After months of tunnel vision on a potential merger with Netflix, Warner Brothers Discovery finally announced last week that it will consider an updated offer from Paramount. Paramount provided that offer yesterday – the highest so far – and Netflix now has a chance to match it.

The announcement signals a major change of heart at Warner Brothers, which previously rejected several Paramount bids, each sweeter than the last, despite mounting concerns that its path forward with Netflix was fraught with regulatory uncertainty. What a difference a federal antitrust inquiry makes.

This month the U.S. Department of Justice launched an investigation into Netflix’s plan to acquire Warner Brothers. Unlike most antitrust reviews that focus narrowly on Section 7 of the Clayton Act, which weighs whether a merger would reduce competition, the DOJ cast a wider net to include Section 2 of the Sherman Act, which prohibits efforts to monopolize an industry.

The expanded scope suggests regulators are leery of the Netflix-Warner Brothers merger—not only that it could reduce consumer options, but also that Netflix already is perceived as a monopoly by regulators, and the acquisition would give it even more power to elbow out competitors. Executives of both companies seem to read the writing on the wall.

Warner Brothers’ CEO said that the company will consider whether Paramount’s offer can provide “superior value and certainty,” a nod to the fact that a Paramount-Warner Brothers merger likely faces a clearer road to approval. Netflix’s waiver to allow Warner Brothers to entertain the competing offer indicates it may be just as eager to rid itself of the regulatory scrutiny.

If history is any indication, this course change is the right move for all parties involved.

As the Wall Street Journal reported recently, Netflix’s proposed acquisition harkens back to Visa’s ill-fated attempt to buy the nascent fintech company, Plaid. The DOJ during Trump’s first term sued to stop the deal, citing Visa’s statements that the acquisition was an “insurance policy” to neutralize a threat to its business.

The similarities between Visa-Plaid and Netflix-Warner Brothers paints a cautionary lesson:

1. Dominant Market Power Posed Grow Larger: In the Visa-Plaid merger, the DOJ found that Visa controlled a “decisive market position” that it sought to “unlawfully extend” by buying Plaid. Netflix is in an eerily similar spot.

   With over 325 million subscribers, Netflix is already the largest subscription video provider, nearly two and half times bigger than the closest “pure” streamer, Disney+. The addition of Warner Brothers’ (HBO Max) 128 million users would cement it firmly at the top. Estimates project the merger would establish Netflix with nearly 60 percent of the streaming market, 15 points higher than the next five stand-alone streaming platforms combined.

2. Increased Pricing Power: The DOJ warned that Visa’s merger would eliminate competition that could help reduce prices. Netflix has already demonstrated its ability to hike rates—it has more than doubled the costs of its standard and premium plans since 2014—and with fewer competitors, it would have even greater latitude to take up prices further.

3. Higher Barriers to Entry: In the credit and debit card industry, the DOJ found the barriers to entry in the fintech market were so high that even well-funded, well-recognized companies struggled to break in.

   The video streaming space is no different. Most services continue to struggle to break even, and many could have to consider combining forces to keep up with an even bigger Netflix—initiating even more consolidation in the market. Smaller platforms and start-ups would be all but fenced out.

4. A Strangle-Hold on the Industry: In the Visa case, the DOJ noted that the company used its contracts and licensing agreements hamstring smaller companies.

   Netflix already commands huge influence over the entertainment industry, largely dictating terms up and down the ecosystem—from creatives to theaters. As Senator Mike Lee (R-UT), chairman of the subcommittee that oversees antitrust issues, noted, Netflix’s ownership of Warner Brothers would give it more leverage, limiting rivals’ ability to secure content needed to attract and retain viewers.

5. Potential Bad-Faith Negotiations: Lawmakers and experts have speculated that Netflix’s offer could be a ploy to tie up its competitor and steal its IP while continuing to amass more users—with the expectation the sale will get blocked. The DOJ raised a similar concern in Visa’s case, noting the company’s executives used the veil of due diligence to gain material information on its competitor.

Senator Lee raised that the merge could be a “killer non-acquisition”—a ruse to weaken its competitor, keep other interested buyers at bay, and steal sensitive information.

Since announcing their agreement in December, Netflix and Warner Brothers proceeded as though regulatory approval were a slam-dunk. The Department of Justice’s antitrust review seems to have brought reality into clearer view. That wake-up call may cause a course correction that produces a better outcome for everyone involved, not the least of which is consumers.

It seems that the Warner Brothers Discovery Board may have recognized that a merger with Netflix will never pass antitrust scrutiny, leading only to a long period of stasis while awaiting a near-certain rejection.

Disclaimer: The opinions and views expressed in this article are those of the author and not necessarily those of The National Law Review.