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U.S. Appellate Court Upholds Indie Suit Dismissal

26 Aug, 2003 By: Holly J. Wagner

A federal appellate court has upheld a San Antonio judge's decision to throw out the antitrust lawsuit that independent retailers brought against Blockbuster and the major studios, accusing them of giving the chain preferential pricing.

In June 2002, the U.S. District Court Judge Edward Prado, hearing the case in San Antonio, put a halt to the proceedings after attorneys for the independents finished putting on their case.

He granted Blockbuster and the studios a directed verdict, finding that the independents' evidence was insufficient to prove their allegations of conspiracy and price discrimination.

The independents appealed, hoping their case would be allowed to proceed. In reviewing Prado's decision, the Fifth Circuit Court of Appeals noted it was procedurally bound to review the evidence in the light most favorable to the independents. Even so, the court upheld Prado's decision.

“The complained-of conduct is not the studios' agreements with Blockbuster per se, but rather the alleged refusal of any of the studio defendants to deal with the independents on similar terms,” the decision, filed Monday, states. “That conduct constitutes an antitrust violation only if it is the result of an agreement, rather than of each studio's independent business judgment.”

The difference between Blockbuster and the distributors, the court found, was that “distributors servicing independents such as plaintiffs could select tapes title by title, after box office results were known, while Blockbuster was committed to purchasing a studio's entire output. Moreover, Blockbuster, unlike the distributors, undertook long-term obligations under its agreement with the studios.”

Attorneys for the independents could not be immediately reached for comment.

Blockbuster EVP and general counsel Edward B. Stead said the chain made the best deals it could to serve consumers.

"Two trial courts and now an appellate court have come to the same conclusion -- that Blockbuster competed fairly and honestly and everything we have done has been in the best interest of the consumer," he said. "Blockbuster viewed revenue-sharing with the studios as an opportunity to satisfy its customers' demands in a way that benefited both the consumer and the company. That's good business."

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