Cable TV Subscribers Win Landmark Antitrust Verdict

A jury decides to punish Cox Communications for tying premium cable services with the rental of expensive boxes.
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With cable boxes currently costing the average household $231 a year, Cox Communication subscribers in middle America won an antitrust lawsuit with a $6.31 million jury verdict on Thursday. The damage award could be trebled as more antitrust lawsuits await.

The plaintiffs in this case alleged that Cox improperly tied and bundled the lease of cable boxes to the ability to obtain premium cable services. A national class action wasn't certified because of differences in geographic markets, but consolidated actions have been proceeding in various regions of the country.

A federal court in Oklahoma was the site of the first case to make it to trial after attempts to send the dispute to arbitration failed.

An eight-day trial explored the question of whether Cox subscribers were really coerced into renting set-top boxes. Some of the premium programming and video-on-demand services may have been available through satellite TV distributors like Dish and DirecTV. Although companies like TiVo have offered an alternative to traditional set-top boxes, the market is thin. For the most part, if Cox customers want premium cable, they must spend extra money for the Cox boxes. 

Nevertheless, Cox has been arguing that it has told subscribers they can use retail devices if other manufacturers decide to sell them. "Where the tied product generally was not available for sale from another firm through no fault of the defendant, there cannot be any coercion as a matter of law," says the defendant in legal papers.

The plaintiffs have been testing the theory that Cox contributed to the very lack of competitors by taking specific actions years ago. They contend that Cox misrepresented the capabilities of non-proprietary boxes and exaggerated their disadvantages. Further, the plaintiffs presented witness testimony that Cox raised barriers to TiVo's entry into the market and made efforts to hinder the development of a secondary market.

"From this evidence, a jury could reasonably infer that Cox contributed to the lack of a viable market for third-party set-top boxes and that several well-financed consumer electronics companies were poised to enter this market," say the plaintiffs in their court papers. "Thus, the alleged lack of competitors does not excuse Cox’s coercion."

The case also explored alleged foreclosure of commerce and the cable company's alleged market power. On the latter issue, Cox argued that it doesn't control set-top box manufacturers, while the plaintiffs pointed to Cox's nearly three-quarters share of the cable market in Oklahoma, discussions with manufacturers, and pricing pushes to support the position that the cable company was dominating to the detriment of consumers.

A jury has now come back in favor of the cable subscribers, but the case isn't quite over. Cox has submitted a motion for a judgment as a matter of law. The judge has not yet ruled on the motion.

But for now, the plaintiffs are celebrating. Says plaintiffs' attorney Joe Whatley, "It is a great result of consumers in Oklahoma. We look forward to the cases in the other states."

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