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Two Studios Reported Near Settlement in Independent Retailer Lawsuits

10 Apr, 2002 By: Thomas K. Arnold

Two studios have offered to settle a pair of retailer lawsuits against the studios and Blockbuster Inc. over alleged price-fixing and antitrust violations in relation to the sale of rental-priced VHS cassettes.

Houston attorney Jim Moriarty, representing the plaintiffs, confirmed that Warner Home Video and MGM Home Entertainment have jointly offered $14.5 million to settle the suits, filed three years ago in Texas and California. Moriarty said the settlement offer could be signed as early as this week.

"But you know how lawyers are," he said. "We've got to take a look at all the paperwork."

Studio executives could not be reached for comment.

Moriarty added that Warner and MGM "were the first studios to bail out of the scam" in which Blockbuster received allegedly preferential terms.

"[Warner Home Video president] Warren Lieberfarb is one smart guy who figured out they had created an 800-pound gorilla [with Blockbuster]," Moriarty said. "He worked to level the playing field. It's interesting that Warner was the first to go back to parity, and is now first to put real money on the table." Moriarty noted that the settlement offer affects about 250 individual litigants in California and Texas representing about 500 stores, but not the class action portion of the lawsuit. However, he said "we're going to nonsuit" both Warner and MGM from the class.

The legal actions against the studios and Blockbuster stem from allegedly preferential revenue-sharing deals that were cut beginning in late 1997. These deals, independent retailers charged, allowed Blockbuster to bring in vast quantities of newly released videocassettes at prices significantly lower than competitors had to pay.

This preferential pricing then allowed Blockbuster to build market share through such promotions as the guaranteed availability of new releases and extended rental periods — promotions with which the independents could not compete.

The indies allege that, in turn, led to thousands of independent retailers going out of business.

The independent retailers sought both damages and court orders barring the practice under federal and California antitrust laws. Judges in Texas and California denied them class status, forcing those who wished to pursue the case on their own.

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