The DOJ simultaneously filed a complaint and proposed settlement against Verizon and four leading cable companies objecting to certain commercial agreements between those parties. The DOJ alleged that the agreements harmed competition in both:

In December 2011, Verizon and cable companies Comcast, Time Warner Cable, Cox Communications and Bright House Networks entered into various commercial agreements to sell bundles that combined:

These bundles, known as quad-play, are currently not nearly as popular as triple-play bundles, which do not include integrated wireless services. Verizon currently offers its own triple-play bundle, which includes its fiber-based voice, video and broadband services through its FiOS product. FiOS competes directly with the cable companies' wireline services.

In particular, the agreements provided that:

Verizon and the cable companies entered into these commercial agreements at the same time Verizon agreed to purchase spectrum from the cable companies. Although contemporaneous, the commercial agreements were not contingent on the spectrum purchases. The DOJ cleared the spectrum acquisitions under the Hart-Scott-Rodino (HSR) premerger notification process but objected to the commercial agreements between the parties.

In its complaint, the DOJ objected to the agreements between Verizon and the cable companies, alleging that they would diminish the parties' incentives to compete with each other in:

The DOJ alleged that the agreements would also prevent the parties from expanding business on their own behalf, ultimately decreasing consumer choice for bundled wireless and wireline services.

The DOJ explained in its complaint that the agreements diminished the parties' incentives to compete in the present video and broadband services market, particularly where Verizon's FiOS service overlaps (or is likely to overlap) with the cable companies' wireline territories. Under the agreements, Verizon must sell the cable companies' products on an equivalent basis with its FiOS product in the overlapping markets. The DOJ alleged that Verizon would not likely compete as vigorously as it otherwise would in those markets because Verizon would receive a commission for its sales of the cable companies' wireline products. The DOJ also alleged that the commission opportunity lessened Verizon's incentives to expand the geographic areas where it offers FiOS services.

As to the joint venture, the DOJ acknowledged potential consumer benefits, including increasing innovation and integration of broadband, video and wireless services. However, the DOJ objected to the joint venture's unlimited duration because it restricted the parties' innovation and development outside of the joint venture, lessening their incentives to compete in future innovation.

Additionally, the DOJ objected to the exclusivity provision that required the cable companies to include only Verizon wireless services in their bundles for an unlimited amount of time. This provision would decrease competition among other wireless companies for inclusion in those bundles.

The DOJ and the parties agreed to a proposed settlement to remedy the DOJ's concerns of competitive harm. The settlement includes provisions limiting among other things:

This case is a good reminder that current and future, as well as direct and potential, competition can be the subject of antitrust investigations, particularly when innovation and product development may be delayed or stalled. Additionally, counsel should conduct an antitrust analysis as to all agreements entered into by current or potential competitors, whether or not subject to HSR.