Court Won’t Let Viacom Stop Cablevision’s Anti-Bundling Lawsuit

VH1 Classic and its love of countdowns is one of the dozen or so add-on channels that Cablevision doesn't want to pay for just to get MTV, Comedy Central, BET, or Nickelodeon.

VH1 Classic and its love of countdowns is one of the dozen or so add-on channels that Cablevision doesn’t want to pay for just to get MTV, Comedy Central, BET, or Nickelodeon.

Sick of being forced to accept Viacom’s massive bundle of barely watched cable channels — Palladia and MTV Hits, anyone? — just to get the handful that its subscribers want to watch (MTV, Comedy Central, BET, Nickelodeon), New York-based Cablevision sued Viacom in early 2013, alleging the broadcaster was violating federal antitrust laws. Viacom has since tried to have the case dismissed, but a U.S. District Court has ruled that the case can move forward.

Cablevision accuses Viacom of forcing the cable company into an illegal tying agreement by only making its most-watched “Core” channels available if the company also pays for and airs a suite of 14 other channels with much lower viewership.

Viacom had argued that Cablevision needs to prove there is an anticompetitive effect to this bundling arrangement, but the court disagreed[PDF], saying that A) the rule for determining whether a tying agreement is illegal does not take market conditions into account, and B) that Cablevision has made a reasonable argument that the forced bundling is anticompetitive, claiming there are only a limited number of channels available and every slot taken up by an unwanted channel is a slot that can’t go to anyone else.

Cablevision has also accused Viacom of the illegal practice of block-booking, which the Supreme Court previously defined, in a case involving Paramount Pictures forcing movie theaters to take crappy movies in order to get the studios’ good films, as “the practice of licensing, or offering for license, one feature or group of features on condition that the exhibitor will also license another feature or group of features released by the distributors during a given period.”

In response, Viacom tried to argue that a 2006 case, Illinois Tool Works v. Independent Ink, showed that block-booking was no longer an issue, as the Supreme Court ruled that the mere holding of a patent does not automatically confer market power on the patent-holder. However, the District Court ruling points out that this doesn’t prevent anyone from making a block-booking claim; it just means that such claims are subject to market power analysis.

The court did not grant Cablevision’s request to void its current license with Viacom, meaning the company will have to continue under its agreement to air all the disputed channels.

“We are gratified the Court has ruled that Cablevision has stated a valid antitrust claim against Viacom for illegal channel tying,” Cablevision says in a statement about the ruling. “We continue to believe that Viacom’s tying of its popular networks to carriage of its lesser-watched ancillary networks is illegal, anti-consumer, and wrong. We look forward to further pressing our case at the next stage of the proceeding.”

It seems likely to us that this case will eventually end up being put before the Supreme Court, but that’s not in the immediate future.

While some are encouraged that a Cablevision victory would result in truly a la carte cable for consumers, the company has yet to confirm that it would break up the bundles that it offers to subscribers.

Additionally, it’s possible the per-channel cost of a la carte cable may be prohibitive to those who want to pick and choose the channels they pay for.