Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Cable television customer alleges restraint of trade by cable operator to delay entry of new competitor, (Mar 21, 2014)

By Linda O’Brien, J.D., LL.M.

A cable television operator unlawfully engaged in a restraint of trade by interfering with regulatory approval and filing sham litigation to prevent or delay the entry of a competing video services provider in certain local markets in violation of the Sherman Act, according to a complaint filed in the federal district court of San Juan, Puerto Rico (Diaz v. San Juan Cable LLC d/b/a OneLink Communications, March 20, 2014).

San Juan Cable LLC d/b/a OneLink Communications is one of three cable television operators in the territory, each of which holds a franchise to distinct, non-overlapping areas. OneLink provides land-based video services, high speed Internet access, and voice communication services to its customers. Armando Diaz is a customer of OneLink.

The complaint states that, in 2008, the Puerto Rico Telephone Company (PRTC), a local exchange carrier, filed an application with the Telecommunications Regulatory Board of Puerto Rico (Board) for a franchise that would permit it to provide video services in competition with OneLink. OneLink, perceiving PRTC as a threat to its monopoly status, allegedly embarked on a course of conduct designed to prevent or delay PRTC’s entry into the market.

OneLink’s pattern of conduct included the issuance of false press releases regarding PRTC, interference with Board proceedings, and filing sham litigation, Diaz claimed. OneLink also used the delay to fortify its market position against potential competitors by (1) upgrading its old network infrastructure; (2) deploying digital devices to existing customers; (3) signing customers to term contracts with automatic rollover provisions and penalties for early termination; and (4) aggressively marketing to new customers, according to the complaint.

While consumers can receive video services either by wireline network or via satellite, wireline video services are the dominant choice of consumers in the United States. A significant segment of consumers cannot use satellite-based video services due to lack of a clear view of the sky or impediments to mounting an external satellite dish. Additionally, consumers often purchase integrated bundles of services and presently only the franchised cable television operators can provide such integrated bundles over a single network.

There are also significant barriers to entry into the relevant markets due to the substantial capital and fixed costs necessary to over-build new cable infrastructure into areas of existing cable systems and the need to obtain requisite zoning and right-of-ways.

The complaint alleges that OneLink’s predatory actions (1) had the purpose and effect to usurp the franchise process; (2) delayed the Board’s resolution and grant of PRTC’s franchise far beyond the statutorily contemplated 180 days; (3) deprived PRTC of access to the market for video services; (4) restricted competition; and (5) harmed consumers by raising prices above competitive levels.

Diaz asserts claims for monopolization, attempted monopolization, and violations of Section 2 of the Sherman Act and the Puerto Rico Anti-Monopoly Act. The action seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 3:14-cv-01244.

Attorneys: John F. Nevares (John F. Nevares & Associates, PSC) and Camilo K. Salas III (Salas & Co., L.C.) for Armando Diaz

Companies: San Juan Cable LLC

News: Antitrust PuertoRicoNews