Viacom Can't Escape Cablevision's Antitrust Lawsuit

James Dolan Philippe Daumon Split - H 2013
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James Dolan Philippe Daumon Split - H 2013

A New York federal judge has denied Viacom's motion to dismiss an antitrust lawsuit brought by Cablevision that alleges that the owner of "must-have [core] networks" like Nickelodeon, Comedy Central and MTV had threatened to impose a "10-figure penalty" if Cablevision didn't license smaller suite networks like Palladia, MTV Hits and VH1 Classic.

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Viacom disputed that it had illegal made a tying arrangement by bundling its networks, and argued that the plaintiff had failed to demonstrate marketplace foreclosure and hadn't identified the relevant product markets for a viable antitrust claim.

But in an opinion on Friday, U.S. district judge Laura Taylor Swain says that Cablevision has "pleaded facts sufficient to support plausibly an inference of anticompetitive effects. For example, Cablevision alleges that if it were not forced to carry the Suite Networks, it 'would carry other networks on the numerous channel slots that Viacom’s Suite Networks currently occupy.' Cablevision also alleges that Cablevision would buy other 'general programming networks' from Viacom’s competitors absent the tying arrangement. Viacom’s motion is therefore denied to the extent it seeks dismissal of Cablevision's per se tying claim for failure to allege anticompetitive effects."

Here's the full ruling.

The lawsuit was filed in February, 2013, just three months after the programmer and distributor reached its last carriage deal. The timing of the lawsuit, so soon after the dealmaking, raised Viacom's ire, as the defendant told the judge that what Cablevision really wanted to do was to "reform the contract to its liking so as to keep only the rates and terms it would like to have."

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The litigation has also been used as an exhibit in the seemingly perpetual push by some consumer advocates and lawmakers for an a la carte pricing system in the TV world.

Cablevision's procedural victory was hardly a given, considering that past courts have said that a tying arrangement in and of itself isn't an antitrust violation. Viacom has also said publicly that that the “10-figure penalty” that Viacom has cited is simply the difference between the standard rates and the significant "discount" Cablevision negotiated.

Although Cablevision was able to fend off a motion to dismiss, the judge declined to address the cable operator's demand to void its deal licensing Viacom's networks at such an early stage in the litigation.

The case now moves on. No trial date has yet been set. Summary judgment motions would likely come first.

In reaction to the ruling, Cablevision issued the following statement: "We are gratified the Court has ruled that Cablevision has stated a valid antitrust claim against Viacom for illegal channel tying. We continue to believe that Viacom’s tying of its popular networks to carriage of its lesser-watched ancillary networks is illegal, anti-consumer, and wrong. We look forward to further pressing our case at the next stage of the proceeding."

Viacom responds: "Viacom’s programming licensing arrangements are flexible, competitive and the result of good-faith negotiations with distributors.  Cablevision’s action in this case is simply part of an ongoing effort to renege on a long-term business agreement, using arguments directly contrary to positions it has taken in other cases and to its own business practices.  Although we are disappointed that the court did not dismiss these claims at the outset, we are confident that Cablevision will fail to prove the facts required to prevail in their case."

Twitter: @eriqgardner