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DOJ Sues DirecTV, Calling It A 'Ringleader' of Collusion Over Regional Sports Programming

from the room-full-of-villains dept

Back in 2013, Time Warner Cable (now Charter Communications) struck an $8.35 billion deal with the LA Dodgers to create LA SportsNet, the exclusive home of LA Dodgers games. To recoup that money, Time Warner Cable began demanding exorbitant prices from competing cable providers if they wanted access to the channel. Unsurprisingly, all of Time Warner Cable’s competitors in the region balked at the $5 per subscriber asking price for the channel. As a result, for three years now a massive portion of Los Angeles hasn’t been able to watch their favorite baseball team, since Time Warner Cable’s asking price not only kept competing cable operators from delivering the channel, but prohibited over-the-air broadcasts of the games.

Fast forward to this week, when the Department of Justice announced it was suing DirecTV for being the “ringleader” in a collusion effort involving the channel. According to the full DOJ complaint (pdf), DirecTV (now owned by AT&T), worked covertly in concert with local competitors Cox, Charter (before it owned Time Warner Cable) and AT&T (before it owned DirecTV) to coordinate a refusal to pay Time Warner Cable’s high prices. The DOJ’s statement notes that these companies engaged in “unlawful information exchanges” to coordinate this refusal in violation of antitrust law:

“As the complaint explains, 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,? said Deputy Assistant Attorney General Jonathan Sallet of the Justice Department?s Antitrust Division. ?Competition, not collusion, best serves consumers and that is especially true when, as with pay-television providers, consumers have only a handful of choices in the marketplace.”

Right, except calling any of this “competition” is being rather generous. It’s an interesting case in that Time Warner Cable had been broadly considered the bad guy in this equation for the last three years by Dodgers fans, 70% of which couldn’t watch their favorite team despite living in Los Angeles. And even after the DOJ lawsuit was filed this week, outlets like the Los Angeles Times were perfectly willing to ignore the illegal behavior, claiming that collusion was ok because it punished Time Warner Cable’s cash grab to the indirect benefit (sort of) of consumers:

“At a time when there?s open rebellion against soaring pay-TV prices, these companies were clearly acting out of self-interest. The last thing they wanted was to give people another reason to cut the cord. Whatever their primary motive, though, they also were defending their customers? interests. That?s rare and welcome behavior from an industry that all too often regards consumers as ATMs from which it can make frequent withdrawals.”

And while some of that may be true, collusion is still collusion, and the fact that Dodgers fans still can’t watch their favorite team can hardly be seen as a win. For whatever it’s worth, AT&T, currently trying to sell its $85 billion acquisition of Time Warner (not to be confused with Time Warner Cable) to regulators, was quick to remind everybody that it didn’t own DirecTV at the time this occurred:

“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.”

It’s an amazing case where in reality everybody is the bad guy, and despite companies colluding and covertly exchanging sensitive data, nobody really wound up benefiting. Well, except perhaps those that were able to cut the cord because they don’t watch baseball.

Filed Under: , , , ,
Companies: at&t, charter communications, directv, la dodgers, time warner cable

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Comments on “DOJ Sues DirecTV, Calling It A 'Ringleader' of Collusion Over Regional Sports Programming”

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8 Comments
Eldakka (profile) says:

Re: Collusion

Negotiations between corporations are usually carried out under NDAs.

Even if they aren’t, if the companies keep the details confidential and don’t release them to the public, then doing anything with that information is a form of insider trading.

If the negotiations weren’t done under NDAs, then the companies could have released the details publically, and that would have been ok. However, by keeping the details private, not available to general stock investors and so on, they can’t then selectively release the information to other people, favourite investors, friends, other competitors. That is illegal. Either it’s public information available to all, investors, competitors, stock brokers, mum and dad, or it is available to no-one (besides the negotiating parties).

And on top of that, when competitors co-ordinate actions in their markets, that is anti-trust law. A goup of supermarkets can’t get together and set the prices of their goods together. A group of broadcasters can’t get together and set how much they will pay for shows. It’s price fixing.

SirWired (profile) says:

Why is calling it competition "generous"?

“Right, except calling any of this “competition” is being rather generous.”

Why?

DirectTV DOES directly compete with cable providers in the TV market. They each offer roughly-equivalent services, but with different features and pricing. Sounds like the exact definition of “competition” to me.

Anonymous Coward says:

Re: Why is calling it competition "generous"?

In this case the owner is keeping a product artificially “on the market” by putting a completely unreasonably price-tag on it. They can show that the product is out on the market and avoid regulatory suspision and they can rile up fans of the Dodgers to buy it at the only provider serving it.

That DirecTV is most known for spending a lot of time in court rooms settling anti-trust, consumer fraud and other “patterns of fraudulent activity”-cases has probably earned them enough notoriety with regulatory bodies to make DOJ pretty explicit in their condemnations of the companys activities.

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