Keep up with the latest developments and legal issues in the telecommunications and emerging technology sectors, with exclusive access to a comprehensive collection of telecommunications law news,...
Sept. 2 — A federal appellate court Sept. 2 upheld a lower court's dismissal of an antitrust lawsuit claiming that Time Warner Inc. illegally required customers of premium cable channels to lease set-top boxes from the company ( In re Time Warner Inc. Set-Top Cable Television Box Antitrust Litig., 2d Cir., No. 11-02512, 9/2/16 ).
The plaintiffs in the class action case didn't sufficiently allege that the cable services and set-top boxes were in separate product markets and that Time Warner had market power over premium cable services, the U.S. Court of Appeals for the Second Circuit ruled in a 2-1 decision. They failed to show “consumers are coerced into ‘leasing' set-top boxes from Time Warner that they would otherwise purchase elsewhere,” the court said.
The decision comes as the Federal Communications Commission continues to work on a plan to open the set-top box market to competition. The agency's March proposal would require pay-TV providers to deliver three core information streams to parties that make alternatives to traditional set-top boxes (2016 TLN 6, 3/1/16). Equipment manufacturers, app developers or other parties would then have access to those information streams through open technical standards.
The FCC may be considering a revised approach after receiving criticism from lawmakers, the cable industry and the copyright community (2016 TLN 9, 9/1/16).
Time Warner spokesman Justin Venech told Bloomberg BNA the company is pleased with the decision. Robert I. Harwood, senior partner at Harwood Feffer LLP in New York, who represented the plaintiffs in the case, said that “Judge Droney got it right,” referring to Judge Christopher F. Droney's dissenting opinion.
Subscribers of Time Warner's cable services alleged that tying premium cable channel subscriptions to the leasing of set-top boxes violated the Sherman Act, 15 U.S.C. § 1. A federal district court in New York dismissed the plaintiffs' third amended complaint because it failed to allege anti-competitive effects.
A tying arrangement is an agreement in which a party will sell a product only on the condition that the buyer also purchase a different product. To state a claim under the Sherman Act over a tying arrangement, a plaintiff must show that the two products are separate, and that the seller has sufficient market power over the tying product.
The Second Circuit said the plaintiffs failed to allege that set-top boxes and cable services are sold separately in the U.S. The court rejected their argument that Time Warner doesn't manufacture its own set-top boxes, and that set-top boxes are sold separately outside the country.
Time Warner's lack of manufacturing operations doesn't address consumer demand, the court said. The plaintiffs didn't allege that the foreign set-top box markets were sufficiently similar to the U.S. market, it also said.
The court said the FCC's failure as of yet to separate set-top boxes from the cable services they deliver “bolsters our conclusion that the plaintiffs have not plausibly alleged separate product markets.”
Also, the plaintiffs failed to plead market power over premium cable services, the court said. The plaintiffs alleged that Time Warner has power over the market for basic cable, but they alleged no facts showing Time Warner's share of the market for premium services, it said.
Harwood Feffer LLP represented the plaintiffs. Latham & Watkins LLP represented Time Warner.
To contact the reporter on this story: Alexis Kramer in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Keith Perine at email@example.com
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)