Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Cox Cable charged with illegally tying rental of set-top boxes to digital TV service, (Aug 30, 2016)

By Edward L. Puzzo, J.D.

Cable television provider Cox Communications illegally tied the rental of its set-top boxes to its digital cable subscriptions in the Nebraska market and thereby acted in restraint of trade, according to a complaint filed in the federal district court in Omaha (Bagwell v. Cox Communications, Inc., August 26, 2016).

Cox Communications is the largest cable television provider—also known as a multi-channel video programming distributor (MVPD)—in the metro Omaha Nebraska market. As a condition of subscribing to its highest quality digital cable tier of services, known as Premium Cable, Cox requires subscribers to rent a set-top box from them instead of allowing subscribers to purchase the set-top boxes from them or from third parties such as TiVo. The set-top box, a digital receiver installed between Cox' cable and the subscriber's television, is required for access to certain additional programming services such as pay-per-view, on-demand, high-definition (HD), an interactive programming guide, and digital video recording (DVR) capability.

Plaintiff April Bagwell brought a putative class action on behalf of herself and other Cox customers in the Nebraska market who subscribed to Premium Cable and paid a monthly rental fee for Cox' set-top box. The complaint alleges that Cox engaged in a tying arrangement in the rental of its set-top boxes in violation of Section 1 of the Sherman Act.

The complaint alleges that Cox abused its substantial economic power in the Nebraska market to severely constrain competition in the sale and lease of set-top boxes, thereby allowing it to extract supra-competitive profits by overcharging for set-top boxes. Cox' economic power was shown by its ability to consistently raise the price of Premium Cable without losing customers. This demonstrated that Cox had sufficient economic power to unlawfully tie set-top boxes to Premium Cable in the Nebraska market, the complaint asserts.

Cox gains several million dollars per year in rental fees for set-top boxes in the Nebraska market, according to the complaint. In its bills, Cox distinguishes its monthly fee for Premium Cable and the monthly rental fee for the set-top box required for access to Premium Cable—illustrating that the two are separate products in separate markets.

The complaint seeks an order enjoining Cox from continuing the practice of tying Premium Cable services to the rental of set-top boxes from Cox, and further seeks treble damages, costs, and attorney fees.

The case is No. 8:16-cv-00406-JFB-TDT.

Attorneys: Steven M. Delaney (Reagan, Melton and Delaney LLP), Todd M. Schneider and Jason Kim (Schneider Wallace Cottrell Konecky Wotkyns LLP), Allan Kanner and Cynthia St. Amant (Kanner & Whiteley LLC), and Joe R. Whatley Jr. (Whatley Drake & Kallas LLC) for April Bagwell.

Companies: Cox Communications, Inc.

News: Antitrust NebraskaNews