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Southern District Of New York Dismisses Multichannel Video Programming Distributor’s Retransmission Fee Claims For Lack Of Antitrust Standing
04/09/2024On March 20, 2024, the Southern District of New York dismissed DirecTV’s (“Plaintiff”) claims against Nexstar Media Group, Mission Broadcasting, and White Knight Broadcasting (together, “Defendants”) for conspiring to fix prices for retransmission agreements (“RCAs”) and unlawfully sharing information in violation of Section 1 of the Sherman Act. DirecTV LLC v. Nexstar Media Group Inc. et al., Case No. 23-cv-2221, 2024 WL 1195524 (S.D.N.Y. Mar. 20, 2024) (the “Opinion”).
Plaintiff is a distributor of television programming. Nexstar is the largest U.S. broadcaster—it owns or operates 200 stations in 116 markets in the U.S. Id. Mission and White Knight each own Big-4 stations (i.e., ABC, CBS, NBC, and FOX) in the same geographic area as Nexstar. Because federal regulations prohibit owning, operating, or controlling more than one Big-4 station within a certain geographic market, Nexstar divested certain stations to Mission and White Knight. Mission and White Knight are known as “sidecars,” and may rely on Nexstar for some shared services, such as common facilities or technical services. However, federal regulations prohibit Mission and White Knight from coordinating on RCA negotiations.
In 2022, Plaintiff began negotiating the renewal of its RCAs with Mission and White Knight. Plaintiff alleged that Mission and White Knight used a common third-party consultant to coordinate negotiations and demanded fees that were disproportionate to the number of stations each entity owned. Plaintiff alleged that Nexstar would benefit from this conduct because its “sidecars” would set a sufficiently high price floor for Nexstar’s forthcoming RCA negotiations with Plaintiff. Choosing the “lesser of two evils,” Plaintiff refused to pay Mission and White Knight supracompetitive fees, which allegedly resulted in blackouts for Plaintiff’s subscribers, 13,000 subscriber cancellations, and lost profits for Plaintiff.
Defendants moved to dismiss Plaintiff’s complaint for failure to state a claim. Ultimately, the court found that Plaintiff did not have antitrust standing and dismissed its Sherman Act claims because it failed to demonstrate antitrust injury and was not an efficient enforcer of the antitrust laws. With respect to antitrust injury, the court concluded that Plaintiff had sufficiently alleged a horizontal price-fixing conspiracy and actual injury in the form of lost profits. However, Plaintiff failed to demonstrate more than “a causal link between the actual injury and asserted violation” by showing that its injury is of the “type the antitrust laws were intended to prevent and that flows from that which makes or might make defendants’ acts unlawful.” (citing Gatt Commc’ns, Inc. v. PMC Assocs., L.L.C., 711 F.3d 68, 76 (2d Cir. 2013)). The court noted that the harm that flows from a horizontal price fixing conspiracy is the payment of supracompetitive prices. The court determined that Plaintiff’s lost profits from blackouts did not flow from Defendants’ unlawful acts because Plaintiff did not pay supracompetitive rates. Instead, the injury flowed from Plaintiff’s choice to withdraw from RCA negotiations with Mission and White Knight. Said differently, Plaintiff failed to show that “as a consumer…it actually paid supracompetitive rates.”
Additionally, the court found that Plaintiff was not an efficient enforcer of the antitrust laws. Analyzing the factors described in Gelboim v. Bank of Am. Corp., the court determined that Plaintiff’s injuries were indirect, and the harm alleged was speculative. Id. at 15 (citing 823 F.3d 759, 772 (2d Cir. 2016)). The court held that Plaintiff’s injuries were too indirect because it did not pay higher prices. The court also held that Plaintiff’s claim was speculative because it stemmed from being “priced out of the market” and “anyone could claim that he or she would have purchased at the competitive price but was priced out of a market as a result of the anticompetitive pricing.” Plaintiff made two critical assumptions that made its injury claims too speculative: “that absent Defendants’ collusive demands the parties would have reached an agreement, and that had the parties agreed, subscribers would not have left” Plaintiff.
This decision serves as useful guidance on the application of antitrust injury doctrine. As a general matter, antitrust injury is an injury that the antitrust laws are designed to prevent and that flowed from the other party’s acts. Here, the fact that Defendants wanted to impose alleged supracompetitive prices is not enough to meet the antitrust injury requirement. Said differently, a party must pay supracompetitive prices to a counterparty engaged in a horizontal price fixing conspiracy for a plaintiff to survive a motion to dismiss.
Antitrust Litigation