Netflix is facing its first class-action lawsuit after the world’s leading streaming service announced it would buy Warner Bros. Discovery’s studio and streaming businesses in a blockbuster deal that’s expected to be aggressively challenged on antitrust grounds.
The lawsuit, led by Las Vegas resident and HBO Max subscriber Michelle Fendelander, alleges that the pending Netflix-Warner Bros. deal poses “irreparable antitrust injury” to American consumers by reducing competition in the subscription video-on-demand market.
“Netflix has demonstrated repeated willingness to raise subscription prices even while facing competition from full-scale rivals such as WBD,” the 56-page complaint says. “With WBD removed as an independent competitor, Netflix would face less pressure to maintain affordable pricing or high-quality content.”
The suit was filed Monday in California federal court, but it was not widely publicized until Tuesday.
Netflix called the lawsuit “meritless” and said it is “merely an attempt by the plaintiffs’ bar to leverage all the attention on the deal,” according to Reuters.
In the court document, Fendelander’s lawyers cited Disney’s acquisition of Hulu as an argument against Netflix’s consolidation with WBD’s HBO Max.
“A previous merger in the same market — between Disney and Hulu, leading to the ongoing consolidation of the Disney+ and Hulu services — has coincided with sharply rising SVOD prices marketwide and has not been offset by new competitive entry,” they argued. “This even-larger horizontal SVOD merger, taking place in an even more concentrated U.S. SVOD Market, can be expected to cause even more significant price inflation and related competitive harms to U.S. SVOD consumers.”
The plaintiffs’ attorneys further alleged that the deal, if approved, would harm advertisers.
“Advertisers seeking reach in professionally produced long-form content would face fewer alternatives, enabling Netflix to raise prices or impose unfavorable terms,” they said. “This concentration can also reduce incentives to innovate in ad-targeting, measurement, and viewer experience—further harming advertisers and consumers.”
The lawsuit does not list WBD as a defendant.
TRUMP SAYS NETFLIX-WARNER BROS. MERGER ‘COULD BE A PROBLEM’
On Friday, Netflix announced it was moving to acquire Warner Bros. for a total enterprise value of $82.7 billion. The announcement sparked intense bipartisan backlash from lawmakers, who argued that the case is a classic antitrust violation. The Trump administration, specifically the Department of Justice’s antitrust chief Gail Slater, is expected to halt the proposed merger’s regulatory approval process.
Although the Warner Bros. board went with Netflix’s cash-and-stock bid for its studio and streaming assets, Paramount Skydance submitted a hostile bid on Monday in an effort to appeal directly to Warner Bros. shareholders. Paramount is looking to buy the entire entertainment company, including its cable businesses, with an all-cash tender offer that surpasses Netflix’s bid by more than $25 billion.