DOJ Settles Antitrust Claim Against AT&T and DirecTV for Illegal Information Exchange with Rivals | Practical Law

DOJ Settles Antitrust Claim Against AT&T and DirecTV for Illegal Information Exchange with Rivals | Practical Law

The Antitrust Division of the Department of Justice (DOJ) settled its lawsuit against DirecTV Group Holdings, LLC, filed on November 2, 2016, alleging that DirecTV acted as the ringleader of a scheme to exchange non-public, confidential information with three competitors during licensing negotiations with Time Warner Cable. The DOJ brought charges under Section 1 of the Sherman Act.

DOJ Settles Antitrust Claim Against AT&T and DirecTV for Illegal Information Exchange with Rivals

by Practical Law Antitrust
Published on 28 Mar 2017 • USA (National/Federal)
The Antitrust Division of the Department of Justice (DOJ) settled its lawsuit against DirecTV Group Holdings, LLC, filed on November 2, 2016, alleging that DirecTV acted as the ringleader of a scheme to exchange non-public, confidential information with three competitors during licensing negotiations with Time Warner Cable. The DOJ brought charges under Section 1 of the Sherman Act.
On March 23, 2017, the Antitrust Division of the Department of Justice (DOJ) reached a settlement agreement that will prohibit DirecTV Group Holdings, LLC (DirecTV) and its parent AT&T (though it did not own DirecTV at the time of the conduct) from sharing competitively sensitive information with competitors.
The settlement comes after the DOJ filed suit against DirecTV on November 2, 2016, alleging that since at least early 2014, DirecTV and three of its competitors agreed to exchange competitively sensitive information in violation of Section 1 of the Sherman Act. The DOJ alleged that the companies engaged in illegal information sharing with Time Warner Cable (TWC) during negotiations over decisions to carry SportsNet LA (the Dodgers Channel) in the Los Angeles market. The information exchanges allegedly harmed competition by corrupting the competitive process and contributing to the blackout of Dodgers games in the region.
According to the DOJ, DirecTV engaged in, and encouraged, the exchange of competitively sensitive and non-public information with its competitor multichannel video programming distributors (MVPDs), specifically Cox Communications, Inc., Charter Communications, Inc., and AT&T (before its purchase of DirecTV). The DOJ claimed that these agreements to share information that was disaggregated, company specific, forward-looking, confidential, and strategic had no procompetitive benefit and served no legitimate business purpose. DirecTV directed and encouraged the information exchange to:
  • Obtain bargaining leverage.
  • Reduce the risk that a competitor would carry the channel and DirecTV would not, potentially resulting in a loss of subscribers by any other individual competitor.
Examples of illegally shared information included:
  • Notice, before the information became public knowledge, of any intent to launch the Dodgers Channel.
  • Information about negotiations with the Dodgers Channel, including its price, and discussions regarding ongoing negotiation strategy.
In fact, all MVPDs declined to carry the Dodgers Channel. This led to a blackout of Dodgers games in the Los Angeles area, harming customers.
The DOJ generally focuses on the exchange of pricing information in information exchange cases. In this case, the DOJ's claims instead focused on the exchange of other non-public information, specifically information regarding negotiation strategy and each company's plans to carry or not carry the channel.

Remedy

The DOJ obtained all of the relief sought in its complaint. The settlement:
  • Enjoins the defendants from sharing competitively sensitive information with MVPDs.
  • Requires the defendants to monitor certain communications with their programming executives and to implement an antitrust training and compliance program.
  • Awards costs.
The remedy sought was intended to prevent corruption in the competitive process for acquiring video programming through illegal information exchanges among rivals and to prevent harm to consumers. In information exchange cases, a common remedy is to enjoin the illegal activity and require implementation of a compliance program.

Prohibited Communications

As a result of the illegal information exchange, defendants are prohibited from:
  • Sharing competitively sensitive, non-public, and strategic information relating to video programming distribution with any MVPD (for example, negotiation strategy, carriage plans, pricing or pricing strategies, costs, revenues, profits, margins, output, marketing, advertising, promotion, or research and development).
  • Requesting competitively sensitive information from any MVPD.
  • Encouraging or facilitating the communication of competitively sensitive information from any MVPD.
Despite these prohibitions, the settlement permits information sharing in certain circumstances where it is unlikely to harm competition, for example:
  • Where it is reasonably related to a lawful purpose, such as a lawful joint venture.
  • During negotiations with an MVPD to buy video programming from, or sell video programming to, that MVPD.
  • With video programmers, even if they are affiliated with an MVPD, as long as it relates to potential or actual carriage of the programmer's content by defendants.
  • In response to news media inquiries about programming distribution and carriage negotiations as long as it does not reveal defendants' negotiation strategy.
  • Where it involves petitioning activity protected by the Noerr-Pennington doctrine.

Antitrust Training and Compliance

Defendants must also designate an Antitrust Compliance Officer (ACO) to be responsible for implementing antitrust training and compliance measures. For a period of five years, the ACO will be responsible for:
  • Distributing copies of the final judgment to defendants' directors, officers, and other executives.
  • Ensuring that training related to the final judgment and the antitrust laws is provided to defendants' directors, officers, and other executives.
  • Certifying annual compliance with the final judgment.
  • Maintaining and periodically submitting a log of all communications relating to competitively sensitive information between certain of defendants' executives and employees of other MVPDs.
For additional information on the antitrust risks of competitor information exchanges, see Practice Note, Information Exchanges Among Competitors (Non-Merger).