Wednesday, August 14, 2019
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Ninth Circuit:
Antitrust Class Action Against DirecTV, NFL May Proceed
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday revived a dismissed putative class action against DirecTV, the National Football League, and the NFL’s 32 teams claiming that an arrangement for the live broadcasting of Sunday games is violative of the Sherman Antitrust Act.
Circuit Judge Sandra S. Ikuta wrote for herself and District Court Judge George Caram Steeh III of the Eastern District of Michigan, sitting by designation. Circuit Judge N. Randy Smith partially dissented.
As Ikuta explained the arrangement:
“Every Sunday during football season, millions of National Football League (NFL) fans tune in to watch their team play. If they live in the same area as their favorite team—such as Los Angeles Rams fans who live in Los Angeles—they can tune into their local Fox or CBS station to enjoy their team’s game on free, over-the-air television. But if NFL fans happen to live far away from their favorite team—such as Seattle Seahawks fans residing in Los Angeles—they can watch every Seahawks game only if they purchase DirecTV’s NFL Sunday Ticket, a bundled package of a 11 NFL games available exclusively to subscribers of DirecTV’s satellite television service.”
(The games are now available online to those unable to receive DirecTV, such as residents of apartment buildings.)
Three-Game Limit
The jurist elaborated:
“[F]ans who do not subscribe to Sunday Ticket have access to, at most, two to three local games each Sunday afternoon, in any given geographic area. This means, for example, that Los Angeles fans would be able to use over-the-air cable to watch the Rams play the Chargers at 1:00PM E.T. on Fox, the Vikings play the Patriots at 1:00PM E.T. on CBS, and the Dolphins play the Cowboys at 4:00PM E.T. on CBS. But there is no option for NFL fans to watch any of the other 7 to 10 games played each Sunday afternoon which are not available on free, over-the-air television.”
The viewing of individual games cannot be purchased, Ikuta noted. Rather, the entire package has to be bought, costing residential subscribers $251.94 per season, as of 2015, and being priced at between from $2,314 to $120,000 per year for commercial subscribers, depending on the seating capacity of the establishment.
(The current price for residences is $293.94.)
District Court Judge Beverly Reid O’Connell of the Central District of California (since deceased) held that no cause of action was stated under either §1 or §2 of the Sherman Act.
Sec. 1
Sec. 1 provides:
“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination of conspiracy hereby declared to be illegal shall be deemed guilty of a felony….”
Ikuta said the issue, in connection with §1, was whether the arrangement injures competition. She pointed to the U.S. Supreme Court’s 1984 decision National Collegiate Athletic Association v. Board of Regents of University of Oklahoma, saying:
“In that case, the Supreme Court held that an agreement among college football teams and the NCAA violated Section 1 of the Sherman Act because the agreement eliminated competition in the market for college football telecasts.”
She went on to declare:
“Because the complaint alleges that the interlocking agreements in this case involve the same sorts of restrictions that NCAA concluded constituted an injury to competition, we likewise conclude that the complaint plausibly alleges an injury to competition. Further, because the alleged restrictions on the production and sale of telecasts constitute ‘a naked restriction’ on the number of telecasts available for broadcasters and consumers, the plaintiffs were not required to establish a relevant market.”
Sec. 2
Sec. 2 of the Sherman Act says:
“Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony….”
The plaintiffs have stated a cause of action under that section, Ikuta said, explaining:
“Plaintiffs allege that by entering into interlocking agreements, the defendants conspired to monopolize the market for professional football telecasts and have monopolized it….
“[P]laintiffs have adequately alleged injury to competition, and have adequately alleged that defendants have market power in the market for professional football telecasts. Moreover, the complaint adequately alleges that the interlocking NFL-Team and NFL-DirecTV agreements were designed to maintain market power, which is sufficient to allege defendants’ specific intent. Accordingly, we conclude that the complaint adequately alleges a Section 2 violation.”
The defendants argued that under the U.S. Supreme Court’s 1977 decision in Illinois Brick Co. v. Illinois, the plaintiffs lacked standing to attack the agreement between the NFL teams and the NFL under which the teams convey their telecasting rights to the league. Under that case, only direct purchaser have causes of action for antitrust violations.
Ikuta responded:
“Even though DirecTV is the immediate seller to the plaintiffs, the plaintiffs’ allegation that they were directly injured by the conspiracy among the NFL teams, the NFL, and DirecTV is sufficient to allege antitrust standing for purposes of surviving a motion to dismiss.”
On that point, Smith dissented, maintaining:
“[T]o conclude that Plaintiffs have anti-trust standing, we must create a new exception to the Illinois Brick rule. The Supreme Court has instructed us not to do so.”
The source of that instruction, he said, is Kansas v. UtiliCorp United, Inc., a 1990 decision which said:
“[A]mple justifications exist for the Court’s stated decision not to carve out exceptions to the indirect purchaser rule for particular types of markets.”
The case is In Re NFL Sunday Ticket Antitrust Litigation, 17-56119.
DirecTV was purchased by AT&T in 2015 for $67.1 billion. It pays the NFL $1.5 billion per year for rights to its games.
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