Antitrust Law Daily Refusal to deal and tying claims go forward against Comcast
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Tuesday, February 25, 2020

Refusal to deal and tying claims go forward against Comcast

By Nicole D. Prysby, J.D.

Spot cable advertising representative Viamedia sufficiently alleged that Comcast used its monopoly power over Interconnect services to force retail cable television competitors to stop doing business with Viamedia.

A spot cable advertising representative offered sufficient evidence that cable company Comcast refused to deal in violation of the Sherman Act and illegally tied services in three geographic markets, the U.S. Court of Appeals in Chicago has decided. The ad rep, Viamedia, alleged that Comcast used its monopoly power over the cooperative Interconnects to force its smaller retail cable television competitors to stop doing business with Viamedia, thereby gaining monopoly power over the market for advertising representation services. Viamedia’s refusal to deal and tying claims would go forward, based on evidence that Comcast abruptly terminated decade-long, profitable agreements and sacrificed short-term profits to obtain and entrench long-term market power. Comcast used its monopoly power in Interconnect services market to tie those services to its advertising representation services and unlawfully refused to deal with Viamedia and any cable competitor that bought advertising representation services from Viamedia (Viamedia, Inc. v. Comcast Corp., February 24, 2020, Hamilton, D.).

Comcast Corp. is the world’s largest broadcast and cable television provider by revenue. Its subsidiary, Comcast Spotlight, LP, is the largest spot cable advertising representative. Viamedia is an independent third-party spot cable advertising representative, representing 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.

Interconnect services are cooperative selling arrangements for advertising through an "Interconnect" that enables providers of retail cable television services to sell advertising targeted efficiently at regional audiences. Advertising representation services for retail cable television providers assist those providers with the sale and delivery of national, regional, and local advertising slots.

Viamedia asserted that Comcast used its control over the Interconnects services market to selectively exclude independent third-party spot cable advertising representatives like Viamedia from competing with Comcast Spotlight in the advertising representation services market. In the Chicago, Detroit, and Hartford markets, Viamedia alleged, Comcast unlawfully used its monopoly power over the Interconnects to tie those services to its advertising representation services and unlawfully refused to deal with Viamedia and any cable competitor that bought advertising representation services from Viamedia. After the federal district court in Chicago granted summary judgment in favor of Comcast, Viamedia appealed.

Refusal to deal and tying claims go forward. The court concluded that Viamedia offered sufficient evidence that Comcast illegally tied purchase of its ad rep services to the Interconnect access it already controlled. Comcast has market power in the tying market for Interconnect services and Viamedia offered evidence that Comcast forced its competitor multichannel video programming distributors (MVPDs) to become its customers for ad rep services if they also wanted to keep their access to the Interconnects. The court rejected Comcast’s argument that Interconnect and ad rep services are not distinct services. While some buyers purchased them together, they are different functionally and Comcast offers them separately in other markets.

Viamedia also demonstrated harm to competition. Prior to Comcast’s conduct, there was competition in three related markets: (1) between Comcast and other MVPDs for subscribers; (2) between Viamedia and Comcast in ad rep services; and (3) between Comcast and other MVPDs for the sale of spot avails in the local market. By forcing out its only competitor in the market for ad rep services and forcing its MVPD competitors to turn over 100 percent of their spot cable availability, Comcast eliminated competition in the market for ad rep services and the market for the sale of local spot availability. The ad rep services market went from two service providers to a single, monopolist provider.

Comcast’s conduct also turned a previously procompetitive platform (the Interconnects) into a weapon to decrease competition in related markets. Having taken control of the Interconnects, Comcast now claims the right to use the mechanism as a source of its competitive advantage over rivals, distorting competition in related markets. Comcast could not now justify exclusionary conduct by pointing to control over the Interconnects, which was acquired through mergers that themselves may have been anticompetitive precisely because of the risk that they could enable Comcast’s exclusionary conduct, according to the court. If Comcast could offer improved efficiencies by offering ad rep services and Interconnect services together to MVPDs, it was always free to do so. If this were the case, it could have passed on some of those savings to MVPD customers and possibly outcompeted Viamedia. Refusing to deal with the MVPD’s representative of choice appeared to be an attempt to avoid competition on the merits in the markets for ad rep services.

The court rejected Comcast’s argument that there was no appropriate judicial remedy for its conduct. Although a remedy may be difficult, there may be potential solutions based on the prior course of business between Comcast and Viamedia. Another obvious possibility would be to prohibit Comcast’s control over Interconnects.

Viamedia could demonstrate antitrust standing on its tying claim because it presented evidence indicating that if Comcast had not tied its sale of Interconnect services to ad rep services, broadband internet service providers RCN and WOW! likely would have continued to obtain ad rep services from Viamedia. And where a direct rival is forced out of a market, the courts ordinarily grant standing to that excluded rival.

Partial dissent. Judge Michael Brennan partially dissented and would have held that Viamedia’s refusal to deal claim should go forward but that its tying claim should fail. Viamedia relied on the injuries and damages it claimed from Comcast’s refusal to deal rather than any distinct tying injury and was not the party who can most effectively vindicate the antitrust laws. The tying claim should also fail for lack of conditioning. The evidence showed that RCN and WOW! sought a full-turnkey relationship with Comcast to receive access to the Interconnects and ad representation services as a bundle. They were neither forced to purchase ad representation services from Comcast nor denied access to the Interconnects unless they purchased ad representation from Comcast.

The case is No. 18-2852.

Attorneys: Aaron Martin Panner (Kellogg, Hansen, Todd, Figel & Frederick PLLC) for Viamedia, InCorp. Ross B. Bricker (Jenner & Block LLP) and John M. Briggs (Davis Polk & Wardwell LLP) for Comcast Corp. and Comcast Cable Communications Management, LLC.

Companies: Viamedia, InCorp.; Comcast Corp.; Comcast Cable Communications Management, LLC; Comcast Spotlight, LP

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