Netflix faces scrutiny from AGs over Warner Brothers acquisition

Investing.com -- A coalition of 11 state attorneys general has urged the Department of Justice to conduct a thorough review of Netflix's proposed acquisition of Warner Brothers, citing concerns about market concentration and potential harm to consumers and the theatrical film industry.

In a letter dated Tuesday to Acting Assistant Attorney General Omeed Assefi, the attorneys general warned that the merger could result in higher subscription prices, lower quality content, and reduced competition in the Subscription Video on Demand market. The letter was led by Montana Attorney General Austin Knudsen and signed by officials from Alabama, Alaska, Iowa, Kansas, Nebraska, North Dakota, South Carolina, Tennessee, Utah, and West Virginia.

The state officials pointed to a lawsuit filed in the Eastern District of California, where private plaintiffs are seeking to block the merger under the Clayton Act. The lawsuit alleges that Netflix's acquisition of Warner Brothers would substantially lessen competition or create a monopoly, particularly through the elimination of HBO Max as a competing platform.

The attorneys general expressed concern about vertical foreclosure of content library inputs that competitors need to operate effectively. They warned that if the merger proceeds, it could lead to a monopoly that charges higher subscription prices while offering less content of reduced quality.

The letter also highlighted potential damage to the theatrical motion picture business. The state officials noted that Netflix CEO has called movie theaters an outdated concept, raising concerns that the company could abandon Warner Brothers' current theatrical release model. Cinema United, a trade group representing major theater chains including AMC and Regal, has described the proposed merger as culturally catastrophic.

The attorneys general said the timing of the merger could be particularly harmful to movie theaters, which are recovering from the COVID-19 pandemic and recent Hollywood strikes. They argued that allowing Netflix to acquire Warner Brothers just before two major years in cinema could deprive the exhibition sector of significant cash flows.

The state officials offered to assist the Department of Justice in its review of the proposed merger.

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