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February 26, 2013

Cablevision Files Antitrust Suit over Viacom's Bundling of Cable Channels

By E. Darius Sturmer, J.D.

Cable television programming package provider Cablevision Systems Corporation has filed an antitrust lawsuit against entertainment media conglomerate Viacom, Inc. in the federal district court in New York City today, alleging that Viacom's bundling of individual cable channels into subscriber packages amounted to unlawful tying (Cablevision Systems Corp. (CVC) v. Viacom International Inc., No. 13-01278, February 26, 2013).

While the details of the complaint are under seal, Cablevision charged in a statement released today that it believes Viacom illegally forced it to carry and pay for 14 lesser-watched ancillary networks its customers do not want in order to carry other must-have Viacom networks such as Nickelodeon, MTV, and Comedy Central. Among these alleged "ancillary networks" are CMT, Palladia, Centric, and several offshoot MTV, VH1, and Nickelodeon channels more narrowly focused in programming or viewer demographics.

According to Cablevision, the complaint asserts a per se illegal tying arrangement, as well as "block booking" prohibited by the Sherman Act and its New York counterpart, the Donnelly Act. Among the remedies sought by Cablevision are declaratory relief voiding the December 2012 carriage agreement with Viacom, a permanent injunction barring Viacom from conditioning carriage of any or all of its core networks on Cablevision's licensing any or all of Viacom's ancillary networks, and a requirement that Viacom permit Cablevision to carry the core networks on terms pending negotiation of a new, lawful agreement.

In response to the suit, Viacom pledged to "vigorously defend this transparent attempt by Cablevision to use the courts to renegotiate our existing two month old agreement." Viacom noted that its practice of "offer[ing] discounts to those who agree to provide additional network distribution" had been "upheld by a number of federal courts and on appeal".

Viacom's comment was a clear reference to a failed consumer class action asserting essentially the same theory, Brantley vs. NBC Universal Inc. The Brantley lawsuit, initially filed in 2007, was repeatedly dismissed on the ground that the complaining cable and satellite television subscribers had failed to allege a cognizable injury to competition, as opposed to mere injuries to themselves, stemming from Viacom's and other programmers' and distributors' bundling practices. The U.S. Court of Appeals in San Francisco upheld this determination early last year (2012-1 Trade Cases ¶77,844, 675 F.3d 1192). In November 2012, the U.S. Supreme Court declined to revisit the Ninth Circuit's decision.

MainStory: TopStory Antitrust

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