Antitrust Law Daily Comcast’s refusal to deal with spot cable ad rep not a basis for ad sales monopoly claim
Thursday, February 23, 2017

Comcast’s refusal to deal with spot cable ad rep not a basis for ad sales monopoly claim

By E. Darius Sturmer, J.D.

Leading cable provider Comcast Corporation would not have engaged in unlawful monopolization of the spot cable advertising sales market by refusing to deal with an independent advertising representative, the federal district court in Chicago has ruled. The complaining ad rep, Viamedia, Inc., charged that Comcast violated the Sherman Act by using its monopoly power over the Interconnects technical and business infrastructure to exclude independent third-party sales reps such as itself from the ad market. While claims based on tying and exclusive dealing—which had survived dismissal in a ruling last summer—were unaffected by the ruling, the monopolization claims were dismissed with prejudice to the extent that they were based on alleged refusal to deal (Viamedia, Inc. v. Comcast Corp., February 22, 2017, St. Eve, A.).

Parties. Comcast Corp. is the world’s largest broadcast and cable television provider by revenue, serving more than 22 million cable and high speed Internet subscribers. Its subsidiary, Comcast Spotlight, LP, is the largest spot cable advertising representative. Spot cable advertising fills the time during the two-to-three-minute commercial breaks on cable networks that are reserved for sale by local cable television service providers.

Viamedia, Inc. is an independent third-party spot cable advertising representative, representing primarily small and medium-size independent cable television service providers that do not maintain their own in-house advertising sales organizations. It directly competes with Comcast Spotlight to represent independent cable operators for their spot cable advertising sales.

In its complaint, Viamedia asserted that Comcast used its control over the Interconnects and the National Cable Communications joint venture, an advertising clearinghouse, to selectively exclude independent third-party spot cable advertising representatives like itself from competing with Comcast Spotlight. Comcast also used its dominant power to ban any smaller cable operator wishing to access its Interconnects from doing business with Viamedia, the complaint averred.

Prior dismissal. In a ruling last summer, the court held that Viamedia had failed to allege or explain how the defendants’ refusal to deal with it—separate from their other conduct like conditioning multichannel video program distributors’ access to Interconnects on their accepting of Comcast Spotlight’s services even for advertising sales that do not involve an Interconnect—lacked any rational competitive purpose. Viamedia thereafter filed an amended complaint.

Amended claims. Even as restated, however, the alleged refusal to deal still did not plausibly constitute the type of anticompetitive conduct that would violate Sec. 2 of the Sherman Act, the court found. While Viamedia’s allegations regarding the termination of its access to the Chicago and Detroit Interconnects could, taken as true, establish that Comcast’s discontinuation of its business relationship with Viamedia caused Comcast to suffer short-term losses, this was not by itself necessarily indicative of anticompetitive conduct.

Viamedia again failed to meet its burden of alleging that Comcast’s refusal to deal "serve[d] no rational competitive purpose," that is, that it was irrational but for its anticompetitive effects, in the court’s view. Noting that it had previously recognized a prototypical valid business purpose from the refusal to deal’s "potentially improved efficiency" of vertical integration, the court rejected Viamedia’s revised argument that Comcast and Comcast Spotlight should be treated as two separate entities incapable of achieving the efficiencies of vertical integration. Elsewhere in the amended complaint, Viamedia treated the two as a single economic entity"—a sensible thing to do given that Comcast Spotlight is Comcast’s wholly-owned subsidiary," the court quipped.

Viamedia’s contention that Comcast had not removed a middleman because Comcast Spotlight would fill the intermediary role Viamedia previously played was also unavailing. Such replacement was a common feature of vertical integration, the court noted. In this case, Comcast had engaged in a business practice that had a rational procompetitive purpose: it has become a ‘one-stop shop’ in certain designated media markets for multichannel video program distributors wishing to sell advertisements on a regional basis.

Because Viamedia’s allegations in the amended complaint were effectively the same as its allegations in its first complaint and failed to raise a plausible inference that Comcast’s refusal lacked any rational, procompetitive business purpose, the court saw no reason to alter its prior conclusion.

The case is No 16-cv-5486.

Attorneys: Britt Marie Miller (Mayer Brown LLP) for Viamedia, Inc. Arthur Burke (Davis Polk & Wardwell LLP) and Ross Benjamin Bricker (Jenner & Block LLP) for Comcast Corp. and Comcast Spotlight, Inc.

Companies: Viamedia, Inc.; Comcast Corp.; Comcast Spotlight, Inc.

MainStory: TopStory Antitrust IllinoisNews

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