AT&T and DirecTV acted as ringleaders in an illegal plot against the Dodgers Channel that kept Los Angeles sports fans from watching their favorite team on television, according to a major lawsuit filed Wednesday by the Justice Department.
The anti-collusion suit alleges that DirecTV — and its corporate parent, AT&T — shared private negotiating information in 2014 with other TV providers, including Cox Communications and Charter Communications, to gain a collective advantage over Time Warner Cable, which was selling licenses to air the Dodgers Channel on other networks. By simultaneously agreeing not to carry the channel, each TV provider could breathe easier knowing their customers would not be able to switch to a provider that did carry live Dodgers games, according to the suit.
Evidence reviewed by the Justice Department allegedly showed DirecTV's chief content officer, Daniel York, intentionally trading information with Cox and Charter in an attempt to drive down the price that the TV providers would need to pay to carry the channel on their networks.
Internal communications between DirecTV executives showed chief executive Mike White understood the implications of a pact, saying the companies “may have more leverage if we all stick together,” according to the suit. To this day, the Dodgers Channel is still unavailable on AT&T, DirecTV and Cox.
“Competition, not collusion, best serves consumers and that is especially true when, as with pay-television providers, consumers have only a handful of choices in the marketplace,” Deputy Assistant Attorney General Jonathan Sallet said in a statement.
AT&T bought DirecTV last year for $49 billion, creating the nation's biggest pay-TV provider. AT&T said Wednesday that it makes carriage decisions independently and that the negotiations in question took place before it acquired DirecTV.
“No other major TV provider chose to carry this content,” said AT&T in a statement, because “no one wanted to force all of their customers to pay the inflated prices that Time Warner Cable was demanding for a channel devoted solely to LA Dodgers baseball.”
The suit comes at a delicate time for AT&T, whose massive acquisition of Time Warner (not to be confused with Time Warner Cable) also probably will be reviewed by the Justice Department. The federal government's case Wednesday against DirecTV and AT&T therefore raises uncomfortable questions for the telecom giant about its ability to harm competition.
“In general when you want to clear a giant merger with the DoJ you want to avoid being sued by the DoJ,” tweeted John Bergmayer, a senior staff lawyer at the consumer advocacy group Public Knowledge.
Wednesday's suit is the result of years of increasing consolidation in the media and communications industries, according to some antitrust experts, who also say the dwindling number of players in the space creates strong incentives to collude and coordinate.
“These are the chickens coming home to roost,” said Diana Moss, president of the American Antitrust Institute. “This is an important development that AT&T-Time Warner should look at very carefully in framing their deal to antitrust authorities.”
In offering licenses to air Dodgers games, Time Warner Cable initially tried to charge other TV providers $4.90 a month per subscriber for the rights, according to the Los Angeles Times. Facing opposition from DirecTV and others, TWC cut the price in March to $3.50.
The Justice Department's suit alleges that the information shared by DirecTV with AT&T, Cox and Charter made it less likely that each of the companies would agree to pay up. “The ultimate result: many consumers in LA had fewer — or no — means by which to watch the Dodgers Channel,” the suit reads.
As many as 3 million homes in the Los Angeles area lack access to the Dodgers Channel, known formally as SportsNet LA. The carriage standoff has frustrated local sports fans, some of whom have written repeatedly — and unsuccessfully — to officials in Washington and Major League Baseball pleading for help.
“This situation is so maddening,” Bill Waxman, 65, of Simi Valley told the Los Angeles Times in March. Waxman said that he had written letters to the Dodgers owners and the heads of Major League Baseball and the Federal Communications Commission. “For years, the Dodgers were the team in our living room. They were the soundtrack of our summers,” he told the Times.
Charter declined to comment on the lawsuit. Cox said in a statement that it was “gratified that we were not named as a defendant” and that it was “committed to making independent decisions on program content.”