Comcast’s Motion To Dismiss Denied
Last week U.S. District Court Judge Padovda of the U.S. District Court for the Eastern District of Pennsylvania denied Comcast’s motion to dismiss the class action lawsuit accusing it of unlawful “imposition of horizontal restraints in the [Philadelphia and Chicago] cable television markets and unlawful monopolization and attempted monopolization of those markets.”
The Legal Intelligencer has a lengthy report on the decision and the case (which has a lengthy history):
The plaintiffs in the suit, a group of cable subscribers, claim that Comcast and its would-be competitors struck a series of deals in which they “swapped” assets and customers so that each company would have “clusters” of markets. Plaintiffs lawyers contend that the deals were designed to eliminate competition. In the Philadelphia and Chicago markets, the suit alleges, Comcast succeeded, through a series of swap agreements with AT&T and Adelphia, in establishing monopolies in the cable television and cable Internet service markets, with 94 percent and 92 percent, respectively, of the two markets. Since then, the suit says, Comcast has used its monopoly power to raise cable prices in the Philadelphia and Chicago clusters to “artificially high, supra-competitive levels.” … [The Court] refused to dismiss the suit, finding that the plaintiffs have stated a valid claim that Comcast established a “horizontal restraint” …. [Comcast] argued that the plaintiffs cannot show that any of the swap deals was unlawful because each of the transactions was approved by government authorities at the federal, state and local levels. Padova disagreed, saying “the mere fact that regulatory and law enforcement agencies may have reviewed and approved the challenged transactions is not ground for dismissal.” Instead, Padova said, courts have held that activities which come under the jurisdiction of a regulatory agency may nevertheless be subject to scrutiny under the antitrust laws, and that “there is no general presumption that Congress intends the antitrust laws to be displaced whenever it gives an agency regulatory authority over an industry.” Regulatory approval, Padova said, will act as a bar to an antitrust claim “only where there is a plain repugnancy between the antitrust and regulatory provisions.” Comcast, Padova said, “does not contend that the antitrust laws and the regulatory provisions under which the challenged transactions were approved are repugnant to each other, but simply argues that we should refrain from ’substitut[ing] [our] judgment for that of the countless federal, state and local authorities who approved the cable system transactions as being in the public interest.’” [Comcast] also argued that the plaintiffs lack “antitrust standing” to challenge its swap agreements and acquisitions because they are unable to demonstrate a direct causal connection between those transactions and their alleged injury of higher cable prices. The fatal flaw in the plaintiffs’ theory, Comcast argued, is that the plaintiffs cannot show there ever was or would have been competition in any of the markets. … Comcast argued that its swap agreements were “competition-neutral” since they did not affect the level of competition existing in any of the markets, and that the plaintiffs therefore cannot show they had any anti-competitive effects that could give rise to an antitrust injury. Padova disagreed, saying the complaint asserts sufficient allegations of “a reduction of actual and prospective competition in the Philadelphia and Chicago clusters that was the intended result of the challenged swap agreements and acquisitions.” … Padova also found that the plaintiffs’ alleged injury — an increase in price resulting from the dampening of competitive market forces — “is assuredly one type of injury for which Section 4 of the Clayton Act potentially offers redress.” The alleged injury, Padova said, “is one that flows from the challenged swap agreements and acquisitions, in that Comcast’s ability to raise its cable prices stemmed from the purported deliberate lessening of competition achieved through those transactions.”
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