Introduction
The proposed acquisition of Warner Bros. Discovery by Netflix would combine the world’s largest subscription-based streaming platform with a major producer of film and television content. The transaction has attracted significant public and regulatory attention amid broader debates about consolidation and vertical integration in media markets.
Under U.S. antitrust law, however, the inquiry is narrower. Section 7 of the Clayton Act asks whether a merger is likely, on a forward-looking and probabilistic basis, to substantially lessen competition in ways that harm consumers. The consumer welfare standard operationalizes that inquiry by focusing on effects such as higher prices, reduced output, diminished quality, or weakened innovation. Under this framework, firm size, market concentration, and vertical integration are not unlawful in themselves; they matter only insofar as they support coherent, evidence-based theories of competitive harm grounded in consumer effects under Section 7.
This blog post applies the consumer welfare standard to the proposed Netflix–Warner Bros. transaction. More specifically, it examines which theories of competitive harm are analytically coherent, the evidentiary showings required to support them, and how U.S. antitrust law disciplines inference when assessing competitive effects in complex and evolving markets.
Market Structure and Competitive Constraints
Assessing the competitive effects of the proposed transaction requires situating it within the structure of the markets in which the parties operate. Market structure is not dispositive under U.S. antitrust law, but it plays an important analytical role: it helps organize inquiry into competitive constraints, where those constraints may weaken, and which theories of harm are plausibly coherent. If formal market definition becomes necessary, it should be informed by—rather than fixed in advance of—evidence on substitution patterns and competitive responses.
On the downstream side, Netflix operates in markets for subscription-based video streaming services where consumers typically face multiple alternatives. To the extent that viewers subscribe to more than one service and respond to changes in price, content availability, or quality by switching between streaming services, competitive constraints may limit the ability of any single platform to exercise market power to the detriment of consumers. At the same time, differentiation—driven by exclusive content, branding, and user experience—may affect switching behavior and therefore bears directly on the assessment of downstream competitive effects. Which of these dynamics predominates is an empirical question, not a presumption that necessarily follows from scale.
Upstream, Warner Bros. Discovery is a major producer of film and television content, supplying programming to both affiliated distribution channels and third-party platforms. In this context, the relevant inquiry is not whether the proposed merger would alter bargaining leverage of the merged entity in the abstract, but whether any such change would plausibly translate into reduced output, lower quality, or diminished investment in content creation. That assessment depends on the availability of alternative buyers and distribution channels, the durability of contractual relationships, and the extent to which creators retain credible outside options.
The transaction also implicates vertical relationships between content production and distribution. Vertical integration can alter incentives with respect to licensing decisions, release strategies, and access to audiences, potentially affecting rival platforms’ ability to compete. Those incentives, however, are constrained by the economic value of broad distribution, consumer substitution across platforms, and competitive responses from other vertically integrated media firms. Understanding how these constraints operate is essential to evaluating whether foreclosure or self-preferencing strategies would be profitable and, ultimately, harmful to consumers.
Taken together, these structural features do not establish competitive harm on their own. Rather, they frame the analysis by identifying the circumstances in which evidence would need to show that the transaction is likely to weaken competitive constraints in ways that matter under the consumer welfare standard.
Theories of Competitive Harm under the Consumer Welfare Standard
With market structure in view, the analysis proceeds to examine theories of competitive harm where they are most likely to arise: first in downstream consumer markets, then in upstream content markets, and finally through potential foreclosure or self-preferencing.
The most direct theory of harm concerns downstream effects on consumers of streaming services. Under the consumer welfare standard, the relevant question is whether the merger would plausibly weaken competitive constraints—including consumer substitution and rival platform responses—in ways likely to result in higher prices, reduced output, diminished perceived quality, or a narrowing of choice.
That assessment turns on the degree of substitution among streaming platforms. Where consumers treat services as reasonable alternatives and respond to changes in price or quality by switching between platforms, competitive pressure may limit the ability of any single service to exercise market power. In contrast, where substitution is weaker—due to exclusive content, strong brand attachment, or differentiated user experience—those constraints may operate less effectively. Which dynamic predominates is an empirical question, not a presumption that follows from scale or integration.
