Today's Ridiculous Lawsuit: Wal-Mart, Netflix Sued Over Conspiracy To Create A Monopoly

from the ugh dept

Way back in 2002, Wal-Mart decided to enter the online DVD rental business, launching an almost exact replica of Netflix. Of course, Wal-Mart quickly discovered what almost every other player in that marker discovered: just offering a competing service to Netflix isn’t enough to get anyone to use it. Wal-Mart had a lot of difficulty signing up customers (and keeping them once they signed up). The whole project was going nowhere fast, and eventually, Wal-Mart decided that it was a waste of time to throw more money into a project that was pretty far removed from its main business, and decided to simply let Netflix take over its online DVD rental service. This was a reasonable business move.

However, nearly four years later, a lawsuit has been filed claiming that Netflix and Wal-Mart “conspired to create a monopoly” in the online video rental market, and as a result of that monopoly, Blockbuster raised its prices. Read that sentence again. Netflix and Wal-Mart are being accused of creating a monopoly — and because of that monopoly another major player in the space raised its prices.

If there’s another major player in the space, there is no monopoly.

Besides, the folks bringing the lawsuit are going to have to convince a judge that the relevant market is online DVD subscription services, rather than any kind of home movie viewing service (which includes store rentals, purchases, internet downloads, subscription services and more). This seems like a random bogus lawsuit targeted at a company with deep, deep pockets (Wal-Mart), rather than anything serious.

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Companies: blockbuster, netflix, wal-mart

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Comments on “Today's Ridiculous Lawsuit: Wal-Mart, Netflix Sued Over Conspiracy To Create A Monopoly”

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Avatar28 says:

not illegal?

Correct me if I’m wrong, but in the US at least, having a monopoly or near monopoly is not, in and of itself, illegal. After all, a patent is a government granted monopoly for a certain length of time on a new idea. Likewise, Microsoft virtually has a de facto monopoly in operating systems and office suites and they are not in trouble for that. It is only when you start ABUSING your monopoly position that it becomes illegal. That is what got Microsoft, the old Ma Bell, et al into trouble.

Anonymous Coward says:

Re: not illegal?

Having a monopoly is illegal in the united states and the only exception to this is certain utilities because, for example, having two competing electric companies in a small city is stupid to say the least and would result in a loss for everyone since neither company can get enough customers to make money to stay in business. All monopolies in terms of railroads, oil, computers, phone, etc. are illegal and will be broken up. Just look in the mid 90s when Microsoft was forced to sell off parts of its company because they had pretty much enveloped the entire market. Right now MS has to compete with Apple/Mac and free Linux distros.

Anonymous Coward says:

Re: Re: not illegal?

“Having a monopoly is illegal in the united states”

No, it’s not. ABUSING a monopoly position is illegal, and CONSPIRING to act as a monopoly (price fixing, other restraints on trade) is. BEING a monopoly is not illegal at all.

“All monopolies in terms of railroads, oil, computers, phone, etc. are illegal and will be broken up.”

Wrong. Just.. wrong. On all counts.

“Just look in the mid 90s when Microsoft was forced to sell off parts of its company because they had pretty much enveloped the entire market.”

No, wonder boy. MS was NOT forced to sell ANYTHING. MS even weaseled out of most of the fines. MS was NOT on trial for being a monopoly. MS was on trial because they cut deals with the big OEMs to give those OEMs massive discounts on Windows as long as they agreed to only sell Windows. In some other cases, MS offered no discounts, but tacked on tons of fees and other punitive measures if you dealt in any non-MS products.

“Right now MS has to compete with Apple/Mac and free Linux distros.”

Yep, but this is totally irrelevant. This has NOTHING to do with MS being a monopoly or not.

You fail. All of it. A lot. Play again later.

David says:

I haven’t seen the lawsuit but I assume it is based on Section 1 of the Sherman Act, which prohibits agreements or conspiracies IN RESTRAINT OF TRADE. It doesn’t say you have to actually create a monopoly, in fact if you had a monopoly you wouldn’t have anyone else to conspire with. All you have to do is make an agreement that basically reduces competition. Part of the proof can be an increase in prices of another player in the market. For instance, it is illegal for 5 funeral homes in a town to agree to not hold funerals on Fridays or Saturdays, since that restrains trade by reducing the number of days people can buy funerals, thereby reducing competition.

If that news release accurately summarizes the lawsuit, then that doesn’t seem like a well-drafted complaint, but that doesn’t mean the lawsuit is groundless.

PLP (user link) says:


Somebody criticizing Walmart for a supposedly unethical act to squash competition is pretty funny. I guess they crawled out from under the rock they were hiding for the last 20 years. Oh. . . .snap.

But anyway, Netflix managment should be proud they were able to convince Walmart to not try and beat ’em, but to join ’em. As far as BB having to raise their prices, this is a result of what it takes to stay competative with the Netflix/Walmart collusion.

Ceteris paribus, yes, a competitors enter price wars to compete; but in this case, Blockbuster claims that it isn’t even a legitimate competitor (crying Monopoly!) so it has to (unfairly) raise its prices just to be able to compete. Just a guess but BB is probably citing an artificial market force on supply.

It would be sad, for me, if Blockbuster discontinued this service because I live next door to one of their distribution centers and I get my rentals the next day. Hard to get flicks I can pick up at the library or the local video store.

Jack Steen (user link) says:

Well, Walmart is getting there

Walmart is the nation’s largest retailer and as they grow, their product gets worse. Does this remind you of something? In the Soviet Union, the government had a monopoly and their product was obviously horrible. If we allow Walmart to continue to grow to this mammoth sizes (Target is the nearest competitor and is only about 1/5 of their size), we’re going to see many of the same problems that the Soviet Union saw.

Opinion only says:

No monopoly, just a the ultimate bully

So Walmart moves into your community, opens a supercenter. All mom and pops, all other small business owners are put out of business – can’t compete with the prices. Businesses close one by one until Walmart is the only game in town. At this point, let’s see if they keep their super low prices really low. Let’s see if they contribute back into the community like regular small businesses do. With the economy already suffering, when Walmart is the only game in town, try to get anyone to borrow and open a business to compete. It won’t happen. How do I know all this? I’m an accountant, in a small town. I watched the community beg Walmart to come in set up, and start. I watched many of the businesses in town close, and others I was doing the bookkeeping for expect to close in the coming year. I also watched Walmart do virtually nothing, and I mean NOTHING in comparison to what I have seen small businesses give back to the communities. I also know Walmart pays their employees and treats them like nothing. But you can keep believing your fairy tales as well. I agree, many, many Walmarts is a big plus – for Walmart and their shareholders.

Anonymous Coward says:

The information provided here sounds extremely thin. I think you should get all the info on the lawsuit before writing an opinion. You are basically proliferating unsubstantiated information as the truth and in essence starting a large scale game of telephone.

As it is, the “factual” information in your paragraph is very shady. And anyone who does not read this with a grain of salt or any semblance of questions after reading it needs to go back to school a learn a little more.

nomas says:

Small Businesses contribute back to the community ? ? ha ha ha ha that’s a good one.

The only reason a small business will contribute something is if it will give them a tax break and/or the one they are contributing to happens to be their own charity of which the make profit from.

Fuck small businesses, I’d rather see a store like Wallmart provide great service, so what if they are the only game in town.

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