EDVA Dismisses "Standards Conspiracy" Suit

Companies and trade associations involved in setting industry standards should take note of a recent decision out of the Eastern District of Virginia this month. 

In SD3, LLC v. Black & Decker, Inc. et al, a federal judge dismissed an antitrust suit alleging a conspiracy in the power tool industry to prevent adoption of table saw safety technology.  The suit, brought by SD3, maker of the SawStop technology which prevents table saw injuries, after unsuccessful licensing negotiations with the defendant power tool companies, alleged a “group boycott” on the part of the companies, claiming that the tool companies conspired not to license the company’s technology.  SD3 also claimed that the companies attempted to prevent the technology from becoming an industry standard.  

The tool companies filed motions to dismiss, and the judge recently dismissed the suit, finding that SD3 had not alleged sufficient proof of a group boycott or any harm to competition.  First, the judge noted that many of the tool companies had continued to negotiate with SD3 after the alleged boycott began.  In addition, the court found the “standards conspiracy” allegations insufficient, noting that “neither mere participation in a standards-setting body nor mere membership in a trade association is sufficient to state an antitrust conspiracy claim” and that merely declining to impose the technology on the market “did not exclude ‘SawStop’ technology from the market in any way.” 

The court’s dismissal is relevant for companies and associations considering industry or product safety standards. 

Disclaimer: Womble Carlyle represented a defendant in this case.

Suit Challenging Cable Bundling Survives Motion to Dismiss

Cable subscribers, tired of being forced to purchase more obscure channels like VH1 Classic and Teen Nick in order to get their nightly Daily Show fix on Comedy Central, should be encouraged by a recent antitrust decision out of the Southern District of New York.

In the case of Cablevision Systems Corporation v. Viacom International, Inc., cable operator Cablevision sued cable programmer Viacom based on Viacom’s practice (like virtually all large cable programmers) of pricing its channels so that the all of its offerings must be taken in order to purchase popular channels at a lower price.  Cablevision alleges that Viacom abuses its market power over access to its most popular cable networks (including BET, Comedy Central, MTV, and Nickelodeon) to force cable operators to license and distribute its less popular channels, which many subscribers do not want (like CMT Pure Country, Logo, MTV Hits, MTV Jams, Nick Jr., Nick 2, Nicktoons, Teen Nick, VH1 Classic, and VH1 Soul).  Cablevision argues that Viacom’s practices inflict on-going harm to Cablevision, consumers, and competition generally and constitute illegal “tying” and “block booking” in violation of Section 1 of the Sherman Act and New York state antitrust laws.

Viacom filed a motion to dismiss the complaint, alleging that Cablevision had not sufficiently alleged harm to competition (a critical element of a Sherman Act claim) and waited too long to bring its complaint.  This week the judge denied Viacom’s motion to dismiss, allowing the case to proceed to discovery on all counts.  While Cablevision will still face a difficult road as it is forced to prove its claims, the opinion constitutes a significant victory for cable operators and consumers seeking an alternative to current cable bundling practices. 

Cablevision is not the first to make this type of antitrust claim, but it is significant because it is the first to survive a motion to dismiss.  A prior suit out of the Ninth Circuit, Brantleyv. NBC Universal, Inc., which was brought as a class action by consumers seeking to unbundle cable, was dismissed before reaching the merits.  The Court found that anticompetitive harm not been alleged, because plaintiffs were merely alleging harm to consumers, rather than competition.  Cablevision’s lawyers have gone to great lengths in their filings to differentiate themselves from the consumer plaintiffs in the Brantley case and have beefed up their complaint with nearly 70 pages of in-depth economic analysis and market data in support of their allegations of abuse of market power and harm to competition.  (Ironically, however, Cablevision was a defendant in the Brantley case and took many positions contrary to those in its current complaint in its pleadings in that case—a fact not lost on Viacom in its motion to dismiss.)

Cablevision’s suit is also interesting, because it constitutes the first time a cable operator has sued a cable programmer, alleging that cable bundling practices are the result of programmer demands, and not a practice agreed upon between operators and programmers, as was alleged in Brantley.  By claiming the practices—much loathed by many cable subscribers—are solely the result of programmers’ demands, Cablevision’s antitrust suit seeks to put an end to these practices and, presumably, open up more possibilities for alternative cable pricing arrangements.