The Department of Justice Wednesday sued DirecTV and its owner, AT&T, alleging antitrust collusion with competitors during contract negotiations to broadcast the Los Angeles Dodgers.
The Dodgers baseball games have been blacked out in much of Los Angeles County because pay-TV providers are unwilling to pay the broadcast fees demanded by SportsNet LA, the channel operated by the Dodgers franchise and Time Warner Cable.
In a complaint filed in U.S. Court for the Central District of California, the DOJ alleges that DirecTV was a “ringleader” in a coordinated scheme with major cable providers Cox and Charter: “Dodgers fans were denied a fair, competitive process when DirecTV orchestrated a series of information exchanges with direct competitors that ultimately made consumers less likely to be able to watch their hometown team.”
Deputy Assistant Attorney General Jonathan Sallet stated that the lack of a competitive negotiation process is especially injurious for consumers in a common carrier market like cable television, where customers have “only a handful of choices.”
AT&T closed its acquisition of DirecTV in July 2015, despite the dispute with the baseball franchise, which began in early 2014. SportNetLA offered “carriage licenses” to the pay-TV companies, but the broadcast is still not available on DirecTV, Cox, or AT&T’s wireline TV service.
The games only became available on Charter, after the company was purchased by Time Warner Cable. The ramifications of the DOJ complaint became much more complicated after AT&T bid $85 billion to acquire Time Warner last month.
The DOJ complaint “alleges that DirecTV unlawfully exchanged competitively-sensitive information with Cox, Charter, and AT&T during the companies’ negotiations for the right to telecast the Dodgers Channel.” The Justice Department added: “Specifically, the complaint alleges that DirecTV and each of these competitors agreed to and did exchange non-public information about their companies’ ongoing negotiations to telecast the Dodgers Channel, as well as their companies’ future plans to carry—or not carry—the channel.”
The DOJ complaint claims DirecTV could play such an outsized role in the negotiations because its satellite service is uniquely available throughout the entire LA County region.
The complaint names DirecTV Chief Content Officer Daniel York, based on emails and voicemails, as the person that orchestrated the information sharing and collusion with the cable providers.
According to the government’s case, the colluding companies negotiated as a block “to obtain bargaining leverage and to reduce the risk that they would lose subscribers if they decided not to carry the channel but a competitor chose to do so.” Allegedly, “through these unlawful agreements,” the colluders as a group decided not to carry the Dodgers.
AT&T has blamed Time Warner Cable for trying to charge a price of $5 per month for every one of their subscribers for the right to carry the Dodgers’ channel. AT&T claims that such an outrageously high price was not economically viable.
AT&T told the ARS Technica blog, “We respect the DOJ’s important role in protecting consumers, but in this case, which occurred before AT&T’s acquisition of DirecTV, we see the facts differently.”
AT&T added:
The reason why no other major TV provider chose to carry this content was that 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 carriage decisions independently, legally, and only after thorough negotiations with the content owner. We look forward to presenting these facts in court.
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