Netflix last week emerged victorious from the months-long bidding war for Warner Bros. Discovery, reaching a massive deal that would unite the two film and television giants and allow Netflix to take ownership of HBO Max, one of its biggest streaming rivals. But President Donald Trump and his Administration could kill the industry-redefining acquisition before it’s ever realized.
While media mergers often end up under the purview of the Federal Communications Commission, that isn’t the case with this deal, as neither Netflix or Warner Bros. owns any broadcast station. But the acquisition will still need the approval of regulators in the U.S. and Europe, and is expected to face an antitrust review by the Department of Justice.
Netflix co-CEO Ted Sarandos said Friday the company was “highly confident” the deal will get the green light. Trump, however, has indicated it may face a more difficult road, saying on Sunday that the deal “could be a problem” because of the market power it would give Netflix and that he will “be involved” in the review and approval process.
“They have a very big market share,” Trump told reporters as he walked the red carpet at the Kennedy Center, referring to Netflix. “When they have Warner Bros., that share goes up a lot.” He added that he would consult “some economists” before he gives the deal his support.
A senior official in the Administration told CNBC on Friday that it was looking at the deal with “heavy skepticism.”
The White House referred TIME to the President’s comments on Sunday when asked about his role in the oversight of the deal.
Under the Hart-Scott-Rodino Act that Congress passed in 1976, parties in large mergers must file a pre-merger notification to the Federal Trade Commission and the DOJ containing details of the transaction, and relevant information about the businesses and industries. A mandatory waiting period follows, during which the deal cannot close.
One of the two agencies, likely the DOJ in this case, then conducts a complete review of the submission for antitrust red flags. If any such issues are identified, the agency can then make a second request for more information, which would trigger an extended review process. During this process, the DOJ could, for example, request more documents from either company or conduct interviews with employees or experts under sworn testimony.
The DOJ can then choose to close the investigation and allow the deal to move forward unchallenged, sign a consent agreement in which both parties agree to provisions to restore industry competition, or move to stop the transaction entirely by filing a preliminary injunction in federal court.
The agency’s review process of a deal of this size “doesn’t happen fast,” Eleanor Fox, an expert in antitrust and competition policy, and a professor emerita at New York University Law School, says to TIME.
The DOJ’s interpretation of the market will determine the outcome of the case, which could go in one of two directions, Fox says. “An aggressive enforcer would look at a narrow market of streaming,” in which the merger would eliminate competition from other streaming providers, she says. But an administration more sympathetic to the deal, she continues, “would probably want to go with Warner Brothers’ proposal that the market is very, very large, and it includes cable and YouTube and Facebook and Tiktok.”
Within days of the deal announcement, Trump made clear he would handle it differently from his predecessors. Past presidents have seldom involved themselves in antitrust reviews involving mergers between companies. That’s in part because past Presidents normally separated themselves from decisions made by the Justice Department. Trump has made clear in his second term that the Justice Department answers to him.
Trump’s approach threatens to set “a terrible precedent,” says Diana Moss, former president of the American Antitrust Institute. “White House interference in antitrust cases, whether it’s mergers or monopolization cases or other cases, really threatens at the very core due process and the rule of law,” Moss tells TIME.
On Monday, Paramount, one of the companies Netflix beat out in the bidding war for Paramount, launched an all-cash hostile counter bid of $30 per share for the media company, upping Netflix’s bid of $27.75 per share. Warner Bros. board of directors has already approved its deal with Netflix, but Paramount’s offer launches the deal into the public sphere.
Paramount CEO David Ellison has made his friendship with Trump a selling point to Warner Brothers’ shareholders. “I’m incredibly grateful for the relationship that I have with the president,” Ellison told CNBC. “And I also believe he believes in competition. And when you fundamentally look at the marketplace, allowing the No. 1 streaming service to combine with the No. 3 streaming service is anticompetitive.”
Paramount Global and the film studio Skydance merged through a billion-dollar deal that was approved by the Administration in July and in which the President was also personally involved.
Yet the Trump Administration isn’t the only hurdle to clear for this deal. There’s also state regulators and those in Europe.
“There are states that are very feisty and many of them are ready to sue in the instance of a big antitrust problem,” Fox says, adding that merger filings will also be required on a state-level, in addition to those submitted to federal agencies.
She adds that Trump’s relationship with European countries, and the leverage he’s gained over them by imposing strict tariffs, could play a role in the future opposition from European regulatory bodies, to which both companies will also have to submit filings of the merger for review, given the impact it could have outside of the U.S.
Congress cannot block or approve mergers directly, but they can also exert great influence over such deals and carry out their own review processes. “Buckle up for an intense antitrust hearing in the Senate,” Republican Sen. Mike Lee of Utah, who is the chairman of the Senate Judiciary antitrust subcommittee, wrote in a post on Monday.
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