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Studios, Blockbuster Lose Dismissal Pleas in Antitrust Case

17 May, 2002 By: Joan Villa


A federal judge handed independent video retailers several major victories today in an antitrust lawsuit against Blockbuster and several studios.

U.S. District Judge Edward Prado rejected eight out of 10 arguments filed by studios or Blockbuster to dismiss certain price-fixing and antitrust claims in the San Antonio, Tex. case, including charges of horizontal conspiracy between studios and vertical conspiracy between studios and Blockbuster.

“Ultimately, Blockbuster paid a particular price for a video title, and the summary judgment evidence indicates that price was always significantly lower than the prices paid by others,” Judge Prado wrote.

The court also determined that the plaintiffs' theory of a horizontal conspiracy makes economic sense and is suitable for trial, even though it is based on circumstantial evidence and pieced together with expert opinion.

“While no direct evidence of a horizontal conspiracy exists, the district court's role is to determine whether the evidence is such that a reasonable jury could return a verdict for the plaintiffs with all reasonable inferences viewed in the light most favorable to the plaintiffs,” the judge explained.

The ruling does not address motions for partial summary judgment filed by MGM Home Entertainment and Warner Home Video “because a settlement appears likely between those defendants and the plaintiffs,” Judge Prado stated.

Warner reportedly reached a $14.5 million settlement with plaintiffs last month in this case and a similar lawsuit underway in Los Angeles Superior Court.

The court granted two defendants' motions, including an argument by Fox Home Entertainment that it did not violate the Robinson-Patman Act because it was the last studio to enter into revenue-sharing agreements with Blockbuster and it did so to meet competition.

“A reasonable person would believe that Fox determined that it must engage in revenue-sharing with Blockbuster in order to compete with the other studio defendants in distributing its new release movies,” the ruling stated.

Judge Prado also dismissed plaintiffs' claims of price discrimination and conspiracy between Viacom and its subsidiaries, Paramount Home Entertainment and Blockbuster, because under Robinson-Patman subsidiaries constitute essentially the same enterprise.

“Blockbuster and Paramount were incapable of conspiring to violate antitrust laws via their revenue-sharing agreement because these corporations were wholly-owned subsidiaries of Viacom when the agreement was implemented,” he noted.

Judge Prado also ruled that witnesses for either the plaintiffs or the defense would have to be available to testify with 72 hours notice, requiring studio executives and other witnesses to appear in court rather that utilize taped depositions.

Trial is scheduled for June 10.

The legal action stems from revenue-sharing deals and other pricing agreements between Blockbuster and the studios beginning in 1997 that were not available to independent retailers. Plaintiffs have charged that the pricing deals were illegal and allowed Blockbuster to stock vast quantities of new release titles and build market share, creating an environment where independents could not compete.

Plaintiffs in the two-year-old federal action are Ron Cleveland of Lonestar Video in San Antonio, Dave Stevenson of The Big Picture Video in Syracuse, N.Y., and John Merchant of 49'er Video in Sacramento, Calif.

Today's rulings will also impact the Los Angeles Superior Court case, which was filed in Jan. 2001 by plaintiff's attorneys on behalf of more than 200 independent retailers.

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