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Federal Judge OKs Class Action Lawsuit Against Netflix

1 Jan, 2011 By: Erik Gruenwedel

A federal judge has reportedly granted class-action status to a group of Netflix subscribers who sued the Los Gatos, Calif.-based online DVD rental pioneer and Walmart for alleged antitrust issues.

The Oakland, Calif.-based U.S. District Court judge ruled that the plaintiffs met the standards for class-action status in their 2009 suit, which alleged that Netflix and Walmart.com colluded to control the DVD market when the latter abandoned the online rental business May 19, 2005, according to Bloomberg News.

According to the complaint, Netflix assumed Walmart’s subscriber list and agreed to not enter the retail disc business, which was increasingly controlled by the Bentonville, Ark.-based retail behemoth. Both companies cross-promoted the other's disc business through online links.

"It's great to have the world's largest retailer as a partner," Netflix CEO Reed Hastings told Bloomberg in 2005.

The alleged conspiracy occurred shortly after Blockbuster entered the online rental market and quickly gained 1 million subscribers. At the time Amazon ran a DVD rental business in England, and was considering expanding domestically.

“As a result, millions of Netflix subscribers allegedly paid supracompetitive prices,” Judge Phyllis Hamilton said in her Dec. 23 order.

Walmart Dec. 14 reportedly reached a $40 million preliminary settlement with the plaintiffs, which did not include Netflix, according to Bloomberg.

Netflix spokesperson Steve Swasey said the case has “no merit” and would continue to be defended.

Trial is slated for early 2012.

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