The Justice Department has opened a sweeping Section 2 probe into Netflix Inc. as part of its review of the company's proposed $72 billion takeover of Warner Bros. Discovery Inc.
The move dramatically expanded the scope of scrutiny and signaled that the streaming giant could face antitrust exposure even if the blockbuster merger ultimately collapses.
According to a civil investigative demand reviewed by Bloomberg News and sent Friday to an independent movie studio, the DOJ is examining whether the deal "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 inclusion of Section 2 — the core federal monopolization statute — is highly unusual in a merger review and suggests the Trump administration is probing not only the transaction itself but also Netflix's broader business practices.
A separate DOJ source told Newsmax that Netflix has already been notified that a Section 2 probe of its business activities is underway. The source said the probe is underway as part of, and parallel to, the department's review of its merger plan with Warner Bros. Discovery.
The administrative subpoena, which has not previously been reported, is the clearest indication yet that federal enforcers are going beyond a routine merger analysis.
Deal reviews are typically conducted under Section 7 of the Clayton Act, which governs mergers and acquisitions.
By invoking Section 2 of the Sherman Act, the Justice Department is signaling it is also evaluating whether Netflix wields — or could wield — monopoly power independently of the merger.
That distinction is critical.
A Clayton Act challenge would hinge on whether the Warner deal substantially lessens competition.
A Section 2 case, by contrast, can target monopolization or attempts to monopolize by a single company, even absent a completed merger.
In other words, the probe is tantamount to a separate investigation into Netflix itself — one that could result in enforcement action regardless of whether the Warner transaction survives.
The DOJ is asking questions about Netflix's ability to leverage its market power in negotiations with independent content creators, including movie studios and filmmakers, according to people familiar with the matter.
Investigators are examining whether the streaming giant wields anticompetitive leverage over creators in acquiring programming — an area of increasing concern as Netflix's dominance in streaming has grown.
Netflix operates the largest paid video streaming service in the world and is one of the biggest buyers of film and television programming globally.
The company plans to spend about $20 billion on programming this year, split between original series and licensed content.
Many of its most popular original programs, including "Wednesday" and "Nobody Wants This," are produced by third-party studios.
In acquiring HBO and Warner Bros., Netflix would not only absorb one of Hollywood's most storied studios but also eliminate a major streaming rival.
The combination would unite the largest streaming platform with one of the deepest film and television libraries in the industry — a scale that critics argue could reshape negotiations with creative talent and independent producers.
Last December, the New York Post's Charlie Gasparino first reported on a DOJ probe of Netflix's inherent monopolization problems.
Later, The Wall Street Journal reported that the DOJ's review includes scrutiny of Netflix's business practices and whether the merger would grant the company monopoly power in the future.
Bloomberg's reporting confirms that investigators are examining both the transaction and Netflix's stand-alone conduct.
"Netflix operates in an extremely competitive market. Any claim that it is a monopolist, or seeking to monopolize, is unfounded," Netflix Chief Legal Officer David Hyman said in a statement.
"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."
Steve Sunshine, head of Skadden, Arps, Slate, Meagher & Flom LLP's global antitrust and competition group representing Netflix, denied claims of the DOJ probe.
"We have not been given any notice or seen any other sign that the DOJ is conducting a monopolization investigation," he said.
The Justice Department declined to comment on the matter. Warner Bros. Discovery also declined to comment.
Monopolization cases typically require proof that a company controls more than 50% of a relevant market — a threshold Netflix may not meet.
If the merger were approved, estimates suggest Netflix could control as much as 42% of the subscription video streaming business in the U.S.
But antitrust experts tell Newsmax that Netflix's market dominance in the paid streaming business with its ability to control content creation poses a unique competition risk to the marketplace.
By spending $20 billion annually and serving as a primary distribution outlet for film and television content worldwide, Netflix occupies a pivotal role in the entertainment ecosystem.
The breadth of the DOJ's inquiry strongly suggests the review could stretch for many more months, delaying any decision on whether to challenge the merger in court.
That timeline may benefit rival bidder Paramount Skydance Corp., which has argued that Netflix's offer is unlikely to clear regulatory hurdles in the U.S. or Europe.
On Friday, Paramount said its own deal faces "no statutory impediment" after clearing the DOJ's second-request review process, though it still faces an ongoing review in the European Union and potential challenges from U.S. state attorneys general.
Warner Bros. last week committed to resume talks with Paramount after a representative signaled willingness to raise its offer price by $1 per share to $31.
Warner Bros. has set a Feb. 23 deadline for Paramount to submit its "best and final" bid.
Paramount, which launched a hostile $77.9 billion tender offer for Warner Bros. last year, has repeatedly claimed that Netflix's proposal will never pass antitrust scrutiny.
President Trump has publicly warned that the Netflix-Warner Bros. deal may pose an antitrust "problem," adding political weight to the regulatory review.
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