On Wednesday, November 2, 2016, in the U.S. District Court for the Central District of California,[1] the Department of Justice filed suit against DirecTV and AT&T Inc., its corporate successor, for engaging in collusion by organizing information-sharing agreements with DirecTV’s competitors.  The Justice Department’s Office of Public Affairs, in a news release, stated that DirecTV acted as “the ringleader of a series of unlawful information exchanges between DIRECTV and three of its competitors – Cox Communications Inc., Charter Communications Inc. and AT&T – during the companies’ negotiations to carry SportsNet LA (or the Dodger channel), which holds the exclusive rights to telecast almost all live Dodgers games in the Los Angeles area.”[2]  Time Warner Cable, one of DirecTV’s competitors, purchased the rights to distribute SportsNet LA in a twenty-five year deal.[3]

The fifty-seven-page complaint[4] alleges that DirecTV, in 2014 before AT&T acquired it, had conversations with each competitor regarding their decisions whether to carry the Dodger channel.[5]  By doing so, each company shared confidential, nonpublic information with each other to “gain leverage in negotiations with Time Warner Cable, which was responsible for recruiting” other cable companies to provide the Dodger channel.[6]  The complaint further alleges that Los Angeles Dodgers fans were “denied a fair competitive process” as a result of DirecTV’s conduct with its competitors because it was harder for Dodgers fans to watch the games[7]  by resisting to carry SportsNet LA.

In an email from Mike White, DirecTV’s former chief executive, to Daniel York, DirecTV’s chief content officer, White said DirecTV and the three other companies “may have more leverage if we all stick together.”[8]  York responded by saying “others holding firm is key.”[9]

One of DirecTV’s arguments in support of this decision, however, is that consumers would pay higher cable bills, which is unfavorable to consumers in a time when they are already complaining of prices being too high.[10] AT&T General Counsel David McAtee also supported his organization’s decision to not offer SportsNet LA, saying “no one wanted to force all of their customers to pay the inflated prices that Time Warner Cable was demanding for a channel devoted solely to LA Dodgers baseball.  We make our decisions independently, legally and only after thorough negotiations with the content owner.”[11]

Meanwhile, and as a reminder, AT&T and Time Warner Inc. are currently in the midst of negotiating a deal whereby AT&T would acquire Time Warner for $84.5 billion.[12]  “Some critics of the deal say further media consolidation could increase the likelihood of the kind of collusive behavior alleged in Wednesday’s lawsuit.”[13]  The Justice Department still needs to evaluate and sign off on the proposed deal between AT&T and Time Warner so it will be interesting to see whether this lawsuit has any impact on that decision, while seemingly unrelated.

As the lawsuit unfolds, it is important to remember what antitrust law is meant to protect: competition.  Deputy Assistant Attorney General Jonathan Sallet of the Justice Department’s Antitrust Division eloquently stated, “[c]ompetition, not collusion, best serves consumers and that it especially true when, as with pay-television providers, consumers have only a handful of choices in the marketplace.”[14]  And for Dodgers fans, this lawsuit may be just what they needed to ensure they can watch their beloved team at home.  Fans may see SportsNet LA on their DirecTV or AT&T U-Verse in the very near future.


Sources

[1] Mike Snider, DOJ Sues AT&T, DirecTV over Blackout Channel, USA Today (Nov. 2, 2016), http://www.usatoday.com/story/tech/news/2016/11/02/doj-sues-t-directv-over-blackout-dodgers-channel/93175810/.

[2] Justice Department Sues DIRECTV for Orchestrating Information Sharing Agreements with Three Competitors, Dept. of Justice (Nov. 2, 2016), https://www.justice.gov/opa/pr/justice-department-sues-directv-orchestrating-information-sharing-agreements-three.

[3] Brent Kendall & Joe Flint, U.S. Sues AT&T’s DirecTV for Alleged Collusion During Dodgers TV Talks, Wall Street J. (Nov. 2, 2016), http://www.wsj.com/articles/justice-department-sues-directv-for-collusion-during-dodgers-tv-talks-1478105262.

[4] Meg James, Justice Department Sues AT&T-DirecTV, Alleges Collusion in Blocking Dodgers Channel, L.A. Times (Nov. 2, 2016), http://www.latimes.com/business/hollywood/la-fi-ct-dodgers-channel-antitrust-directv-lawsuit-20161102-story.html.

[5] Kendall & Flint, supra note 3.

[6] James, supra note 4.

[7] Justice Department Sues DIRECTV for Orchestrating Information Sharing Agreements with Three Competitors, supra note 2.

[8] James, supra note 4.

[9] Id.

[10] Kendall & Flint, supra note 3.

[11] Snider, supra note 1.

[12] Kendall & Flint, supra note 3.

[13] Id.

[14] Justice Department Sues DIRECTV for Orchestrating Information Sharing Agreements with Three Competitors, supra note 2.

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