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Netflix Opposes Proposed Settlement in Walmart Online DVD Rental Antitrust Litigation

Wednesday, August 3, 2011
Alexandra Kay | Bloomberg LawIn re Online DVD Rental Antitrust Litigation, No. 4:09-md-02029 (N.D. Cal. Aug. 24, 2011) Netflix recently filed a motion opposing plaintiffs' motion for preliminary approval of a revised $27.25 million settlement in a California multidistrict litigation that charged Netflix and Wal-Mart Stores Inc.'s with conspiring to divide the markets for sales and online rentals of DVDs in the United States. Plaintiffs had sought court approval for a revised settlement with Walmart that would provide Netflix subscribers with a choice between cash or an online gift certificate to walmart.com. Although Netflix did not object to the settlement itself, it opposed the "manner of effectuating" it, stating that the proposed settlement threatened its reputation and trade secrets. According to Netflix, the notice plan for the settlement would effectively allow a rival, Walmart's Vudu video rental service, to broadly damage Netflix's reputation by alerting class members to the deal through broad public notices, rather than individual mail contact. Netflix also argued that the proposed settlement would permit its competitor to access Netflix's trade secret customer information because the class members would only be able to redeem their gift cards at walmart.com, where Walmart would be able to obtain the customer information. To remedy this confidentiality concern, Netflix suggested that the court: (1) expressly prohibit Walmart from ever using the names and contact information provided by class members when redeeming their gift cards for any purpose other than fulfilling the orders placed in that transaction; and (2) require Walmart to certify under oath that its systems and databases have been modified to delete the customer information obtained from the class members. Alternatively, Netflix proposed that the gift cards could be made redeemable only in Walmart retail stores. Finally, to alleviate concerns that the settlement would permit Walmart to gain an unfair competitive advantage in marketing Vudu to Netflix customers, Netflix suggested that Walmart be prohibited from placing any Vudu-related materials, advertisements, or promotions on the website pages that will be visited by class members in redeeming their gift cards. Netflix also proposed that the settlement gift cards be ineligible for Vudu video rentals or that the gift cards be restricted to in-store use. Disclaimer This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy. ©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.

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