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Antitrust Class Action Lawsuit Filed Against Major League Baseball Over Live Game Videos

NEW YORK - (Mealey's) Four baseball fans filed a putative class action in federal court in New York on May 9 against Major League Baseball Enterprises Inc. (MLB), several MLB member clubs and several cable and Internet providers, alleging that live-game video offerings violate antitrust laws (Fernanda Garber, et al. v. Office of the Commissioner of Baseball, et al., No. 12-cv-3704, S.D. N.Y.).

The fans - Fernanda Garber, Marc Lerner, Derek Rasmussen and Robert Silver - filed the lawsuit in the U.S. District Court for the Southern District of New York, contending that the 30 separately owned and operated baseball clubs that comprise Major League Baseball entered into unlawful exclusive license agreements that "eliminate competition in the distribution of games over the Internet and television."

The MLB member clubs named as defendants are the owners and/or operators of the Oakland Athletics, Seattle Mariners, Chicago Cubs, Chicago White Sox, Colorado Rockies, New York Yankees, Philadelphia Phillies, Pittsburgh Pirates and San Francisco Giants.

The television defendants are Directv LLC and its subsidiaries, Comcast Corp. and its subsidiaries and Yankees Entertainment and Sports Networks LLC.

Exclusive License Agreements

The MLB member clubs "divide the live-game video presentation market by assigning an exclusive territory to each team and its television partners. In exchange for being granted anticompetitive protections in its own home market, the team and its partners expressly agree not to compete in the other teams' exclusive territories," the fans say.

Consumers can watch video presentations of other teams only through "out-of-market" packages - MLB.TV, which is available through the Internet, or MLB Extra Innings, which is available through cable and satellite providers. The "in-market" games are blacked out to protect the local television partner, the fans say.

"In addition, the Defendants have colluded to sell the 'out of market' packages only through the League. The League Defendants are then able to exploit their illegal monopoly by charging supra-competitive prices. As a result of this monopoly, moreover, the League is able to require purchasers of MLB.TV or MLB Extra Innings to buy all 'out-of-market' games of all the League's teams even if the fan is only interested in a particular team or a particular game."

No Antitrust Exemption

The fans contend that "[a]greements with third parties to restrain competition in the television and internet industry are well outside the narrow exemption to the antitrust laws recognized in Flood v. Kuhn, 407 U.S. 258 (1972). (available to subscribers) Nothing about these agreements reflect anything unique to baseball; they are essentially identical to those in other major sports, and baseball itself has long understood that broadcasting does not fall within the exemption, as has Congress."

The fans say that the agreements have restrained horizontal competition and have substantially lessened competition in the relevant markets.

The fans allege that the defendants violated Sections 1 and 2 of the Sherman Act.

Market, Class Definitions

The fans define the relevant product market as the provision of major league baseball contests in North America and the live presentations of major league baseball games over media such as cable and satellite television and the Internet. The relevant geographic market is defined as North America.

The fans define a television class as "[a]ll individuals who purchased television service from Directv and/or Comcast, or their subsidiaries, at any time within four years prior to the filing of this complaint and until the effects of the anti-competitive conduct end, that included channels carrying video presentations of live major league baseball games that were not available through a sponsored telecast (as that term is used by the Sports Broadcasting Act, 15 U.S.C. ? 1291, et seq.)."

The Internet class is defined as "[a]ll individuals who purchased in the United States directly from any of the League Defendants or their subsidiaries at any time within four years prior to the filing of this complaint and until the effects of the anti-competitive conduct end."

The fans are represented by Michael M. Buchman of Pomerantz Haudek Grossman & Gross in New York and Edward Diver, Howard Langer and Peter Leckman of Langer, Grogan & Diver in Philadelphia.

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