Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES NEWS: Time Warner Cable’s bundling of sports programming violates California Unfair Competition Law: class action, (Jun 21, 2013)

By John W. Arden, J.D., LL.M.

Time Warner Cable Inc.’s bundling of Los Angeles Lakers and Dodgers games in its enhanced basic cable packages in Southern California constitutes an unfair and unlawful business practice within the California Unfair Competition Law, which cost subscribers $8-$9 per month, according to a class action filed in the Superior Court of the State of California, County of Los Angeles (Fischer v. Time Warner Cable Inc., June 18, 2013).

Sherry Fischer, Stewart R. Graham, Todd Crow, and Gavin McKiernan filed a class action civil complaint against Time Warner Cable, The Los Angeles Lakers, and the Los Angeles Dodgers Holding Company, LLC, claiming that the bundling of programming content is an invidious practice because it (1) requires consumers to buy and pay for channels they do not want or watch and (2) precludes or impairs cable distributors from competing with each other through “smaller, user-friendly packages” and from substituting competing channels or networks to distribute over scarce bandwidth availability.

The network of contracts between programmers and distributors “artificially restrains free commerce among and between distributors and programmers, and among and between distributors to the detriment of the consuming public, a substantial segment of which is required to buy and pay for programming it does not watch or want while being deprived of alternative programming which it may want to watch, but cannot.”

In particular, the action complained about Time Warner Cable’s acquisition of rights to televise Los Angeles Lakers’ games (for $3 billion) and Los Angeles Dodgers’ games (for $8 billion). The “humungous” costs of acquiring these rights will be passed on to subscribers as part of the “enhanced basic cable offering,” despite the fact that approximately 60 percent of the population is not sports enthusiasts and “left to their own” would not subscribe and pay for Lakers and Dodgers telecasts.

The addition of the Lakers’ games cost enhanced basic cable subscribers approximately $4 per month and the addition of Dodgers’ games cost another $4 to $5 per month. “Again, a very large segment of the consuming public is not sufficiently interested in Dodgers games to pay $50-$60 per year, but they have no way of unsubscribing from either the Lakers or Dodgers telecast, which together add (or will if unrestrained) about $100 per year to the subscriber’s TWC bill.”

The Los Angeles Lakers executed its deal with Times Warner Cable with the knowledge that consumers, even non-sports fans, would be required to pay substantially more in their monthly cable bills to watch Lakers games, according to the plaintiffs. The Los Angeles Dodgers also executed its deal with Times Warner Cable, knowing that consumers would be required to pay substantially more to watch Dodgers games.

Times Warner Cable’s practice of bundling these channels into the enhanced basic cable offering was an unfair method of competition within the meaning of the California Unfair Competition Law, it was alleged. The purpose of the lawsuit was to secure restitution and injunction relief against this practice.

Class allegations. The plaintiffs brought this civil class action on behalf of themselves and all others similarly situated, defined as:

All former and current cable subscribers in Southern California during the time period October 1, 2012 through the present (1) who were required to purchase and pay for Los Angeles Lakers telecasts but who would have terminated subscription to that network if able to do so without terminating the entire subscription; and (2) who are threatened to have to pay for Los Angeles Dodgers telecasts starting in 2014 because they are unable to reject being charged for that network.

Unfair Competition Law. The California Unfair Competition Law (Cal. Bus. & Prof. Code §17200 et seq.) proscribes “any unlawful, unfair or fraudulent act or practice.” The statute’s purpose is to protect both consumers and competitors in commercial markets for goods and services, the complaint stated. Time Warner Cable’s conduct constitutes unfair and unlawful business acts and practices because its bundling “forces consumers to buy telecasts they do not want or watch without affording the consumer the right to opt out.” The bundling is therefore “unethical, oppressive, and unscrupulous” and there was no practicable way consumers could avoid this injury, the complaint alleged.

Requested relief. The plaintiffs requested equitable relief in the form of an injunction to prevent future violations and restitution of the money paid to Time Warner Cable, the Lakers, and the Dodgers; prejudgment interest; and reasonable attorney fees.

The case is No. BC512259.

Attorneys: Maxwell M. Blecher (Blecher Collins Pepperman & Joye, P.C.) for Sherry Fischer.

Companies: Time Warner Cable Inc.; The Los Angeles Lakers, Inc., Los Angeles Dodgers Holding Company LLC

News: StateUnfairTradePractices CaliforniaNews