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I’m Feeling Studio Lawsuit Déjà Vu

25 Aug, 2009 By: Stephanie Prange

Veterans of the video industry may be feeling déjà vu when they mull the recent Redbox lawsuits against the studios.

The studios’ cold war against video rental has heated up in court a few times before, beginning with the Sony Betamax case that established the First Sale Doctrine for prerecorded videos and allowed the rental business to flourish.

But there is another case that culminated at the beginning of this decade that also featured rental dealers against the studios and the No. 1 rental goliath Blockbuster Inc.

It also was an antitrust case, and the collection of independent, mom-and-pop video store owners in the suit — who tried to take on the studios and Blockbuster for what they alleged were preferential deals — lost. Blockbuster went on to dominate the rental business, and many mom-and-pop stores closed.

While this time around it’s a major corporate retailer (Redbox) that is suing the studios, it’s interesting that the antitrust claim in the kiosk company’s lawsuit against Universal survived judicial review.

Once again it looks like the rental complainant has to prove that the studios have colluded, either among themselves or with others. And that won’t be easy, according to Jim Moriarty, the lawyer for the mom-and-pop stores in the previous case, who conceded his side just didn’t have enough evidence of that.

Indeed, the 2003 appellate decision said that the studios’ deals violated antitrust laws “only if [they were] the result of an agreement, rather than of each studio’s independent business judgment.” In short the decision found the rental dealers had to have proven the studios and Blockbuster were working together violating antitrust laws. Moriarty says he didn’t have that “smoking gun.” Redbox may have to find it if it hopes to prevail.

The judge in the Redbox vs. Universal case, in upholding the antitrust claims, said that  his decision “leaves a more searching inquiry and balancing of competitive factors” for future arguments. That means Redbox will have to gather sufficient evidence of the antitrust claims.

We veterans have seen this before, and it will be fascinating to watch — and this case, like others in the industry’s past, is sure to change the business once again.

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