CBS, Fox: Our NFL Broadcast Deals Are Exempt from Antitrust Review

The networks are being sued for their role in an alleged conspiracy to drive up the cost of out-of-market game telecasts.
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On Thursday, a judicial panel in Louisiana will help sort out the dozens of antitrust lawsuits brought over the way NFL games are packaged for telecast. A decision will be made on whether to consolidate the proposed class actions, and if so, where the disputes will be adjudicated.

In advance of the hearing, interested parties have been stepping forward. Even though the judicial panel on multidistrict litigation (MDL) isn't tasked with addressing the merits of the antitrust claims, companies such as CBS, Fox and ESPN have been sneaking in their arguments of why they think they will ultimately beat allegations of playing a collusive role in the expensive Sunday Ticket package offered by DirecTV. Two of the networks are nodding towards a half-century-old law that addressed how leagues pool television rights.

First, though, some background.

In May, a federal judge in New York agreed to certify a class action over telecast deals made by MLB and the NHL. The pro hockey league came to a settlement the following month — agreeing to a discount on a digital package — while the plaintiffs co-represented by the Cohen Milstein firm are set to take on the pro baseball league next month at trial.

Many class-action attorneys smelled opportunity in the wake of what happened and have brought similar legal actions against the NFL and DirecTV.

The first lawsuit (as far as we're aware) came in June on behalf of NFL fans. That was followed in July by another lawsuit being handled by prominent antitrust attorney Michael Hausfeld on behalf of bars, restaurants and other "commercial subscribers" to the Sunday Ticket package. Then came a flood of more litigation, with a notable development coming in October when, for the first time, CBS Corp., Fox Broadcasting Company, NBCUniversal Media and ESPN were hit by a lawsuit from a sports bar represented by Cohen Milstein over the networks' alleged role in Sunday Ticket.

It was Hausfeld that filed a motion to consolidate the cases as an MDL. Given the numbers and similar issues, that's probably what will happen, but there's the mystery of whether the litigation will play out in New York or California. This puts Hausfeld (who is notable for the antitrust case over NCAA athlete compensation) against Cohen Milstein (who besides challenging sports TV deals is suing film studios over anti-poaching pacts.)

The "Sunday Ticket" defendants, with knowledge of what happened to MLB and NHL in New York, are on board the Hausfeld plan to have the case tried in California. But Cohen Milstein has pointed out that its lawsuit is broader and targets TV networks headquartered in New York.

Enter the sneaky arguments from the networks, who are basically telling the judicial panel that they have no place in the dispute and that the attempt to stick them amounts to gamesmanship.

"The claims in that case against Fox are creative to say the least," an attorney for the network wrote in a Nov. 13 filing. "Fox is not a party to the agreement between the NFL and DirecTV that is the focus of all the cases before the Panel, and Fox enjoys Congressional antitrust immunity with respect to its own agreement with the NFL to broadcast NFL games."

CBS makes a similar point.

"CBS is not a party ... to the challenged agreement between the NFL and DirecTV, and its own broadcast agreements with the NFL have been fully exempt from antitrust challenge for over 50 years," wrote its attorney on Nov. 11.

As for ESPN, the Monday Night Football network gets the prize for the best argument.  "Plaintiffs admit elsewhere in their complaint that ESPN's only broadcast is on Monday, not Sunday, and therefore cannot possibly be part of the Sunday Ticket package." (Italics belong to ESPN.)

The lawyers at Cohen Milstein have accordingly responded.

"These gamesmanship charges have no basis," they reply in a court filing (see here). "The core issue in these cases is the horizontal agreement among the 32 teams in the National Football League to exclusively sell their telecasts jointly. The Network Defendants have 'facilitated, encouraged, and expanded' that agreement by, among other things, 'insist[ing] on contractual clauses guaranteeing that the Teams will continue to sell their rights only through the NFL, putting the NFL at risk of facing serious monetary consequences if they should end their scheme.'"

Again, the judicial panel won't address the merits of the case, and won't evaluate the credibility of an allegation like Fox insisting on Sunday Ticket being capped at one million subscribers. Then again, the arguments do offer a good preview of what's to come after MDL consolidation.

CBS and Fox are already signaling they will use the Sports Broadcasting Act of 1961 as a defense. 

Cohen Milstein has responded that "courts have consistently rejected the argument that the SBA exempts agreements to distribute telecasts through subscription-only packages — including Sunday Ticket in particular."

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