Comcast Wins Antitrust Appeal at U.S. Supreme Court
Justice Antonin Scalia says that a lower court shouldn't have accepted an expert's opinion that Comcast's "clustering" in the Philly cable TV market added up to $875 million of damage to a class of plaintiffs.
Comcast scored a win at the U.S. Supreme Court on Wednesday against a class-action lawsuit that challenges how it has allegedly monopolized the Philadelphia cable market.
The high court reviewed a lower judge's decision to certify a class of plaintiffs who say they were damaged from an activity that's known in the industry as "clustering."
From 1998 to 2007, Comcast would acquire competitor cable provider systems in the region in exchange for systems outside the region. In essence, Comcast made transactions that bolstered its local market share. For example, in 2001, Comcast obtained 464,000 subscribers in Philadelphia from Adelphia Communications in exchange for subscribers in Palm Beach, Fla., and Los Angeles. By doing so, Comcast was able to gain an estimated 60 percent of pay-TV subscribers in Philadelphia.
An expert for the plaintiffs estimated damages from this activity to be worth more than $875 million, but it's that number that attracted the rebuke of the Supreme Court's five most conservative justices in a narrowly divided decision. Here's the full ruling.
In the proposed antitrust class action, the plaintiffs originally asserted four theories on how Comcast's "clustering" was harmful.
Three of those theories never made it past a federal judge: It was argued that clustering made it profitable for Comcast to withhold local sports programming from its competitors, resulted in fewer “benchmark” pricing comparisons that cable customers could make when choosing a service and that clustering increased Comcast’s bargaining power relative to content providers.
Only one theory was accepted: Comcast’s activities allegedly discouraged “overbuilders,” companies that might wish to build competing cable networks in an area like Philly where Comcast had established incumbency.
The problem came because a judge is only allowed to certify a class when questions of law or fact are common to class members rather than questions affecting only individual members.
When James McClave, the plaintiff's statistical expert, was tasked with figuring out the estimated damage attributable to Comcast's alleged anti-competitive practices, he based his analysis on all four theories of harm rather than just the "overbuilders" theory that eventually was accepted.
First, a federal judge gave it a pass; so did the 3rd Circuit Court of Appeals. But the U.S. Supreme Court was more strict.
Justice Antonin Scalia wrote the majority opinion that concluded the class action was improperly certified.
"If respondents prevail on their claims, they would be entitled only to damages resulting from reduced overbuilder competition, since that is the only theory of antitrust impact accepted for class-action treatment by the District Court," he wrote. "It follows that a model purporting to serve as evidence of damages in this class action must measure only those damages attributable to that theory. If the model does not even attempt to do that, it cannot possibly establish that damages are susceptible of measurement across the entire class."
Scalia added, "Calculations need not be exact … but at the class-certification stage (as at trial), any model supporting a 'plaintiff’s damages case must be consistent with its liability case, particularly with respect to the alleged anticompetitive effect of the violation.' "
Scalia was joined in the majority by Justices John Roberts, Anthony Kennedy, Samuel Alito and Clarence Thomas.
The minority opinion on behalf of the high court's more liberal wing was jointly authored by Justice Stephen Breyer and Ruth Bader Ginsburg, who wrote that the Supreme Court shouldn't have reviewed the case.
According to their dissent, "In any event, as far as we can tell, the lower courts were right. On the basis of the record as we understand it, the District Court did not abuse its discretion in finding that McClave’s model could measure damages suffered by the class -- even if the damages were limited to those caused by deterred overbuilding. That is because respondents alleged that Comcast’s anticompetitive conduct increased Comcast’s market share (and market power) by deterring potential entrants, in particular, overbuilders, from entering the Philadelphia area market."
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