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DOJ Sues DirecTV for Illegal Information Exchange with Rivals
Practical Law Legal Update w-004-3935 (Approx. 3 pages)
DOJ Sues DirecTV for Illegal Information Exchange with Rivals
by Practical Law Antitrust
| Published on 03 Nov 2016 • USA (National/Federal) |
The Antitrust Division of the Department of Justice (DOJ) sued DirecTV Group Holdings, LLC alleging that it acted as the ringleader of an agreement to exchange non-public, confidential information with three competitors during licensing negotiations with Time Warner Cable. The DOJ brought charges under Section 1 of the Sherman Act.
On November 2, 2016, the Department of Justice (DOJ) filed suit against DirecTV alleging that, since at least early 2014, DirectTV, Cox Communications, Charter Communications, and AT&T agreed to exchange competitively sensitive information in violation of Section 1 of the Sherman Act. The DOJ alleged that the companies exchanged information about the status of their negotiations with Time Warner Cable (TWC) over the licensing of Dodgers games to be broadcast on a Dodgers Channel in Los Angeles. The information exchanges allegedly harmed competition by corrupting the competitive process and contributing to the blackout of Dodgers games in the region.
In its complaint, the DOJ alleges that the companies exchanged non-public, confidential information in an effort to artificially enhance each party's bargaining position in their negotiations with TWC. The complaint names only DirecTV (and its corporate successor, AT&T, which did not own DirecTV at the time of the conduct) as a defendant, based on its alleged role in orchestrating and implementing the information exchanges. In addition, because of its large, national subscriber base, the DOJ argues that DirecTV's actions may have had a domino effect on other competitors.
The complaint alleges that DirecTV and its competitors exchanged information about:
- Whether they were close to a deal with TWC.
- Plans to carry the Dodgers Channel.
The complaint also cites to public statements made by the DirecTV CEO at an industry conference that it was important for DirecTV and its competitors to stand together in negotiations.
According to the DOJ, this information was non-public, forward-looking, and material to competition between the companies. The information exchange allegedly allowed the companies to:
- Enhance their bargaining position against TWC because they were not concerned that another competitor was nearing a deal with TWC to broadcast the games.
- Decide not to carry the Dodgers Channel without having to worry about losing subscribers to a competitor who might reach a deal with TWC.
The parties to the information sharing agreement are alleged to have significant market power in the relevant market. As a result, the DOJ claims that the information exchanged between these parties harmed competition because it:
- Reduced the companies' incentives to negotiate regarding the Dodgers channel.
- Limited the companies' responsiveness to customer demand.
- Undermined the competitive process, which would have otherwise taken into account market demand for the Dodgers channel.
The DOJ also noted that the communications did not serve any procompetitive purpose.
In its request for relief, the DOJ asked the court to:
- Bar similar communications between these parties in the future.
- Require implementation of an antitrust training and compliance program.
- Award costs.
For additional information on the antitrust risks of competitor information exchanges, see Practice Note, Information Exchanges Among Competitors (Non-Merger).