District Judge Edward Davila, presiding in San Jose, has ruled that media giant The Walt Disney Company must confront allegations of engaging in business practices that stifle competition in the live-streaming paid television market, ultimately leading to increased prices for consumers.
Judge Davila issued a pair of related 25-page orders this past Saturday, indicating that subscribers of Google’s YouTube TV and AT&T’s DirecTV Stream have the green light to pursue legal action against Disney. The consumers accuse Disney of imposing “onerous” contracts that allegedly create unfair barriers for potential competitors in the streaming television industry. However, it’s important to note that the judge has prohibited the plaintiffs from seeking monetary damages in this case.
Crucially, Judge Davila did not find sufficient evidence to support claims of an unlawful agreement among streaming TV competitors. Nevertheless, he granted the consumers an extension until October 16 to amend their case.
The primary grievances raised in the two prospective class actions against Disney involve the company’s practices of wielding “unmitigated power” to drive up prices for rival streaming services. Disney achieves this by requiring that these competitors include its sports network, ESPN, in their lowest-priced channel packages. It’s worth mentioning that Disney owns ESPN, providing it with a unique advantage in this regard.
Notably, Disney holds a controlling interest in Hulu, which the plaintiffs contend is the nation’s second-largest provider of live television streaming services.
The lawsuits also argue that Disney’s influence extends to streaming TV infrastructure and content agreements, effectively creating insurmountable obstacles for new entrants to the market. The plaintiffs assert that no rival streaming service has managed to gain traction at scale without pre-existing video streaming infrastructure.
Disney’s legal team, represented by Farella Braun + Martel and Cravath, Swaine & Moore, countered these claims earlier this year by asserting that the plaintiffs have misunderstood fundamental antitrust and economic principles. They emphasized that antitrust laws are designed to safeguard competition, not individual interests.
Despite this, Judge Davila’s ruling on Saturday concluded that the plaintiffs’ “detailed allegations of barriers to entry” have provided a sufficient foundation for the antitrust lawsuit to proceed in its early stages.