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Second Suit Filed Against Netflix and Wal-Mart

2 Feb, 2009 By: Chris Tribbey

A second lawsuit has been filed against Wal-Mart and Netflix, alleging their 2005 agreement in which Wal-Mart turned over its online DVD rental business to Netflix was a “conspiracy” that aimed to build a monopoly for online DVD rentals.

Filed Jan. 26 in United States District Court in the Western District of Arkansas, on behalf of Chicago resident Marci Badgerow, the suit is nearly identical to one filed Jan. 2 against the two companies.

Both suits point to a January 2005 dinner between Netflix CEO Reed Hastings and John Fleming, then-CEO of Walmart.com, in which they allegedly discussed the DVD rental business. The suit goes on to say that when Wal-Mart agreed to shutter its online DVD rental service and give Netflix its customers, and Netflix agreed to promote Wal-Mart as the place to buy DVDs, the businesses created an unfair monopoly, and allowed Netflix to charge more than it would have for its rental service.

“Defendants’ illegal acts and practices have caused anticompetitive effects in the online DVD rental market,” the suit reads. “The subscription fees charged by Netflix to plaintiff, as well as the other members of the class, were maintained at artificially high and supracompetitive levels.”

The suit seeks class-action status, and seeks an unspecified amount of damages for Netflix subscribers since May 2005.

Netflix declined to comment on the suit. Michelle Bradford, a Wal-Mart spokeswoman said, “We made our own independent decision to exit the DVD rental business and our subsequent agreement with Netflix is entirely proper. We intend to defend vigorously our decisions regarding the products and services offered to our customers.”

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