NFL's $12 Billion Deal With DirecTV Faces Major Antitrust Lawsuit

Steelers Ravens NFL - H 2014
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Steelers Ravens NFL - H 2014

On Monday, a major class-action lawsuit was filed against the National Football League and DirecTV by the prominent antitrust attorney Michael Hausfeld and colleagues at Hausfeld LLP.

Hausfeld, whom ESPN once called "one of the most powerful people in sports," seeks to represent a class of "commercial subscribers" to DirecTV's Sunday Ticket, a package of all out-of-market football games. The plaintiffs would be bars and restaurants throughout the nation, led by a San Francisco pub known as The Mucky Duck, seeking to end what they see as a conspiracy.

If bars and restaurants want to show these games, they must go through DirecTV, which has an exclusive $12 billion deal with the NFL. But it can be expensive. According to the lawsuit, a bar with occupancy up to 100 patrons will pay $2,314 for Sunday Ticket in 2015 while larger establishments like Las Vegas hotels are charged more than $120,000 per year.

"But for the NFL teams’ agreement in which DirecTV has joined, teams would compete against each other in the market for NFL football programming, which would likely induce more competitive pricing," states the complaint.

Last month, lawyers representing football fans filed their own class-action lawsuit over Sunday Ticket, seeking an end to a system of blackouts and all-or-nothing out-of-market TV game packages. The NFL and DirecTV were hit with this lawsuit after fans experienced some pretrial success in similar litigation against other sports leagues. The National Hockey League even came to a proposed settlement with fans that would result in an option to purchase their favorite teams' out-of-market games at a discounted price.

The latest lawsuit arguably goes even further, painting a broader picture why the NFL's deal with DirecTV should be deemed a violation of two sections of the Sherman Antitrust Act. The attorneys behind the lawsuit are the same ones who represented college athletes in an antitrust lawsuit against the NCAA in a drive toward compensation for amateurs. Now, with references to the AT&T/DirecTV merger and the 2010 Supreme Court ruling American Needle v. National Football League, which held that NFL teams are capable of conspiring when making licensing deals, they are attacking the very essence of a professional sports league striking an exclusive television deal. They are not only filing a lawsuit over the arrangement that NFL teams have with each other, but also one that challenges the limiting of Sunday Ticket distribution to just DirecTV.

"Of the 4 major professional sports in this country—baseball, basketball, hockey, and football—the only one with an exclusive out of market broadcasting arrangement is the NFL/DirecTV Sunday Ticket," states the complaint. "Major League Baseball, the National Basketball Association, and the National Hockey League all distribute live out of market games through multiple MVPDs [multichannel video programming distributors], including, for example, DirecTV, Dish Network, Comcast, Cox Cable and Time Warner.

"As a result, DirecTV does not charge nearly as much for access to MLB Extra Innings, NBA League Pass, and NHL Center Ice, which provide access to more games per week over a longer season than the NFL," continues the complaint, which is adorned with charts showing that prices for packaged football games are increasing at a much greater rate that the other sports' as well.

The plaintiffs are seeking the recovery of damages for "supracompetitive premiums" that DirecTV has charged for NFL Sunday Ticket, and perhaps more tantalizing, an injunction on a deal that was renewed in 2014.

"But for the exclusive agreement between DirecTV and the NFL, additional MVPDs would be willing to compete for consumers of these games," says the complaint.

As noted in our past stories on the sports TV antitrust front, this is a big issue for entertainment at large because live sports has a big impact on cable and satellite subscriptions and whether consumers are cord-cutting. If the lawsuit makes it to trial, the NFL and DirecTV may have the opportunity to showcase the pro-competitive effects of bundled packages and exclusive deals, though there likely will first be a lot of antitrust analysis on the horizontal agreement among NFL teams as well as the league's arrangement with DirecTV to exert monopoly power.

Here's the full complaint.