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Cablevision files antitrust suit against Viacom over programming bundling

Zachary Lutz

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Fan of channels such as CMT, VH1 Classic and Teen Nick? Cablevision is assuming that's a negatory. Today, the cable provider filed a federal antitrust suit against Viacom over the content distributor's programming bundling practices, which are alleged as anti-competitive. The lawsuit revolves around Viacom's insistence that ancillary networks be included in programming agreements in order to gain distribution rights to more popular networks such as Nickelodeon, MTV and Comedy Central. While the complaint itself remains under seal, Cablevision is arguing abuse of power in the lawsuit, which if successful, could have rippling effects throughout the pay-TV industry.

Cablevision is seeking declaratory relief that would void the two companies' programming contract (inked just this past December), along with a permanent injunction against Viacom's practice and the ability to carry Viacom programming until a new contract can be negotiated. Meanwhile, Viacom has asserted that it'll vigorously defend the lawsuit, and maintains that its practice is "win-win and pro-consumer" in the sense that its niche networks are offered at discounts. It seems that we can look forward to both companies butting heads for a while to come.

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Cablevision Files Federal Antitrust Lawsuit Against Viacom For Illegally Forcing Purchase Of Programming Services

BETHPAGE, N.Y., Feb. 26, 2013 /PRNewswire/ -- Cablevision Systems Corporation (NYSE: CVC) filed an antitrust lawsuit today against Viacom (NYSE: VIA), in federal court in Manhattan, for illegally forcing Cablevision to carry and pay for 14 lesser-watched ancillary networks its customers do not want, such as Palladia, MTV Hits and VH1 Classic, in order to carry must-have networks such as Nickelodeon, MTV and Comedy Central.

Commenting on the lawsuit and Viacom, Cablevision offered the following statement:

"The manner in which Viacom sells its programming is illegal, anti-consumer, and wrong. Viacom effectively forces Cablevision's customers to pay for and receive little-watched channels in order to get the channels they actually want. Viacom's abuse of its market power is not only illegal, but also prevents Cablevision from delivering the programming that its customers want and that competes with Viacom's less popular channels."

Cablevision's suit contends that:

Viacom abused its market power over commercially critical networks, including must-have networks such as Nickelodeon, Comedy Central, and MTV, to coerce Cablevision into carrying the 14 far less popular ancillary channels.
Viacom coerced Cablevision by threatening to impose massive financial penalties unless Cablevision complied with Viacom's demands.
Viacom's conduct harms Cablevision and its customers, and impairs competition by making Cablevision pay for and carry networks that many subscribers do not want to watch, while other networks are excluded from distribution, preventing Cablevision from being able to differentiate its services and harming subscribers.
Cablevision's complaint asserts that Viacom engaged in a "per se" illegal tying arrangement in violation of the federal antitrust laws. Cablevision's antitrust lawsuit also asserts that Viacom has engaged in unlawful "block booking," which is a form of tying that conditions the sale of a package of rights on the purchaser's taking of other rights. Viacom's conduct also violates the Donnelly Act in New York State Law, which parallels federal anti-trust laws.

The complaint was filed under seal and a public version is not yet available.

Cablevision is seeking a number of remedies including:

Declaratory relief voiding the December 2012 carriage agreement.
A permanent injunction barring Viacom from conditioning carriage of any or all of its core networks on Cablevision's licensing any or all of Viacom's ancillary networks.
To effectuate the permanent relief, a requirement that Viacom permit Cablevision to carry the core networks and ancillary products on terms pending negotiation of a new, lawful agreement
Treble damages and legal fees.
Viacom's eight core networks:

TV Land
Comedy Central

Viacom's 14 ancillary networks:

MTV Hits
MTV Tr3s
Nick Jr.
Teen Nick
VH1 Classic
VH1 Soul
CMT Pure Country**
Nick 2**
MTV Jams**

*Optimum East Only
**Optimum West Only

Antitrust Legal Background

Federal antitrust laws protect competition. By protecting competition, antitrust laws secure lower prices, higher quality, and other benefits for consumers.
The antitrust laws prohibit tying, where a powerful firm wields its leverage from a product in one market, called the "tying" product, to compel a customer to take another product, called the "tied" product, when that customer would have preferred instead to take a product that competes with the "tied" product.
The reason antitrust law prohibits such tie-ins is to protect competition and consumers. If powerful firms can leverage their power from one market to another, they can insulate the tied product from competition. Forcing customers such as Cablevision to take Viacom networks instead of competing networks, in turn, hurts consumers because they get less for what they pay for video services.
Cablevision officials indicated that there would be no immediate disruption in programming offerings pending the resolution of this matter.

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