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From Antitrust Law Daily, November 2, 2016

Justice Department sues DirecTV for unlawful information-sharing

By Linda O’Brien, J.D., LL.M.

The Department of Justice today filed suit against satellite service provider DirecTV and its corporate successor, AT&T Inc., for orchestrating a series of unlawful information exchanges between DirecTV and three of its competitors—Cox Communications Inc., Charter Communications Inc., and AT&T—during the companies’ negotiations to carry SportsNet LA, which holds the exclusive rights to telecast almost all live Dodgers games in the Los Angeles area (U.S. v. DirecTV Group Holdings, LLC, Dkt. No. 2:16-cv-08150).

According to the Antitrust Division’s complaint, filed in the U.S. District Court for the Central District of California, DirecTV unlawfully exchanged competitively-sensitive information with Cox, Charter and AT&T during the companies’ negotiations for the right to telecast the Dodgers Channel. Specifically, the complaint alleges that DirecTV and each of these competitors agreed to and did exchange non-public information about their companies’ ongoing negotiations to telecast the Dodgers Channel, as well as their companies’ future plans to carry—or not carry—the channel.

The complaint also alleges that the companies, which spend billions of dollars on sports content each year, engaged in this conduct in order to unlawfully obtain bargaining leverage to depress the cost of sports content and to reduce the risk that they would lose subscribers if they decided not to carry the channel but a competitor chose to do so. The information learned through these unlawful agreements was a material factor in the companies’ decisions not to carry the Dodgers Channel. The collusive activity corrupted the competitive process and harmed consumers by causing likely reductions in quality and output, as happened by the blackout of the Dodgers Channel for the past three baseball seasons. The Dodgers Channel is still not carried by DirecTV, Cox, or AT&T, the complaint further alleges.

DirecTV, acquired by AT&T Inc. in July 2015, is a Delaware corporation with headquarters in Dallas. As of 2014, DirecTV had approximately 1.25 million video subscribers in the Los Angeles area. AT&T is a Delaware corporation with headquarters located in Dallas. As of 2014, AT&T had approximately 400,000 video subscribers in the Los Angeles area.

"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."

Companies: DirecTV Group Holdings, LLC; AT&T, Inc.

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