A second theory of harm concerns upstream buyer power in markets for film and television content. Increased bargaining leverage does not itself establish anticompetitive harm. The relevant inquiry is whether any shift in bargaining dynamics would plausibly translate into reduced content creation, lower quality, or diminished investment.
Where creators retain credible outside options—such as other platforms or distributors—changes in surplus division may not affect consumers in meaningful ways. By contrast, where alternatives are limited, increased buyer power could constrain output or narrow creative choices. Distinguishing between these possibilities is ultimately a matter of evidence rather than assumption.
Vertical foreclosure and self-preferencing raise additional concerns, but U.S. antitrust law applies a demanding test. A viable foreclosure theory must establish not only technical feasibility, but also economic incentive and a likelihood of consumer harm. Withholding or degrading access to content can entail significant opportunity costs, including lost licensing revenue and reduced audience reach. Absent evidence that such strategies would be profitable, durable, and likely to harm consumers through reduced rivalry, vertical integration alone does not satisfy the consumer welfare standard.
Merger Efficiencies and Competitive Effects
After identifying the principal theories of competitive harm, the consumer welfare standard requires consideration of whether any merger-specific efficiencies plausibly interact with those risks. Efficiencies matter under this framework not as independent justifications for consolidation, but only insofar as they affect the likelihood or magnitude of identified harms—either by mitigating competitive risks or by strengthening consumer-facing dimensions of competition. Efficiencies that are unrelated to the mechanisms of harm, or that operate purely within the firm, do not alter the competitive assessment.
In the context of a predominantly vertical transaction such as Netflix–Warner Bros., the efficiencies invoked by the parties relate to coordination between content production and distribution, as well as financing and risk-sharing across a portfolio of projects. According to Netflix and Warner Bros. Discovery, vertical integration may reduce transaction costs, streamline commissioning and release decisions, and support more stable investment over time. Under the consumer welfare standard, however, such efficiencies cannot be assumed or asserted in the abstract: they must be supported by evidence, grounded in identifiable mechanisms, and shown to bear on the specific competitive risks previously identified in ways that consumers would plausibly experience.
Remedies under the Consumer Welfare Standard
Where efficiencies do not fully mitigate the competitive risks identified, the consumer welfare framework then turns to the question of how those risks can be addressed through remedies. Crucially, enforcement under U.S. antitrust law is not binary. In predominantly vertical transactions, competitive concerns arise not from the elimination of a direct rival but from potential changes in access, incentives, or conduct along the value chain. In that setting, structural remedies such as divestitures or line-of-business separations are uncommon absent a clearly defined horizontal overlap. By contrast, behavioral remedies may be considered where evidence supports discrete foreclosure or self-preferencing risks that would plausibly weaken competition to the detriment of consumers. Calibration is therefore critical: remedies should be proportional to the likelihood and magnitude of the harm, targeted to the identified mechanism, and no broader than necessary to preserve competitive constraints.
Conclusion
Applying the consumer welfare standard to the Netflix–Warner Bros. transaction demands disciplined focus on mechanisms, incentives, and evidence—rather than reliance on structural intuition alone. U.S. antitrust law asks whether the transaction is likely to weaken competitive constraints in ways that harm consumers through higher prices, reduced output, diminished quality, or impaired innovation.
That inquiry turns on empirical analysis of substitution patterns, bargaining dynamics, and investment incentives, as well as on whether identified competitive risks are durable and material. Where those risks can be precisely articulated and supported by evidence, U.S. antitrust law permits proportionate enforcement responses, ranging from targeted remedies to prohibition where no narrower or effective remedy would adequately prevent durable competitive harm. Absent such showings, uncertainty alone is insufficient to justify adverse enforcement action. Maintaining this distinction is essential to principled and predictable merger review.