Netflix and Facebook Secret Deal: Lawsuit Alleges Anticompetitive Agreement

Case Overview: A class action lawsuit claims Netflix and Facebook engaged in an anticompetitive agreement to raise prices, share data, and limit consumer choice in the video streaming market.

Consumers Affected: Consumers who paid for Netflix video streaming services since August 9, 2017.

Court: U.S. District Court for the Northern District of Illinois, Eastern Division

Netflix and Facebook forged a secret agreement to divide markets, inflating prices for Netflix subscribers and limiting consumer choices in video streaming, a new lawsuit alleges. At the same time and as part of the agreement, consumers’ data was shared from Netflix to Facebook to benefit the social media giant's advertising revenue, the lawsuit claims.

The lawsuit alleges the arrangement violated antitrust laws, harming competition while benefiting both companies financially.

Netflix and Facebook Made Secret Deal, Lawsuit Claims

The alleged agreement dates back to 2017 when Facebook launched its streaming platform, Watch, directly competing with Netflix’s video-streaming dominance. With a user base exceeding 2 billion, analysts predicted Watch could generate billions in revenue, challenging Netflix’s position, the lawsuit claims. 

However, Netflix CEO Reed Hastings, who also served on Facebook’s board, and Facebook CEO Mark Zuckerberg reportedly held discussions about the competitive threat.

These talks allegedly led to a quid pro quo arrangement: Facebook would step back from aggressively competing in the streaming market, defunding and sidelining Watch. In return, Netflix would increase its advertising spend on Facebook, with annual payments rising from $40 million to up to $200 million, and continue funneling its user data to Facebook.

Netflix also allegedly agreed to reduce advertising on Facebook’s competitors, such as Snapchat, further consolidating Facebook’s dominance in targeted advertising. Meanwhile, Netflix raised subscription fees shortly after the deal was solidified, marking its largest price hike to date, with increases of up to 18%.

Consumers Lost, Facebook Gained in Data-Sharing Agreement, Lawsuit Says

Illinois residents John Luis Bracamontes and Ronald Williams, who filed the proposed class action lawsuit, argue that consumers were the biggest losers in this arrangement. They claim the deal reduced competition, leaving viewers with fewer options and enabling Netflix to charge higher subscription fees.

The complaint also highlights Facebook’s significant gains from Netflix’s user data. This data, crucial for Facebook’s advertising algorithms, reportedly became even more valuable after Facebook limited third-party apps’ access to its platform. By leveraging Netflix’s insights into consumer preferences, Facebook enhanced its targeted advertising, solidifying its dominance in the ad market, the lawsuit claims.

Antitrust Concerns Grow in Tech and Entertainment Industries

​​The lawsuit against Netflix and Facebook adds to a growing wave of antitrust cases in the tech and entertainment industries. Visa is currently under fire for allegedly stifling competition and overcharging businesses through its payment processing fees. Valve Corporation, known for its Steam gaming platform, faces accusations of inflating game prices by restricting publishers from offering discounts on rival platforms.

Apple is also embroiled in a class action lawsuit over alleged anti-competitive practices in its App Store, which plaintiffs claim led to inflated app prices. Meanwhile, Disney must contend with allegations that it forced other streaming providers to bundle its ESPN channel in costly subscription packages, limiting cheaper alternatives.

Facebook itself is no stranger to such allegations. The company has faced legal challenges for allegedly receiving consumer data without proper consent. Paramount and Zumba Fitness have been sued for similar violations of the Video Privacy Protection Act, accused of sharing user viewing histories with platforms like Facebook and TikTok.

In the Netflix and Facebook class action lawsuit, the plaintiffs seek to represent a class of consumers nationwide who paid for Netflix video streaming services at any time between August 9, 2017 and the present. They are suing for violations of the Sherman Act and are seeking damages, injunctive relief, fees, costs, and interest. 

Case Details

• Lawsuit: Bracamontes et al v. Meta Platforms, Inc. et al.
• Case Number: 1:24-cv-11839
• Court: U.S. District Court for the Northern District of Illinois, Eastern Division

Plaintiffs' Attorneys

• Kenneth A. Wexler, Justin N. Boley, Tyler Story, Zoran Tasić, and Margaret Shadid (Wexler Boley & Elgersma LLP)
• Kevin Landau and Archana Tamoshunas (Taus, Cebulash & Landau, LLP)
• Daniel C. Hedlund, Michelle J. Looby, and Bailey Twyman-Metzger (Gustafson Gluek, PLLC)

Are you a Netflix subscriber? What are your thoughts on this lawsuit? Share your opinion in the comments below.