The Justice Department is suing AT&T and its satellite TV service DirecTV for unlawfully colluding with competitors Cox and Charter Communications about carrying SportsNet LA, a Los Angeles Dodgers-owned TV channel.
In its lawsuit filed in the U.S. District Court for the Central District of California, the department alleges that DirecTV — in 2014 before it was purchased by AT&T in 2014 and approved last year —unlawfully shared competitively-sensitive information with AT&T, Cox and Charter during those companies' negotiations with SportsNet LA, which has the exclusive rights to nearly all live Dodger telecasts in the L.A area.
The companies shared information about their plans of whether to carry the channel, the DOJ says in the complaint, to obtain bargaining leverage. DirecTV was the "ringleader" in the sharing of information that became "a material factor" in the companies' decisions not to carry the channel, the complaint says. Since then Charter has added the Dodgers Channel, but the other providers have not.
"Dodgers fans were denied a fair competitive process when DirecTV orchestrated a series of information exchanges with direct competitors that ultimately made consumers less likely to be able to watch their hometown team," said Deputy Assistant Attorney General Jonathan Sallet of the DOJ's antitrust division in a statement. “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.”
Stan Kasten, president and CEO of the Dodgers, called the allegations "shocking but not surprising," in a statement posted to Twitter.
Time Warner Cable, acquired in 2015 by Charter, paid the Dodgers $8.35 billion in 2013 for the rights to games for 25 years. When SportsNet LA launched in 2014, many satellite and cable providers balked at what they considered high fees to carry the channel.
The sharing of information "made it less likely that any of these companies would reach a deal" because each knew the competition was unlikely to begin carrying the channel, the complaint says. Should DirecTV, especially, decide to carry SportsNet LA, the other companies would feel forced to, to prevent subscriber defections, the suit says.
But AT&T General Counsel David McAtee said the company sees "the fact differently," he said in a statement released after the DOJ complaint was announced. "The reason why no other major TV provider chose to carry this content was that 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. We make our carriage decisions independently, legally and only after thorough negotiations with the content owner. We look forward to presenting these facts in court.”
Also, DirecTV has said, Time Warner Cable wanted the channel carried on the pay TV services standard tier — not as an option.
Estimates by research firm SNL Kagan indicate that SportsNet LA costs were higher than some, but lower than others. Pay-TV providers would have to pay an average monthly subscriber fee of $4.06 for SportsNet LA versus $2.83 for YES Network, which broadcasts the New York Yankees and Brooklyn Nets, and $4.55 for MSG Network (New York Knicks, Rangers and Islanders, New Jersey Devils). It compares to top basic cable channels such as ESPN ($7.21) and TNT ($1.82), Kagan estimates.
'Good news' for baseball fans
The case complicates issues for AT&T, which two weeks ago announced its $85.4 billion bid for Time Warner. (Time Warner includes CNN, Warner Bros. Studio and HBO; it spun off Time Warner Cable in 2009.)
Since that deal will require DOJ approval, AT&T will likely settle this suit, says Phil Swann, president of TVPredictions.com. "There is no way that AT&T will allow the Justice Department attorneys to begin merger consideration with this lawsuit pending," he said.
That's good news for baseball fans, he says. The settlement will likely include SportsNet LA on DirecTV and AT&T's U-Verse next season.
Follow Mike Snider on Twitter: @MikeSnider