Judge tosses Seven pay TV suit

'Mega-litigation' could cost Aussie net millions

After a judge's dismissal of the largest legal action in Australian corporate history, Seven Network chairman Kerry Stokes defended the multimillion-dollar suit he filed against rival broadcasters for anti-competitive conduct over the 1999 acquisition of pay TV sports rights.

"We feel completely justified in bringing the action, but clearly today's judgment is disappointing," Stokes said Friday in a statement, adding, "Seven will consider its position fully in relation to its rights to appeal."

The case, which is estimated to have cost more than AUS$200 million ($172 million) to date, is noted for Seven seeking damages of up to AUS$480 million ($413 million) from 17 Australian media companies including News Corp., Publishing and Broadcasting Ltd., Telstra Corp. and Foxtel.

Seven alleged that its pay TV arm, C7, had been driven out of business after its rivals colluded to deprive Seven of access to pay TV rights to the two key Australian sports competitions, the National Rugby League and the Australian Football League.

But after 10 months of deliberation, Justice Ronald Sackville dismissed all of Seven's claims, calling the network the "author of its own misfortune."

"Seven was far from a helpless victim in the face of the allegedly anti-competitive conduct of which it complained," Sackville said in a 30-minute summary of his judgment, which was carried live on Sky News Australia, unusual for a federal court case.

Seven director Bruce McWilliam admitted outside the court that Sackville's judgment was a "comprehensive loss" for the broadcaster.

Seven's shares fell more than 4%, or AUS49 cents, to end at AUS$10.91 ($9.38) as shareholders digested the realization that the network could face a payout of up to AUS$200 million ($172 million), the amount the parties to the suit are estimated to have spent on the litigation to date.

However, analysts said Seven's exposure from the case was already factored into its share price.

In his summary of the judgment, which runs 1,230 pages, Sackville was scathing of all the parties for allowing the "mega-litigation" to take place, calling the hundreds of millions of dollars that the parties have spent on the case "extraordinarily wasteful" and "bordering on the scandalous."

He found that Seven had been unable to prove that its rivals conspired to "kill off" pay channel C7 by colluding on pay TV sports rights and rejected Seven's allegations of anti-competitive conduct by News, Foxtel and PBL.

Sackville warned Seven and other parties against appealing the judgment and urged the parties once again to "bring these protracted and excessively expensive proceedings to a conclusion by mutual agreement."

The judge has asked for further submission on costs.

Foxtel CEO Kim Williams and News Ltd. chairman John Hartigan welcomed the judges' decision in separate statements.

"We agree with Justice Sackville that the litigation launched by Seven was a great waste of executive energy and creative and financial capital across the Australian media sector for the past five years," Williams said.

"Foxtel does, however, observe that it had no option other than to mount a sustained and comprehensive defense. The case was of Seven's making entirely," he added.

Hartigan branded Seven's "willingness to employ litigation as a commercial strategy and its attempts to manipulate the courts as well as the media covering this case" a "disgrace."

Seven has been working on the case for the past seven years and initially claimed damages of more than AUS$1 billion ($860 million), which was whittled down to AUS$212 million ($182 million) plus interest during the court hearings.

The hearings, which began in November 2005, lasted 120 days and saw 44 witnesses called and more than 85,000 documents submitted.