Judge Rules Class Action Suit Against Disney Can Go Forward
The company is being sued by YouTube TV customers in several states for antitrust violations.
The Walt Disney Company got good news and bad news in court this week. Both stem from the same case; an antitrust violation levied by users of live TV services like YouTube TV and DIRECTV STREAM, which was first filed last fall. The class-action suit has been brought by customers in several states, and alleges that Disney is violating antitrust laws with the way it distributes and controls content.
According to Deadline, Judge Edward Davila ruled that part of that lawsuit can go forward, but he dismissed the other part of the plaintiff’s argument. Davila granted that Disney’s control of both content and distribution provided a barrier to entry into the market for competitors, but did not agree with the argument that requiring live TV streaming services to carry ESPN does not constitute “cognizable injury” to competition.
“The Court agrees with Disney that, to the extent Plaintiffs rely on allegations of reduced consumer choice and increased subscription prices, these allegations are insufficient to allege an injury to competition,” he said. But, “Plaintiffs also allege that, in addition to increased prices, the infrastructure and agreements have produced barriers to entry. Detailed allegations of barriers to entry are sufficient to allege anticompetitive harm.”
The plaintiffs felt they had a strong case to make on both arguments, so the fact that only half of their lawsuit is going forward is a small win for Disney. The suit alleged that because Disney required streamers to offer ESPN in its base package, and because ESPN has the highest carriage fee of any cable channel, prices have been driven up unsustainably for consumers.
However, the fact that Disney owns channels like ESPN, FX and other popular cable networks as well as controlling its own live TV service in Hulu + Live TV could mean that a potential new live TV service could be asked to pay an exorbitant sum to get those channels, or face other barriers thrown up by Disney to slow down a competitor. Judge Davila is allowing the plaintiffs to proceed with that argument, and gave them until Oct. 16 to amend their case. Disney asked the judge to dismiss the suit entirely in February, but its arguments were clearly not convincing.
The failure of the old cable model has been very much on Disney’s mind lately, especially in light of its recent carriage deal with Spectrum. The company had to give Spectrum customers access to Disney+ to get its cable channels back on the air in exchange for higher carriage fees, and some Spectrum users will get access to the new ESPN streaming platform that will launch in the next two or three years.
Hulu + Live TV and YouTube TV are some of the most popular live TV services available. Customers are much more satisfied with these services than traditional cable, but some YouTube TV users think Disney is harming the marketplace with some of its practices surrounding Hulu + Live TV. According to the judge, the law might be on their side, and Disney may end up writing some checks to disgruntled plaintiffs soon.
YouTube TV
YouTube TV is a live TV streaming service with more than 60 channels for $72.99/month. This plan includes local channels, 32 of the top 35 cable channels, and regional sports networks (RSNs) in select markets. The service includes an unlimited DVR.