Netflix's $83B Deal Faces Antitrust Scrutiny as Paramount's Bid Intensifies

The immediate threat to the Netflix-WBD deal has shifted from political rhetoric to a formal antitrust investigation. The Justice Department has launched a broad-based probe based on Section 2 of the Sherman Act, questioning whether Netflix operates as a monopoly with significant pricing power in a "relevant market." This is not a standard merger review; it's a separate, sweeping investigation into Netflix's core business operations that could fundamentally challenge the deal's viability.

The mechanics of this probe create a direct and prolonged risk. Because it is a standalone Section 2 investigation, it is not bound by the typical merger review timeline. As one source noted, the antitrust review process often takes as long as a year, and this probe could delay the deal for over a year. The DOJ's subpoena, which questions exclusionary conduct, signals a deep dive into Netflix's market power that goes beyond the specific WBD acquisition. This creates a legal overhang that could force Netflix to make concessions or face a regulatory challenge that undermines the deal's economics.

Crucially, the political wildcard has been removed. President Trump has deflected to career regulators, stepping back from his earlier suggestion of personal involvement. This removes a potential wildcard but also signals that the DOJ's career antitrust division is now fully in charge. The probe is now a pure regulatory event, with no immediate political pressure to expedite or block it. The bottom line is that the deal now faces a longer, more uncertain path through a regulatory minefield.

Paramount's Counter-Strategy: Framing Netflix as a Monopolist

Paramount is turning the regulatory tide against Netflix. While the DOJ probe casts a shadow over the $83 billion deal, CEO David Ellison is actively weaponizing the antitrust narrative in a direct counter-offensive. In a late-night open letter to the UK creative community, Ellison explicitly accused Netflix of creating a "monopolistic or dominant entity" if it acquires Warner Bros. Discovery's studios. This is a strategic pivot: Paramount is no longer just bidding for assets, but positioning itself as the champion of competition.

The plan is to offer a tangible alternative. Ellison laid out a five-point commitment, including a pledge to release more than 30 cinema films a year and maintain a minimum theatrical window of 45 days. These specifics are designed to appeal to the very creative communities Netflix is accused of marginalizing. By framing its own hostile bid as a way to "strengthen competition by creating a more capable and effective rival" to Netflix, Paramount is trying to reframe the debate. The message is clear: choose a deal that preserves choice and theatrical exhibition, not one that consolidates power.

Financial flexibility is a key vulnerability in any hostile bid, and Paramount has addressed it head-on. Larry Ellison, the Oracle co-founder, has provided a personal guarantee worth more than $40 billion. This backstop is meant to directly counter Warner Bros. Discovery's criticism that Paramount's offer lacks certainty. It signals deep-pocketed resolve and aims to neutralize a major argument against the bid's feasibility.

The bottom line is a coordinated attack. Ellison is using his charm offensive in the UK and Europe to build political and industry support, while simultaneously offering a regulatory-friendly alternative to Netflix's deal. If the antitrust probe intensifies, Paramount's narrative-that its combination would create a true competitor-could gain significant traction with regulators and shareholders alike.

Valuation and Risk: The Deal's Fragility

The regulatory overhang has transformed the valuation calculus for both deals. Warner Bros. Discovery's board remains firmly committed to the Netflix path, rejecting Paramount's $108.4bn hostile takeover bid as "inadequate" and highlighting the "significant" risks and costs of a potential failure. Yet the DOJ's probe gives Paramount a powerful new argument that the Netflix deal itself reduces competition, potentially swaying regulators who are already skeptical of Netflix's market clout.

This creates a multi-jurisdictional battle where the DOJ's Section 2 investigation adds a major US hurdle. While Paramount's bid for the entire WBD conglomerate faces its own regulatory scrutiny, its narrative is now aligned with the antitrust concerns raised by the DOJ. CEO David Ellison is explicitly framing a Netflix-WBD combination as a "monopolistic or dominant entity" that would stifle competition, a direct counter to Netflix's own defense. The probe's focus on Netflix's core business operations, not just the WBD acquisition, means Paramount can argue that even a partial deal would entrench Netflix's power.

The financial terms are also under pressure. WBD's board noted that accepting Paramount's offer would incur $4.7bn in costs, including a breakup fee to Netflix and additional debt interest. This high price of failure underscores the fragility of the situation. The deal's fate now hinges on a prolonged regulatory fight where the DOJ's probe could force Netflix to make concessions or face a challenge that undermines the deal's economics. For now, the board's recommendation holds, but the regulatory clock is ticking.

Catalysts and Watchpoints

The path forward hinges on a series of near-term events that will test the deal's survival. The immediate focus is on the DOJ's antitrust probe, which has already begun. The department's broad-based investigation into Netflix's monopoly power is a direct threat. Watch for any early signals of regulatory hostility, such as follow-up subpoenas or public statements from antitrust officials. The probe's mechanics are critical: because it is a standalone Section 2 investigation, it is not bound by the typical merger review timeline and could drag on for over a year. This creates a prolonged legal overhang that could force Netflix to make concessions or face a challenge that undermines the deal's economics.

Simultaneously, regulatory decisions in the UK and EU are becoming key battlegrounds. Paramount is actively lobbying these markets, framing its hostile bid as a way to "strengthen competition" against a "dominant platform." CEO David Ellison has been meeting with UK lawmakers and the Culture Secretary as part of a charm offensive. The UK's regulatory stance is particularly important, as Netflix has stated it is "highly confident" the deal is "pro-consumer" and will clear UK authorities. Any shift in sentiment there, driven by Paramount's narrative, would be a major red flag for the Netflix deal's viability.

Finally, shareholder votes remain a critical checkpoint. While WBD's board has unanimously rejected Paramount's offer as "inadequate," the regulatory uncertainty could influence the vote. The board has highlighted the "significant" risks and costs of a potential failure, including a $2.8bn breakup fee to Netflix and additional debt interest. If the DOJ probe intensifies or Paramount secures positive regulatory signals in Europe, it could pressure shareholders to reconsider. The vote will be a direct referendum on whether the board's confidence in the Netflix path outweighs the mounting regulatory and financial risks.