A lawsuit seeking class action status has been filed against Meta, alleging that the tech giant dismantled its now-defunct Facebook Watch streaming video service to intentionally clear the way for Netflix, as part of an alleged scheme to reap the benefits of today’s evolving digital landscape.
The antitrust lawsuit, submitted in the U.S. District Court for the Northern District of Illinois by two residents who are also Netflix subscribers, argues that recent revelations from prior court documents expose a collusion agreement between Meta and Netflix. This arrangement reportedly took place shortly after Facebook launched its own video-streaming platform, Watch, which closely mirrored Netflix’s offerings, providing audiences with a range of TV-like shows that defined Netflix’s success.
According to the suit, Netflix CEO Reed Hastings, who was serving on Facebook’s board of directors at that time, engaged in conversations with Facebook (now Meta) CEO Mark Zuckerberg. These discussions allegedly culminated in an agreement to stifle competition in the video-streaming arena, allowing Facebook to pull back on its Watch platform capabilities. In return, Netflix would continuously relay valuable customer data and advertising expenditures to Facebook, data which was utilized to enhance Facebook’s already profitable targeted-advertising systems.
The suit contends that the reportedly “anticompetitive agreement” between the two tech giants curtailed the range of consumer choices available in video-streaming services. This arrangement inadvertently led to rising costs for consumers, as Netflix seized the opportunity to raise subscription prices more than it would have otherwise, had Facebook not ceded the streaming market to them.
According to the plaintiffs, “Shortly after Facebook and Netflix cemented their agreement, Netflix for the first time raised prices for all Netflix subscriptions.” The lawsuit is seeking a jury trial on behalf of all Netflix subscribers who joined after August 7, 2017.
Netflix has chosen not to comment on the allegations at this time. Meta has yet to provide a response to the request for comments regarding this matter.
Facebook Watch launched in 2017 with ambitions to acquire the rights to popular TV series episodes, including beloved titles such as Buffy the Vampire Slayer, Angel, and Firefly. The lawsuit also emphasizes that House of Cards, a significant series for Netflix, and Scandal were among the premium shows that Facebook sought to bring to its platform.
However, in May 2018, Zuckerberg reportedly slashed nearly $1 billion from Watch’s budget for original content and sports for the upcoming year. By early 2019, Facebook announced it would not renew the majority of the 21 news shows it had recently premiered as part of Watch Originals, signaling a retreat from its original content ambitions. By early 2020, Facebook declared it would discontinue most of its original programming initiatives.
The suit highlights that Zuckerberg had characterized Watch’s purpose as merely a marketing tool for Facebook. However, it notes that Facebook has not provided a convincing or coherent justification for the platform’s rapid decline and eventual shutdown.
According to the plaintiffs, the underlying reason for this collapse was a “quid pro quo” arrangement between Facebook and Netflix, which paved the way for the former to withdraw from being a serious competitor in the video-streaming market.
The followers of the suit assert that in exchange for Facebook stepping back from the competitive landscape of video streaming, Netflix would continue to feed valuable subscriber data into Facebook while also making significant advertising investments on the platform—amounting to hundreds of millions of dollars annually.
The lawsuit claims that Facebook disclosed subscriber information regarding the videos users recommended to their contacts, an element of data that proved vital for targeted advertising strategies. Netflix allegedly paid Facebook roughly $40 million annually for advertising placements related to its series and films prior to the introduction of Watch, a figure that reportedly skyrocketed to between $150 million and $200 million annually following Facebook’s decision to reduce Watch’s competitive threat.
According to the suit, Facebook and Netflix entered into a collaborative agreement aimed at establishing a dynamic advertising model that would specially target users with Netflix content. This strategy promised to fulfill Facebook’s needs for compelling advertising while diverting its focus away from promoting its own Watch platform.
This action highlights a significant departure in that instead of fostering its product, Facebook was fully committed to promoting Netflix’s streaming offerings, thereby allowing user data to enhance and refine its advertising algorithms.
How might this lawsuit influence future antitrust cases against major tech companies?
**Interview with Legal Expert Jane Doe on the Recent Class Action Suit Against Meta**
**Editor:** Thank you for joining us today, Jane. Let’s dive right into the lawsuit against Meta. What are the main allegations being presented by the plaintiffs?
**Jane Doe:** Thank you for having me. The plaintiffs allege that Meta intentionally dismantled its Facebook Watch streaming service to pave the way for Netflix, creating what they are calling an “anticompetitive agreement.” This involves conversations between top executives from both companies that supposedly led to Facebook retracting its investment in its own video service in exchange for Netflix providing valuable customer data to enhance Facebook’s advertising systems.
**Editor:** Interesting. It seems this lawsuit claims that the agreement limited consumer choices in the video-streaming market. How does that impact consumers directly?
**Jane Doe:** The lawsuit argues that as a result of this agreement, Netflix was able to raise its subscription prices without facing the usual competitive pressures. The plaintiffs maintain that had Facebook continued to invest in its streaming service, consumers would have seen more options and potentially lower prices. So the central claim is that this collusion led to higher costs for consumers who subscribed to Netflix after August 2017.
**Editor:** What does the legal landscape look like for this type of case? Does it stand a chance in court?
**Jane Doe:** Class action suits, especially those focused on antitrust issues, can be quite complex. The plaintiffs need to demonstrate clear evidence of collusion and its impact on competition. If they can prove that the conversations between Mark Zuckerberg and Reed Hastings amounted to an illegal agreement to stifle competition, they may have a solid case. However, Meta and Netflix will likely challenge these claims vigorously, arguing that the market dynamics and consumer preferences could explain these developments without necessarily implying wrongdoing.
**Editor:** Meta has yet to respond to these allegations publicly. What could be the potential implications if the court finds against them?
**Jane Doe:** If the court rules in favor of the plaintiffs, it could lead to significant financial repercussions for Meta, including damages and potentially stricter scrutiny of their business practices. This might also inspire a broader trend of lawsuits against tech giants over similar allegations, potentially reshaping how these companies operate in the digital landscape.
**Editor:** what should consumers take away from this lawsuit?
**Jane Doe:** Consumers should be aware of how corporate strategies can affect their choices and costs. This case highlights the importance of competitive markets and raises questions about the influence of major tech companies on consumer options. Ultimately, it’s a reminder to remain vigilant about how these platforms evolve and how they might impact our wallets and viewing choices.
**Editor:** Thank you for your insights, Jane. We’ll continue to monitor this situation closely as it develops.