Antitrust Law Daily Wrap Up, ANTITRUST—Cal. App.: Former DirecTV retailer failed to show horizontal, vertical conspiracy in sales leads bidding, (Feb 1, 2016)

By Linda O’Brien, J.D., LL.M.

A former independent retailer of DirecTV programming failed to show a genuine issue of material fact as to whether there was a horizontal or vertical conspiracy by DirecTV to limit competition for the bidding on the retailer’s sales leads, the California Court of Appeals in Los Angeles has ruled in an unpublished opinion. Thus, the trial court’s grant of summary judgment was affirmed (Basic Your Best Buy, Inc. v. DirecTV, Inc., January 29, 2016, Edmon, L.).

DirecTV provides satellite entertainment programming in competition with cable providers. The company markets its programming directly to consumers as well as through a network of authorized retailers. Basic Your Best Buy specializes in signing up customers through advertisements in telephone directories and was an authorized DirecTV retailer from 1996 to 2008. The business relationship between Basic and DirecTV was governed by DirecTV’s Independent Retailer Agreement, which included a termination clause whereby either party could terminate the agreement at no cause upon 30 days prior written notice.

In 2008, DirecTV notified Basic that it was exercising its right to terminate the retailer agreement. Following the termination, DirecTV advised Basic that it was interested in purchasing Basic’s sales leads generated from ads placed before the termination. Other authorized retailers were also interested in buying Basic’s sales leads but could not do so without DirecTV’s approval. Without other potential buyers, Basic agreed to sell its sales leads to DirecTV.

In August 2011, Basic brought suit against DirecTV, alleging conspiracy in restraint of trade to restrict competition in the bidding for its sales leads, in violation of California’s Cartwright Act. In March 2014, the trial court granted DirecTV’s motion for summary judgment and Basic appealed.

Horizontal restraint. The appellate court rejected Basic’s contention that the alleged coerced agreement to suppress competition to buy Basic’s sales leads was a horizontal restraint in the market for sales leads. According to the court, a horizontal restraint or group boycott is an agreement between competitors at the same level of the market to minimize or eliminate competition. In this case, DirecTV was not in competition with independent retailers who were potential bidders for Basic’s sales leads, since DirecTV was an entity at the manufacturer level. The alleged restraint was instead vertical in nature that was imposed by DirecTV for its own benefit.

Although DirecTV was a dual distributor of satellite entertainment programming, there was no evidence of any agreement between DirecTV and any direct competitor of Basic regarding Basic’s sales leads. The fact that retailers had bought and sold sales leads from each other in the past was insufficient to raise a triable issue in this case, the court noted.

Vertical restraint. Additionally, Basic failed to present evidence of a cognizable relevant market. The appellate court noted that Basic’s proposed definition of the relevant market—the market for DirecTV’s sales leads—was deficient since it did not address either the interchangeability of DirecTV sales leads with other sales leads or why DirecTV sales leads were not part of a larger market for sales leads. Without a legally sufficient definition of the relevant market, there was no genuine issue of material fact regarding Basic’s claim of a vertical restraint, the appellate court concluded.

The case is No. B258061.

Attorneys: David Wayne Kesselman (Kesselman Brantly Stockinger) and Gregory D. Call, Michael Y. Kao, and Daniel A. Sasse (Crowell & Moring) for Basic Your Best Buy, Inc. Michael E. Williams and Justin C. Griffin (Quinn Emanuel Urquhart & Sullivan) for DirecTV, Inc.

Companies: Basic Your Best Buy, Inc.; DirecTV, Inc.

Cases: Antitrust FranchisingDistribution CaliforniaNews