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From Antitrust Law Daily, May 17, 2016

Boston NBC television affiliate's monopolization claims against Comcast fail

By Edward L. Puzzo, J.D.

Comcast's refusal to renew an affiliate agreement with the current Boston area NBC broadcast television affiliate was not monopolistic exclusionary conduct, the federal district court in Boston has ruled, because the agreement had an expiration date and no right of first refusal, so no binding obligation to extend the relationship existed (WHDH-TV v. Comcast Corporation, May 16, 2016, Stearns, R.).

Independently owned Boston television station WHDH-TV has been an affiliate of the National Broadcasting Company (NBC) since 1995. Comcast, the world's largest cable subscription company, began acquiring an ownership interest in NBC in 2009 and had obtained the entirety of ownership of NBC by 2013. During the regulatory review of the merger by the Federal Communications Commission (FCC) and Department of Justice, various groups expressed their concern over the anticompetitive effect of the merger. During this period, Comcast entered into an agreement with the NBC affiliate’s trade organization, the NBC Television Affiliates Association (NBCTAA), agreeing to maintain the NBC network as a general entertainment programming service to be made available for over-the-air broadcasting by the network’s broadcast television affiliates for a period of 10 years.

Beginning in 2013, WHDH made repeated overtures to Comcast to begin negotiations over the renewal of the affiliate agreement it had with NBC, which was scheduled to expire in January 2017, but the overtures were rebuffed by Comcast. Comcast implied that extension negotiations would eventually begin, but instead, in September 2015, Comcast notified WHDH that it would not renew the affiliate agreement after it expired. Comcast expressed its intention to make its own regional cable news channel the NBC broadcast affiliate for the Boston area. Consequently, WHDH brought various claims of monopolization and attempted monopolization against Comcast under the Sherman Act and the Massachusetts Antitrust Act, and further alleged unfair trade practices under Massachusetts law. Comcast moved to dismiss.

Monopolization claim. WHDH alleged that Comcast's refusal to engage in renewal negotiations with it was monopolistic exclusionary conduct. The court explained that exclusionary conduct is conduct, other than that necessary for competition on the merits, that makes a significant contribution to creating or maintaining monopoly power. WHDH alleged that after acquiring NBC, Comcast had obtained unprecedented power in the Boston commercial television market. But the court stated that market power, by itself, was not an antitrust violation. Further, the court continued, Comcast’s conduct—the non-renewal of WHDH’s affiliation—could not be construed as anticompetitive for the simple fact that WHDH had bargained for a contract with an automatic expiration date and no right of first refusal. There was no binding obligation on the part of NBC or Comcast to be locked into an affiliate relationship with WHDH indefinitely.

WHDH also argued that Comcast's refusal to negotiate was inherently anticompetitive because Comcast had admitted that its newly minted owned-and-operated station was likely to be less successful than WHDH, at least in the short term. The court conceded that a company’s unilateral refusal to do business with another desirous of a relationship is not absolutely immune from antitrust scrutiny. But here, Comcast was merely replacing WHDH as the Boston NBC outlet with its own broadcast station. Comcast supplied the content that WHDH distributes, and thus is a vertical supplier. As such, a supplier of a product may vertically integrate its distribution channels without being subject to antitrust liability. The court concluded that Comcast’s refusal to engage in renewal negotiations with WHDH had not been monopolistic exclusionary conduct.

State unfair trade practices. Chapter 93 of the Massachusetts General Laws requires the plaintiff to demonstrate a causal relationship between the unfair conduct alleged and its harm. Here, the court stated, to simply catalogue the damages WHDH will incur when the affiliate agreement expires was insufficient because, as explained above, Comcast was under no obligation to extend the agreement and therefore cannot be held liable for the consequences of the bargained-for expiration of the agreement.

WHDH also alleged that Comcast had rebuffed its attempts to negotiate an extension of the affiliate agreement, but had led them to believe it was a matter of timing, falsely leading WHDH to believe that extension negotiations would be forthcoming at some point. The court explained that in order to recover for fraudulent misrepresentation, WHDH must show both that Comcast made a false representation of material fact and that WHDH was damaged by its reliance upon the representation. Here, WHDH failed to allege the latter; i.e. that it would have pursued some alternative advantageous opportunity but for Comcast’s representation that it would eventually agree to negotiate. Thus the fraudulent misrepresentation claim must also fail, the court ruled.

The case is No. 1:16-cv-10494-RGS.

Attorneys: Michael T. Gass (Choate Hall & Stewart LLP) for WHDH-TV. Arthur J. Burke (Davis, Polk & Wardell, LLP) and Peter A. Biagetti (Mintz Levin Cohn Ferris Glovsky & Popeo PC) for Comcast Corp.

Companies: WHDH-TV; Comcast Corp.

MainStory: TopStory Antitrust StateUnfairTradePractices MassachusettsNews

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