Antitrust Law Daily Wrap Up, ANTITRUST—DDC: Internet TV Provider Fails to State Claim Based on Termination of C-SPAN Distribution Rights, (Jun 4, 2013)

By Jeffrey May, J.D.

Sky Angel U.S., LLC, which delivers television content to its FAVE-TV subscribers using the subscribers’ high-speed Internet service, failed to adequately allege antitrust claims against National Cable Satellite Corporation for terminating Sky Angel's right to distribute reception of the C-SPAN television networks, the federal district court in Washington, D.C. has ruled. Sky Angel was, however, granted leave to amend its complaint (Sky Angel U.S., LLC v. National Cable Satellite Corp., June 3, 2013, Contreras, R.).

At the outset, the court rejected C-Span's assertions that it lacked subject matter jurisdiction over Sky Angel’s Sherman Act claims. C-SPAN could not “dodge” the court’s jurisdiction over the Sherman Act claims by arguing that there was an overlap between the antitrust claims and a potential “program access” claim under the Communications Act.

In support of its antitrust claims, Sky Angel alleged that C-SPAN, which distributes video of legislative proceedings and other programming, is controlled by cable industry multichannel video programming distributors (MVPDs). The top ten largest MVPDs purportedly hold seats on C-SPAN’s board. According to Sky Angel, C-SPAN’s termination of their distribution agreement resulted from a conspiracy among C-SPAN’s cable MVPD board members to boycott Sky Angel.

Although C-SPAN contended that it was a single entity incapable of conspiring, the complaint raised a plausible inference that C-SPAN board members might have acted on interests separate from the interests of C-SPAN, the court ruled. Sky Angel alleged that the termination of the agreement authorizing FAVE-TV to carry C-SPAN programming resulted in a sacrifice of C-SPAN’s revenue for no legitimate purpose other than to create barriers for those who competed with the cable MVPDs and who would exert downward pressure on the prices of their independently-priced subscription packages.

Sky Angel failed, however, to plead a factual context sufficient to support a plausible inference of conspiracy among C-SPAN’s cable MVPD board members. Sky Angel could not rely on a communication by a single C-SPAN agent, seeking removal of C-SPAN networks from FAVE-TV to establish the conspiracy. The “plurality of actors” requirement was not satisfied. “Once the conclusory inference of agreement—through use of agency law—is stripped away from the complaint,” Sky Angel’s Section 1 claim could not rest “solely on the fact that the top cable MVPDs have representatives on C-SPAN’s board of directors.”

Monopoly. The court also rejected Sky Angel’s claim that C-SPAN terminated their agreement in order to maintain monopoly power over the market for real-time, multichannel video programming distribution services delivered by MVPDs in violation of Section 2 of the Sherman Act. Sky Angel failed to adequately allege relevant product and geographic markets.

Despite C-SPAN's assertions to the contrary, the boundaries of the alleged product market could be ascertained from the complaint. However, Sky Angel did not support the exclusion of other video program industry participants whose programming was not “real-time” and “multichannel,” such as online video distributors (OVDs) Netflix and Hulu Plus. In addition, Sky Angel failed to provide sufficient detail about the geographic scale on which competition actually occurred.

Even if the relevant markets were adequately pleaded, Sky Angel's “shared monopoly” theory could not support a Section 2 claim, the court ruled. The Section 2 claim was improperly premised on the alleged collective action of several cable MVPDs within a single, national market. “Where the alleged monopoly is held by multiple separate companies within a market, there is no 'monopoly' at all,” the court explained.

Injury. Although the court found that the Sherman Act claims were inadequately pleaded, it noted that, if such violations had occurred, Sky Angel sufficiently alleged injury in fact and antitrust injury. Sky Angel alleged that it lost profits and business opportunities due to C-SPAN’s termination of their agreement. It also alleged that the purported boycott of Sky Angel and the cable MVPDs’ monopoly conduct reduced competition and allowed the cable MVPDs to maintain artificially high prices.

At this stage of the proceedings, the court refused to dismiss Sky Angel’s complaint on the basis that C-SPAN's termination of their agreement was caused by Sky Angel’s supposed breach of contract (because FAVE-TV's Internet distribution method was not permitted by the contract). Sky Angel adequately alleged that the termination was “motivated by anticompetitive animus,” the court decided.

The case is Civil Action No. 12-1834 (RC).

Attorneys: Jonathan Laurence Rubin for Sky Angel U.S., LLC. Bruce Douglas Sokler (Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, PC) for National Cable Satellite Corp.

Companies: Sky Angel U.S., LLC; National Cable Satellite Corp.

Cases: Antitrust DistrictofColumbiaNews