Log in

HIVE EXCLUSIVE: Indies Claim Studio Files Show Evidence of Price Fixing

5 Oct, 2001 By: Joan Villa

Seven movie studios shared confidential pricing terms offered only to Blockbuster Video and conspired with Blockbuster to fix prices, charges a motion for class certification for more than 200 independent retailers newly re-filed in Los Angeles Superior Court.

The studios and Blockbuster dispute the allegations and deny any price fixing conspiracy.

The redacted (edited) version of the previously confidential class certification motion alleges that studios engaged in a “price fixing conspiracy” from late 1997 that offered terms to distributors “significantly worse than Blockbuster's.” For its part, “Blockbuster acted as a shuttle, telling each studio what the status was with the others,” the motion charges.

Viacom chief Sumner Redstone headed the mid-1997 effort to get new terms for subsidiary Blockbuster from Viacom-owned Paramount Home Video and the other studios, the motion contends.

“The first revenue-sharing agreement was not signed until after the Viacom group had obtained the agreement of several studios and Redstone gave the green light on Nov. 3, 1997, by publicly announcing that several studio defendants were committed,” plaintiffs' attorneys argue. “The simple fact is that, for the reason stated in the Warner memo, no studio was about to do this deal independently without assurance that others were going to go along.”

Further, plaintiffs contend that the files of studio defendants “are littered with their competitors' secret pricing information.” For example, the motion claims:

--Fox has in its files a grid dated Nov. 2, 1998, outlining price and terms of Disney's revenue-sharing agreements with Blockbuster and pay-per-transaction distributor Rentrak Corp., and Disney's proposal for deals with Rentrak and other wholesalers.

--Paramount has a “revenue share competitive detail” chart identifying distributors' pricing and negotiations for every studio.

--Universal possesses a Disney document describing that studio's revenue-sharing proposal to distributors.

--Columbia's files contain a Warner document describing Warner's secret revenue-sharing deals with distributors.

--MGM has key pricing terms from Disney's confidential deal with Blockbuster.

The seven studios deny allegations of price fixing in their joint opposition to class certification and claim the plaintiffs' facts “misstate the actual evidence and…do not even hint at the sort of horizontal conspiracy” charged by the retailers.

“There is nothing in the Blockbuster (or any other) revenue-sharing deals themselves that say, or even imply, that they are exclusive,” the studios argue.

The opposition also pleads against class certification on the grounds that the plaintiffs are not a common class but instead vary widely depending on the retailers' individual business and market location. Further, the studios contend that no court has certified a nationwide class with similar circumstances based upon a single state's antitrust laws — in this case, California's Cartwright Act. A second class certification motion under federal Sherman Antitrust laws was denied earlier this year in a case by the same attorneys pending in U.S. District Court in San Antonio.

Studios also dispute the plaintiffs' intent to quantify damages as an “overcharge” based on the difference between what distributors paid for product versus what Blockbuster paid, arguing that revenue-sharing is not a “price” but a “set of economic terms” that don't compare to a traditional purchase. In their argument for class certification, plaintiffs give an example of a $20 overcharge per tape multiplied by 20 million tapes sold in a given year, as yielding class damages of $400 million for each year the price-fixing occurred.

For its part, Blockbuster filed separate opposition supporting many of the studios' points and arguing that revenue-sharing is “anything but a price reduction.” Blockbuster asserts that Redstone's mid-1997 meetings do not support the plaintiffs' conspiracy allegations. Instead, the meetings resulted in the studios' refusal to lower traditional video pricing, leading Blockbuster to seek individual revenue-sharing deals as part of a new business model intended to satisfy customer demand, the document explains.

“Ultimately, Blockbuster negotiated deals that allowed it to retain from 55% to 65 of rental revenue and return to the studios between 35% and 45% of rental revenue,” the filing states.

The chain's opposition also rejects that it acted as a “shuttle” between studios, arguing that plaintiffs failed to provide evidence that Blockbuster communicated with any studio about other studios' terms or coordinated an agreement among them.

The original Aug. 7 class certification motion and later opposing documents from studios and Blockbuster were filed under court seal to protect trade secrets, attorneys say. The redacted versions, which black out specific pricing and most details of depositions with key industry executives, were submitted Oct. 3 after Judge Victoria Chaney ordered the parties to limit what information was sealed from public view.

A hearing on class certification has been slated for Dec. 6.

Add Comment