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From Antitrust Law Daily, May 29, 2013

Evidence Did Not Support FCC Finding That Comcast Discriminated Against Unaffiliated Tennis Channel

By Jeffrey May, J.D.

Cable television provider Comcast Cable Communications LLC was not shown to have discriminated in violation of Federal Communications Commission (FCC) rules by rejecting a proposal by The Tennis Channel, Inc. to reposition the network onto a tier with broader distribution that included Comcast's own affiliated sports programming networks Golf Channel and Versus, the U.S. Court of Appeals in Washington, D.C. has ruled (Comcast Cable Communications LLC v FCC, May 28, 2013, Williams, S.).

The FCC concluded that Comcast, by rejecting the Tennis Channel proposal and distributing its own sports networks more broadly, violated a regulation that prohibits a multichannel video programming distributor (MVPD) from discriminating against unaffiliated programming networks in decisions about content distribution to “unreasonably restrain the ability of an unaffiliated video programming vendor to compete fairly.” The FCC ordered Comcast to carry the Tennis Channel on the same distribution tier as its Golf and Versus channels.

Comcast appealed, and the appellate court overturned the FCC's order. There was not sufficient evidence to support the FCC's determination that Comcast unlawfully discriminated against the Tennis Channel in favor of its own networks, according to the court.

If an MPVD treats vendors differently based on a reasonable business purpose, then the regulation is not violated, the court explained. The reasonable business purpose would not include an effort to illegitimately hobble the competition.

The record lacked material evidence that the Tennis Channel proposal offered Comcast any commercial benefit, in the court's view. While Comcast would have incurred additional costs under the proposed tier change, the Tennis Channel showed no corresponding benefits that would accrue to Comcast by its accepting the change.

“Without showing any benefit for Comcast from incurring the additional fees for assigning Tennis a more advantageous tier, the Commission has not provided evidence that Comcast discriminated against Tennis on the basis of affiliation,” according to the appellate court.

Concurring opinions. In a separate opinion, Judge Brett Kavanaugh joined in the court's opinion in full but added that the relevant regulation should only apply when a video programming distributor possesses market power. The underlying statutory provision was part of the Cable Television Consumer Protection and Competition Act of 1992.

The “statute applies only to discrimination that amounts to an unreasonable restraint under antitrust law,” according to Judge Kavanaugh. “Vertical integration and vertical contracts – for example, between a video programming distributor and a video programming network – become potentially problematic under antitrust law only when a company has market power in the relevant market.”

Because Comcast had “only about a 24% market share in the national video programming distribution market,” it did not possess market power and did not violate the regulation, it was suggested.

In another concurring opinion, Judge Harry Edwards questioned the timeliness of the Tennis Channel's complaint to the FCC. According to Judge Edwards, because the complaint was almost four years late, it should have been dismissed as time-barred.

The case is No. 12-1337.

Attorneys: Miguel A. Estrada (Gibson, Dunn & Crutcher LLP) for Comcast Cable Communications LLC. Peter Karanijia, Deputy General Counsel, for Federal Communications Commission.

Companies: Comcast Cable Communications LLC; The Tennis Channel, Inc.

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