Viacom Demands Judge Dismiss Cablevision's Antitrust Claims

2012-33 BIZ Lawsuit Illustration P IPAD

A fight over Christopher Nolan’s "Dark Knight Rises" commissions is the latest Hollywood lawsuit to reveal that looming bottom-line pressures trump even bad press.

In February, Cablevision made a move with the potential of forever changing the television industry. The cable TV company sued Viacom, alleging that the owner of "must-have networks" like Nickelodeon, Comedy Central and MTV had threatened to impose a "10-figure penalty" if Cablevision didn't license smaller networks like Palladia, MTV Hits and VH1 Classic.

On Wednesday, Viacom reacted to the antitrust charge with a motion to dismiss.

Viacom not only disputes Cablevision's characterization that it has engaged in a “per se” illegal tying arrangement by bundling its networks, but goes on the attack against the plaintiff with a blistering barrage of the many ways that Cablevision has allegedly contradicted itself. As the case goes forward, Cablevision may have to dance around statements made to past courts, the Federal Communications Commission and the Securities and Exchange Commission.

As we pointed out when Cablevision first filed the lawsuit against Viacom, consumers have also attempted to hold companies in the TV industry liable for using their market power to force consumers to accept bundled packages of channels.

One such case -- Brantley vs. NBCU -- made its way to the Ninth Circuit Court of Appeals last year. Cablevision was one of the defendants. In that case, the appellate circuit ruled, "Tying arrangements, without more, do not necessarily threaten an injury to competition... Plaintiffs must also allege facts showing that an injury to competition flows from these tying arrangements."

Now, Viacom is pointing to the way that Cablevision participated in defending the bundling conduct in the Brantley case, including telling the Supreme Court, "This Court has repeatedly emphasized the need to demonstrate foreclosure in tying cases, both under the rule of reason and the per se doctrine.”

In translation, what Viacom is saying is not only Cablevision being two-faced about its claims, but also that Cablevision hasn't successfully hurdled the necessary bar on allegations of injuries.

"Its foreclosure allegations fail as a matter of law because they pertain only to Cablevision itself, not to the market for programming as a whole," says the motion to dismiss. "And even as to Cablevision, they are deficient because Cablevision never alleges that it would have carried an otherwise foreclosed programming service if it did not carry Viacom’s Suite Networks."

In Cablevision's lawsuit, the plaintiff attempted to anticipate this line of argument by saying that "absent Viacom's foreclosure of competing general programming networks, Cablevision would have greater flexibility to assemble its programming packages to meet consumer demand."

Viacom reacts to statements like this by countering, "Cablevision never alleges that it would have carried an otherwise foreclosed programming service if it did not carry Viacom’s Suite Networks. Instead, Cablevision conspicuously says only that it would have considered carrying other services."

But Viacom goes further, pointing to other statements that Cablevision has made to government regulators who presumably demand the truth.

According to the motion, "While Cablevision now alleges that each of MTV, Nickelodeon, Comedy Central and BET is its own relevant product market and has no real substitutes, it has consistently represented to courts, the FCC, and the SEC that programming services operate in 'highly competitive markets' and that no service 'can make or break the competitive viability' of any cable or satellite distributor."

The motion to dismiss, filed by attorney Joseph Tringali at Simpson Thacher & Bartlett, then lists out seven statements made by Cablevision, including one on the "mature competitive marketplace," including one that states that "the hundreds of available channels means that no single channel... represents so great a proportion of overall viewing as to render it essential for an [multichannel video programming distributor] to offer," and including one doubting the plausibility of a "foreclosure strategy."

Viacom also argues that the lawsuit should be dismissed because it is barred by the laches doctrine. The defendant says that rather than bring the claims sooner, Cablevision entered into an allegedly coercive agreement with Viacom, and as a result, demonstrated an unreasonable delay.

The full arguments on why Viacom believes Cablevision's lawsuit is defective is posted below.

A Cablevision spokesperson responds in a statement to THR:

"Viacom’s assertions are predictable and do not change the fact that its all-or-nothing approach to selling programming is illegal and anti-consumer. By forcing Cablevision’s customers to pay for more than a dozen unpopular channels – or pay a penalty of more than $1 billion – in order to receive the channels they actually want, Viacom is abusing its market power.... Viacom's interpretation of the Brantley case is misleading and they are inappropriately applying it to this case. We will provide our response to the court when appropriate.  We also think it is notable that Viacom, in its motion, does not even contest that they in fact forced us in the negotiations last December to take their unpopular networks.  So, all of the claims Viacom made when we first filed suit about merely offering us a 'standard volume discount' if we took all their channels were not truthful."

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