Fed’s antitrust suit against AT&T’s DirecTV is odd, legal experts say

When the U.S. Justice Department filed an antitrust action against AT&T and its DirecTV subsidiary this week, it waded deep into the communications between one executive and his counterparts at rival pay-TV providers, quoting texts, citing phone records and offering snippets of coded communications.

But despite all that intrigue, attorneys and antitrust experts say the department’s allegations against AT&T and the satellite TV company it bought last year are kind of, well, underwhelming — and even odd.

“I can’t think of any case that’s similar to it,” said Jason de Bretteville, a partner at Newport Beach law firm Stradling and a former assistant federal prosecutor.

Prosecutors don’t allege there was price-fixing — that pay-TV providers conspired to charge customers higher prices — or that DirecTV led an illegal boycott of Time Warner Cable’s pricey Los Angeles Dodgers channel.

All prosecutors allege is that DirecTV and its rivals illegally shared information as they sought to lower the price of the channel, and all prosecutors demand is that the companies stop doing so.

“Dodgers fans were denied a fair competitive process when DirecTV orchestrated a series of information exchanges with direct competitors that ultimately made consumers less likely to be able to watch their hometown team,” Deputy Assistant Atty. Gen. Jonathan Sallet of the Justice Department’s antitrust division said in a statement Wednesday.

Christopher Leslie, a law professor at UC Irvine, said that boils down to a fairly small claim by the government.

“What they’re saying is pretty simple: ‘You got together and shared information you shouldn’t have,’” Leslie said. “From an antitrust standpoint, this isn’t a particularly big, complicated fact pattern.”

Though not complicated, the Justice Department’s case has a handful of strange elements, Leslie and other antitrust experts said.

It alleges harm to a very specific set of consumers — specifically Dodgers fans — while others may have benefited. And it alleges that DirecTV was privately sharing information that it was also broadcasting publicly.

Federal prosecutors say DirecTV, by sharing information with its rivals, gave all of those companies less incentive to pick up the Dodgers channel, ultimately resulting in many Dodgers fans being unable to watch Dodger games.

But De Bretteville notes that if any party suffered damages, it was Time Warner Cable, which many believe overspent when it entered a $8.35-billion deal to carry and exclusively distribute the Dodgers channel over 25 years — not the average cable customer, who would have benefited from lower monthly bills.

“The complaint makes clear how Time Warner Cable was harmed and how Dodgers fans were harmed,” he said. “But I’m not sure how other consumers were harmed.”

Scott Martin, an antitrust attorney and partner in the law firm Hausfeld, said there is legal precedent to allege consumers can be harmed if uncompetitive practices result in them not having access to a product, as the Justice Department has said in the DirecTV case.

But he also said the department in this case risks being criticized for going after activity that ultimately harms only baseball fans.

“It’s one of those things where some lawyer would look at it and say, ‘There are people running around with chainsaws, and they’re going after these guys?” Martin said. “Is this the best use of their resources?”

Indeed, the lawsuit makes plain that when DirecTV allegedly colluded with other pay-TV providers, including Cox Communications and Charter Communications, the actions were driven by what the providers felt was the high cost of the Dodgers channel. A consulting firm has estimated Time Warner Cable wanted about $5 per month per subscriber, which would raise a typical bill by about $60 a year at a time when customers are increasing dropping costly pay-TV packages.

Another wrinkle in the case is that though the Justice Department alleges DirecTV was privately sharing information with its competitors — in part to assure them the the company did not plan to pick up the Dodgers channel — DirecTV was also quite public about saying it did not plan to pick up the channel.

In spring 2014, Daniel York, the DirecTV executive who prosecutors say was at the center of the illegal information-sharing, made it clear in an interview with The Times that the satellite-TV provider believed Time Warner Cable wanted too much money for the channel.

“DirecTV has an obligation to all of its 20 million customers to deliver the best possible programming and the best possible value,” York said in April of that year. “That means not saying yes to everything that’s proposed to us.”

Martin said DirecTV’s very public stance, coupled with the allegations of illegal information sharing, paints an odd picture: “It’s akin to exchanging information in a smoke-filled room with the door standing wide open.”

Still, Martin said that the communications between York and executives at rival companies quoted in the Justice Department’s complaint are more detailed — sometimes providing specifics of offers made by Time Warner Cable — than the information DirecTV was presenting publicly, which could point toward impropriety.

However, Leslie, the UC Irvine professor, said allegations of illegal information sharing often come alongside other allegations — that companies illegally shared information to organize an illegal boycott or to fix prices, for instance.

The case against DirecTV is notable, he said, for its lack of other allegations.

“We think of information-sharing as anti-competitive because it’s information-sharing in pursuit of price-fixing,” Leslie said. “We’re not worried about the information-sharing, but about the use of shared information. But here, it’s odd that it’s just information sharing without something else.”

Because there is no allegation of price fixing, it also could limit what kind of redress consumers could seek if they decide to file private lawsuits, which often follow government antitrust cases. In private litigation, customers are often looking for the extra money they paid because companies fixed prices.

In this case, Leslie said it will be interesting to see whether any such litigation is filed or what, if any, compensation consumers ask for.

“It would be hard to get money from denial of being able to watch Dodgers games,” he said.

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