Ninth Circuit Rejects Consumer Antitrust Challenge To Cable Television Bundling

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The Ninth Circuit recently affirmed the dismissal of a consumer class action challenging the television programming industry's practice of exclusively offering multi-channel cable packages. Brantley v. NBC Universal, Inc. No. 09-56785 (9th Cir. June 3, 2011). In so holding, the Court affirmed that allegations regarding widespread harm to consumers (either through increased prices, reduced choice, or both) -- without some separate, cognizable injury to competition -- fail to state a Section 1, Sherman Act claim.

Brantley involved a putative nationwide class of consumers suing two groups of industry participants: (1) programmers in the upstream market who sell television channels and programs to distributors; and (2) distributors in the downstream retail market who sell the programming to consumers. Plaintiffs alleged that programmers exploit market power derived from "must-have," high-demand channels by bundling or tying them with less desirable, low-demand channels for sale to distributors, forcing distributors in turn to sell only higher-priced, multi-channel packages to consumers. Plaintiffs alleged that in the absence of such bundling, distributors would offer "a la carte programming" to meet consumer demand, thereby allowing consumers to purchase only those channels they wish to watch. Defendants' vertical restraints thereby reduce consumer choice, raise prices, and limit competition between distributors. Indeed, plaintiffs cited to third party findings (including from the FCC) that the average cable subscriber is forced to pay for 85 channels that he does not watch to obtain the 16 he does, and that defendants' bundling results in a net consumer welfare loss of $100 million.

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