Regulatory Scrutiny Intensifies Over Netflix’s Proposed Acquisition

Netflix US64110L1061

The U.S. Department of Justice has initiated a formal probe into Netflix, casting a shadow over the streaming giant's ambitious plan to acquire Warner Bros. Discovery. This regulatory intervention comes at a critical juncture, as rival bidder Paramount Global has presented a substantially more lucrative cash offer for the same target.

According to reports from the Wall Street Journal, the DOJ's antitrust division is examining whether Netflix engaged in potentially anti-competitive conduct to facilitate the proposed merger. The investigation gained tangible momentum on Friday, February 6, when civil subpoenas were issued to several other major entertainment firms. Regulators are seeking to determine if Netflix leveraged its market position to disadvantage competitors ahead of the deal.

Central to the inquiry is the issue of market concentration. The transaction, valued at $82.7 billion or $27.75 per share, would significantly consolidate the streaming sector. Netflix's own internal assessment suggests approximately 80% of HBO Max subscribers already maintain a Netflix account—a substantial overlap that has raised concerns about reduced consumer choice.

A Rival Bid Reshapes the Battle

The competitive dynamics shifted dramatically with the entrance of a counter-bid. Paramount Global, through its Skydance media arm, has submitted an all-cash proposal worth $108 billion, or $30 per share. This offer exceeds Netflix's bid by a staggering $25 billion.

Paramount is actively urging the Justice Department to expedite its review, hoping for a resolution within weeks. Although the Warner Bros. Discovery board initially rejected Paramount's overture in favor of Netflix's agreement, the ongoing DOJ investigation introduces significant uncertainty that could alter the outcome.

Corporate Defense and Legislative Skepticism

In an effort to secure regulatory and political approval, Netflix Co-CEO Ted Sarandos appeared before a Senate subcommittee on February 3 to advocate for the merger. He argued that the combined entity would command only about 10% of total television viewing time, a share he characterized as far smaller than platforms like YouTube.

Lawmakers expressed reservations. A particular point of contention is Netflix's stated intention to enforce a 45-day theatrical window for Warner films, a period substantially shorter than the industry standard of over 100 days. Critics contend this strategy could undermine the traditional cinema distribution model.

Share Price Demonstrates Resilience

Despite the cloud of regulatory uncertainty, Netflix's equity showed strength in Friday's trading session. Shares closed between $81.43 and $82.20, recovering from a 52-week low of approximately $79.23 reached the previous day.

Recent financial performance has provided underlying support for the stock. For the fourth quarter of 2025, Netflix reported a 19.1% increase in revenue, reaching $12.14 billion. Earnings per share for the period came in at $0.56.

The company is scheduled to release its first-quarter results on April 21, 2026. Market analysts suggest the trajectory of the DOJ probe will likely be the primary driver of the stock's performance in the interim. A regulatory green light would allow Netflix to proceed with the acquisition, while a block would pave the way for Paramount's superior offer, delivering significantly greater value to Warner Bros. Discovery shareholders.

@ boerse-global.de | US64110L1061 REGULATORY