The Department of Justice (DOJ) reinforces the perils of competitor information exchanges by challenging alleged communications between DirecTV and other video programmers related to broadcast rights for Los Angeles (LA) Dodgers baseball.
WHAT HAPPENED:
- In November 2016, the DOJ filed an antitrust complaint against DirecTV. DOJ alleged:
- The LA Dodgers sought to sell broadcast rights to their baseball games to cable and satellite TV companies.
- DirecTV was a potential bidder for Dodgers’ rights, as were other cable companies operating in the LA area.
- DirectTV entered into agreements with competing cable companies to exchange information relating to their negotiations with the LA Dodgers.
- As a result of the information learned through these information exchanges, the various potential bidders did not compete aggressively for Dodgers broadcast rights because they gained information about their rivals’ negotiating positions.
- The negotiations dragged on, and since no programmer had broadcast rights, people in LA could not watch Dodgers games on television.
- Notably, DOJ did not allege that the broadcasters reached any price fixing or market allocation agreement.
- In late March, DirecTV settled with the DOJ and entered into a consent order that precludes it from providing non-public, competitively sensitive information to a competitor or seeking such information from competitors.
- There are exceptions to allow exchanges in connection with legitimate due diligence, collaborative ventures or commercial vendor/vendee arrangements.
WHAT THIS MEANS:
- While not surprising, this case reinforces that information exchanges between competitors creates substantial antitrust risk.
- Exchanges can create antitrust exposure even if there is no agreement between the competitors on pricing or other competitive decisions, and compliance programs should reinforce this principle.
- Agreements or coordination among buyers raise the same types of competitive issues as agreements among sellers.
- In this case, the Dodgers were the sellers and DirecTV and programmers were the buyers.
- Another recent example is the FTC/DOJ guidance issued last fall on anticompetitive agreements among employers, such as “no poach” or “no solicit” agreements, which DOJ stated it may prosecute criminally if they are “naked” agreements, unrelated to a legitimate activity such as a joint venture.
- The antitrust laws protect the competitive process rather than low prices.
- A competitive market for the sale of products often leads to lower priced goods and services.
- In this case, DOJ alleged that DirecTV and the other providers exchanged information to prevent the Dodgers from raising the price for Dodgers’ broadcasts, but that did not legitimize the conduct.
