June 06, 2011 11:17am PT by Eriq Gardner
Appeals Court Rejects Class Action Lawsuit Over 'Bundling' Cable Channels
Many cable television subscribers hate being forced to accept hundreds of channels they'll never watch when they sign up for service. Over the years, a number of lawmakers have proposed legislation that would force the cable industry to go "a la carte" instead of the channel "bundling" that currently occurs. But the Ninth Circuit Court of Appeals rejected on Friday an attempt by a class of consumers to make this an antitrust matter.
A lower court previously threw out the the class action lawsuit against NBC Universal, the Walt Disney Co., Fox Entertainment Group, Time Warner, and others, because the plaintiffs failed to show that their injuries were caused by an injury to competition.
On appeal, the plaintiffs offered theories on how the sale of multi-channel packages injured them. Specifically, they asserted that the "bundling" activity limited the manner in which distributors compete with each other, and that the method foreclosed independent programmers from entering the market, which reduced consumer choice and led to increased prices.
Writing for the Ninth Circuit, Justice Sandra Ikuta rejects the theory.
In her opinion, she finds that the plaintiffs still haven't met the third prong of showing a Sherman Act Section 1 violation -- injury to competition:
"The complaint does not allege that Programmers’ practice of selling tied “must-have” and low-demand channels excludes other sellers of low-demand channels from the market. Nor does the complaint allege that the Programmers’ bundling arrangement prevented any competitors from participating in either the upstream or downstream market."
What's left are allegations of reduced choice and increased prices, but the justice adds: "Although plaintiffs may be required to purchase bundles that include unwanted channels in lieu of purchasing individual cable channels, antitrust law recognizes the ability of businesses to choose the manner in which they do business absent an injury to competition."