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DirecTV Comes Out Swinging in Lawsuit

Says DOJ hasn’t made case that communications nixed SportsNet LA deals 1/30/2017 8:00 AM Eastern
TakeAway

DirecTV told a U.S. court that high license fees, not collusion, kept it from striking a carriage deal with Dodgers network SportsNet LA.

WASHINGTON — DirecTV has told a federal court that it was the price of Los Angeles Dodgers baseball, not anticompetitive communications, that prevented it from doing a carriage deal with Time Warner Cable for the team’s SportsNet LA channel.

 

Satellite-TV provider DirecTV and its parent, AT&T, have told a U.S. District Court for the Central District of California that the Justice Department has not made a case for either restraint of trade or anti-competitive effects in its suit against the company over carriage for SportsNet LA, which is owned by the Dodgers and managed by Charter Communications. Charter acquired Time Warner Cable, and its deal with the baseball team, last May.

 

Moreover, an equally plausible alternative explanation for those MVPDs’ decision not to carry the channel was the independent conclusion of all that TWC was charging too much — and that they weren’t going to pay it.

 

It remains to be seen how strongly the Trump Justice Department pursues the case. President Trump last fall threatened to block DirecTV parent AT&T’s pending acquisition of media giant Time Warner Inc. (a separate company from the former Time Warner Cable), but in a recent meeting, the president and AT&T chairman and CEO Randall Stephenson only talked about creating jobs and the impact of regulations on business. In the meantime, DirecTV said the court should dismiss the suit “as a matter of law,” and “with prejudice,” so the suit can’t be amended.

 

Justice charged DirecTV last fall with being the “ringleader” in a series of “unlawful information exchanges” with Cox Communications, Charter (prior to the TWC acquisition) and AT&T (before AT&T bought DirecTV) during the companies’ negotiations for the rights to carry SportsNet LA.

 

Time Warner Cable launched SportsNet LA, with the Dodgers’ games, in February 2014 after paying $7 billion to $8 billion for the the team’s television rights, but a number of distributors complained about the per-subscriber price the company was seeking — reportedly in the $4-$5 range.

 

The complaint alleged that information “was a material factor in the companies’ decisions not to carry the Dodgers Channel,” and pointed out that SportsNet LA “is still not carried by DirecTV, Cox or AT&T.”

 

DirecTV told the court earlier this month that the complaint was based only on generalized allegations of information sharing, but DirecTV said given there is “no allegation of any multilateral agreement of communication on the negotiations, or anything else for that matter, no allegation that DirecTV’s negotiations were not in good faith, no allegation of improper communications with Dish or Verizon, who still don’t carry the channel, and no allegation that any of the distributors who allegedly would have carried the channel save for the communications had market power over TWC, there is nothing in the complaint that contradicts the obvious alternative explanation that DirecTV and other distributors independently analyzed the value of the Dodgers Channel to their subscribers, tried to negotiate reasonable terms with TWC in good faith, and reached the same fundamental conclusion that TWC’s price demands were too high.”

 

A court hearing in the Central District is scheduled for March 10.

 

Casey at the Bar

 

While DirecTV does not contest discussions with other distributors about carriage of SportsNet LA, it gave the court a number of reasons why the Justice Department’s take on the talks did not make the case for anticompetitive conduct, boiling its arguments down to:

 

• Antitrust law has limited applicability to claims of “mere” information sharing.

• The government has not plausibly alleged that DirecTV agreed to reciprocal exchanges of sensitive competitive information.

• The complaint fails to plausibly allege the anticompetitive effects required.

• The complaint does not allege direct evidence of actual anticompetitive effects.

• The complaint fails to plausibly allege ‘likely’ anticompetitive effects.

• The government fails to allege market power over TWC in the relevant market.

• The government has not plausibly alleged that the challenged conduct is of the sort likely to harm competition.

• The complaint fails to plausibly allege causation.

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