Netflix hit with antitrust suit over plan to acquire Warner Bros.

(CN) — An HBO Max customer filed an antitrust class action against Netflix Monday over the platform’s recently announced deal to acquire Warner Bros. Discovery, calling it one of the more “audacious horizontal mergers in recent memory.”

The media companies announced on Dec. 5 the $72 billion deal that would merge Netflix, which dominates the streaming market globally, with Warner Bros. Discovery, which includes HBO Max among its wide-ranging film and television subsidiaries.

“This acquisition will improve our offering and accelerate our business for decades to come,” Greg Peters, co-CEO of Netflix said in a press statement last week. “Warner Bros. has helped define entertainment for more than a century and continues to do so with phenomenal creative executives and production capabilities. With our global reach and proven business model, we can introduce a broader audience to the worlds they create — giving our members more options, attracting more fans to our best-in-class streaming service, strengthening the entire entertainment industry and creating more value for shareholders.”

But in a 56-page complaint filed in the Northern District of California Monday, plaintiff Michelle Fendelander says the merger could result in higher prices for customers and fewer high quality offerings.

“If allowed to consummate, the Netflix-WBD merger will substantially decrease competition in the U.S. [subscription video on demand market], harming consumers in that market through increased prices, reduced service quality, and decreased output (including reduced consumer choice),” Fendelander, who is represented by Bathaee Dunne LLP, says in the complaint.

She further said the merger will worsen the content and subscriber barrier to entry in the market, preventing new players in the subscription video on demand market at the same time that it’s “massively and perhaps irreversibly concentrated.”

Fendelander, who filed the lawsuit on behalf of a nationwide class of people and entities who paid for a streaming video on demand subscription to HBO Max from Dec. 8, 2021 through the present, brings her claim under Section 7 of the Clayton Act.

“WBD is one of a small number of firms with the scale, production capabilities, and content libraries necessary to constrain Netflix’s market power,” Fendelander says in the complaint.

“This reduction in competition will directly result in higher prices to plaintiff and the class, reduced output, diminished content diversity, lower investment in innovative or risky programming, and reduced consumer choice. Without WBD’s competitive pressure, Netflix would have greater ability and incentive to raise subscription fees, reduce the quality or breadth of its content slate, or withhold premium content to foreclose rivals.”

The lawsuit came on the same day Paramount Skydance launched a hostile bid to acquire Warner Bros. Discovery, offering an all-cash offer to acquire Warner Bros. Discovery shares for $30 per share, which it said provides $18 billion more in cash to shareholders than Netflix’s offer. (Warner Bros. Discovery reportedly rejected Paramount’s prior offer of $20 per share).

While Netflix’s offer is only for Warner Bros. Discovery’s studio and streaming service, Paramount’s would include the company’s cable brands, including CNN.

Paramount claims its offer — which, according to Securities and Exchange Commission filings includes funding from the Public Investment Fund (Kingdom of Saudi Arabia), L’imad Holding Company, PJSC (Abu Dhabi), Qatar Investment Authority (Qatar) and Affinity Partners (the investment fund of Jared Kushner, who is President Donald Trump’s son-in-law) — is “pro-consumer.”

“We believe our offer will create a stronger Hollywood,” David Ellison, chairman and CEO of Paramount, said in a press statement Monday. “It is in the best interests of the creative community, consumers and the movie theater industry. We believe they will benefit from the enhanced competition, higher content spend and theatrical release output, and a greater number of movies in theaters as a result of our proposed transaction.”

U.S. Senator Elizabeth Warren, who last week called Netflix’s bid for Warner Bros. Discovery an “anti-monopoly nightmare,” shared similar sentiments about a Paramount Skydance merger Monday.

“A Paramount Skydance-Warner Bros. merger would be a five-alarm antitrust fire and exactly what our anti-monopoly laws are written to prevent,” Warren said in a statement. “Paramount Skydance’s new hostile bid is backed by a who’s who of Trump buddies, from Jared Kushner’s private equity firm to the Ellison family to money flowing from the Middle East — raising serious questions about influence-peddling, political favoritism, and national security risks.”

“The Department of Justice and the Committee on Foreign Investment in the United States must review any Warner Bros. deal based on the law and facts, not who sucked up the most to Donald Trump,” she continued.

When asked whether he supported Paramount’s bid, Trump, who previously said the Netflix merger “could be a problem,” told reporters at the White House Monday he didn’t know enough about it yet.

“I have to see what percentage of market they have,” Trump said. “I mean, none of them are particularly great friends of mine.”

Netflix could not immediately be reached for comment on the lawsuit.