Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Comcast sued for monopolizing spot cable ad sales, (May 24, 2016)

By Linda O’Brien, J.D., LL.M.

Leading cable provider Comcast has engaged in anticompetitive conduct by using its monopoly power over the Interconnects technical and business infrastructure to exclude independent third-party sales representatives from the spot cable advertising market, according to a complaint filed in the federal district court of Chicago (Viamedia, Inc. v. Comcast Corporation, May 23, 2016).

Comcast Corporation is the world’s largest broadcast and cable television provider by revenue, serving more than 22 million cable and high speed Internet subscribers. Its subsidiary, Comcast Spotlight, LP, is the largest spot cable advertising representative. Spot cable advertising fills the time during the two-to-three-minute commercial breaks on cable networks that are reserved for sale by local cable television service providers.

Viamedia, Inc. is an independent third-party spot cable advertising representative, representing primarily small and medium-size independent cable television service providers that do not maintain their own in-house advertising sales organizations.

The complaint alleges that cable operators use technical and business infrastructure called “Interconnects” to market and sell spot cable advertising time to regional and national advertisers. Access to Interconnects is critical for cable operators to enable them to participate in regional spot cable advertising sales and to receive revenue generated from regional sales. In 1981, a joint venture—National Cable Communications LLC (NCC)—was formed by the five largest cable operators at the time to act as the central clearinghouse for advertisers seeking to place spot cable advertising in multiple designated market areas (DMAs) simultaneously. Through a series of acquisitions, Comcast now owns 60 percent of NCC and has the ability to effectively control NCC.

Viamedia directly competes with Comcast Spotlight to represent independent cable operators for their spot cable advertising sales. Viamedia claims that Comcast has used its control over the Interconnects and the NCC to selectively exclude independent third-party spot cable advertising representatives, such as Viamedia, from competing with Comcast Spotlight. Comcast has also used its dominant power to ban any smaller cable operator that wishes to access its Interconnects from doing business with Viamedia, the complaint charges.

The lawsuit alleges that, from 2002 to 2012, Viamedia represented two cable operators—WOW and RCN—and participated in the Interconnects for Chicago and Detroit for the purpose of selling their spot cable advertising. In 2011, Comcast contacted WOW and RCN, expressing Comcast Spotlight’s interest in representing the companies for the purpose of selling their spot cable advertising in national, regional, and local markets. When the companies declined to switch to Comcast Spotlight, Comcast unilaterally ended Viamedia’s access to those Interconnects and removed WOW and RCN from participating in regional ad sales, Viamedia maintained. Comcast allegedly informed WOW and RCN that if they wished to regain access to the Interconnects, they would be required to cease using Viamedia as their spot cable advertising representative. As a result of the exclusion, Viamedia and its clients lost tens of millions of dollars in revenue from the sale of spot cable advertising through the Chicago and Detroit Interconnects, the plaintiff contended.

Viamedia also claims that it has participated in the NCC for years for the purpose of selling spot cable advertising to national advertisers and its current agreement to provide access to NCC will expire in December 2017. Despite repeated requests from Viamedia, NCC has refused to entertain a long-term extension of the agreement that would ensure Viamedia’s continued access to NCC. As it has done with the Interconnects, Comcast intends to exclude Viamedia and its clients from participating in national spot cable advertising sales as a way to coerce independent cable operators to transfer their spot cable advertising to Comcast Spotlight, the complaint states.

Viamedia asserts claims for tortious interference with a business expectancy, and monopolization and attempted monopolization in violation of Section 2 of the Sherman Act, Illinois Antitrust Act, Michigan Antitrust Reform Act, and Connecticut Antitrust Act. The action seeks injunctive relief, treble damages, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 1:16-cv-05486.

Attorneys: Britt M. Miller, Jeffrey J. VanDam, Mark W. Ryan, and Sean P. McDonnell (Mayer Brown LLP) for Viamedia, Inc.

Companies: Viamedia, Inc.; Comcast Corporation; Comcast Spotlight, LP

News: Antitrust IllinoisNews