May 10, 2012 4:56pm PT by Eriq Gardner
Meet the Baseball Fans Suing to Change the Business of Televising Games
On Wednesday, several baseball fans filed a class-action lawsuit against Major League Baseball and some of the league's broadcast partners, including Comcast and DirecTV. The plaintiffs object to the way that the league has carved up TV rights into different territories, how consumers must pay a lot for "out of market" games and how local "in market" telecasts are blacked out when consumers sign up for MLB's digital service.
For more than a century, there's been a tension between intellectual property and antitrust laws. The right to control content and make exclusive license deals often is at odds with prohibitions against having a monopoly, exercising authority over a market and coming to collusive arrangements with others. Maybe it's no surprise that one of the more trendy legal claims of late is to assert that the deals made by professional sports leagues with broadcasters and other entertainment companies are anticompetitive in nature.
Sports television is a multitrillion-dollar industry where the status quo has TV broadcasters paying lots of money to leagues and their teams for exclusive regional rights to games. As new technologies like web streaming and place-shifting come to the forefront, however, the dealmaking is undergoing some antitrust scrutiny.
The latest challenge comes from a class of plaintiffs led by Fernanda Garber, who lives in Oakland and pays for Comcast service; Marc Lerner, who lives in Mississippi, and would prefer not to pay high out-of-market package fees to watch his favored New York Yankees; Derek Rasmussen, who lives in Indiana and has to pay a lot to see his favored Milwaukee Brewers; and Robert Silver, who lives in Philadelphia and canceled DirecTV because of high prices allegedly attributable to the defendants' actions.
These plaintiffs assert that MLB's 30 teams are an "illegal cartel" that make "agreements to eliminate competition in the distribution of games over the Internet and television."
The lawsuit further alleges that the defendants, including the cable and satellite companies, agree "to divide the live-game video presentation market into exclusive territories, which are protected by anticompetitive blackouts. Not only are such agreements not necessary to producing baseball contests, they are directed at reducing competition in the live-game video presentation market, involving and protecting third parties who operate only in that separate market."
The claims might appear at first blush to attack a state of being in sports television so established as to stretch any credible prospect of success, but there have been various legal developments of late emboldening class-action lawyers into making objections to these billion-dollar deals.
In particular, in 2010, the U.S. Supreme Court found in the American Needle case that NFL teams are capable of conspiring when making licensing deals and don't have broad antitrust protection. And in another case, the New York Rangers alleged the National Hockey League was a cartel and couldn't stop it from having a website and streaming their games online. The case was settled before any precedential decision came, but some lawyers were impressed by the NHL's failure to win a motion to dismiss at the preliminary stage.
Sports leagues and TV broadcasters might believe their unilateral licensing deals are sacrosanct and beyond a viable challenge, but it didn't stop a class of plaintiffs from pursuing Electronic Arts for making allegedly anticompetitive deals with the NFL for the Madden NFL video game franchise. The class was certified by a judge in 2010, and EA reached a tentative settlement with the plaintiffs this week that could be worth as much as tens of millions of dollars.
Of course, the odds are still long that the plaintiffs will succeed in their attempt for an enjoinment against alleged violations of the Sherman Act and damages.
The ones suing MLB, Comcast and DirecTV have an "uphill battle," says Marc Edelman, a sports law professor at Fordham, who says the lawsuit follows two similar cases in recent weeks against the National Hockey League. But if the plaintiffs were to win, he adds, "It would be lot more difficult for sports leagues to reach agreements on the same financial terms if there was knowledge there was going to be competition online."
To protect regional sports deals that require exclusivity and MLB TV blackouts in local markets, the baseball league could attempt to assert their famous antitrust exemption, which makes the league unique in the sports world. However, Edelman says that MLB has long feared bringing the issue of its exemption before a court. "Baseball has been reluctant to try to use that exemption because they are careful not to lose it," he says.
Perhaps that's about to change.