Antitrust Lawsuit Alleges Netflix, Facebook Illegally Agreed Not to Compete in Video-Streaming Market

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Meta Platforms (formerly Facebook) and Netflix face a proposed class action lawsuit that claims the companies violated federal antitrust law by agreeing not to compete in the market for video-streaming services—a conspiracy that allegedly allowed Netflix to raise its subscription costs.

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Per the 28-page lawsuit, Netflix was presented with a serious competitive threat in August 2017 when Facebook launched its own video-on-demand platform, Facebook Watch. This threat, however, never fully materialized, the case says. Despite the initial success and growing momentum of Facebook Watch, Meta CEO Mark Zuckerberg had cut the majority of its funding, canceled most of its programming and reduced advertising for the platform by early 2019, the filing shares.

According to the suit, these seemingly inexplicable decisions stemmed from a quid pro quo agreement between Zuckerberg and Netflix CEO Reed Hastings, who had been a member of Facebook’s board of directors since 2011. As part of the arrangement, Facebook would yield the video-streaming market to Netflix by defunding Facebook Watch, the case says. In return, the complaint alleges, Netflix agreed to share valuable subscriber data with Facebook and invest hundreds of millions of dollars in targeted advertising on the social media platform—a “financial windfall” for Facebook’s advertising business.

“In other words, the two defendants agreed to not compete by allocating markets to one another – video streaming to Netflix and data to Facebook,” the antitrust lawsuit contends.

The complaint stresses that the companies’ alleged anticompetitive agreement has harmed consumers by limiting their options for streaming services and forcing Netflix subscribers to pay more than they would have in a more competitive market, the suit says. In fact, the filing shares, Netflix raised subscription prices in January 2019, shortly after the agreement was cemented.

“This was the first time that Netflix raised prices for all Netflix subscriptions,” the case states. “At the time, the fee hikes were the biggest in Netflix’s history, ranging from 12.5 to 18% depending on the type of subscription.”

The lawsuit looks to represent anyone in the United States who paid for Netflix’s video-streaming services at any time since August 9, 2017.

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