re going to continue to provide them opportunities to pitch shows to the Netflix studios, to the Warner Bros. studios, which will remain independent. And I think it’s going to be a really good scenario for creators at the end of the day.”
He also expressed confidence that the deal would give consumers “more value for less money,” pointing to the 80% overlap between Netflix and HBO Max subscribers and noting that Netflix costs consumers 36 cents per hour of content, while Paramount is over 70 cents per hour.
In addition to regulatory approval, Netflix’s deal for Warner Bros. will need approval from shareholders, with a vote expected to occur by April.
Netflix has previously said its deal with Warner Bros. would close within 12 to 18 months, with Warner’s cable networks set to be spun out into Discovery Global before the end of 2026.
Ellison has launched a proxy fight in an effort to thwart the deal and is seeking to condition the company’s pending cable network spinoff Discovery Global on a shareholder vote.
