For the film and media distribution industries, this year has been action-packed.  Production budgets are skyrocketing and new digital services have been announced or are launching with each passing month. The streaming wars are upon us. Moreover, the FCC recently voted to treat streaming services as “effective competition” to traditional cable providers (or MVPDs), thereby triggering basic cable rate de-regulation in parts of Hawaii and Massachusetts.

The distribution landscape took yet another unexpected legal twist this week. On November 18, Assistant Attorney General Makan Delrahim announced that the Antitrust Division of the Department of Justice would ask a federal court to terminate the “Paramount Consent Decrees” (the “Decrees”), which have prohibited movie studios from engaging in certain distribution practices with movie theaters since the 1940s. The DOJ filed a motion to terminate the Decrees in federal court in the Southern District of New York on November 22, 2019.  Notably, the DOJ cites streaming services and new technology as a few of the many reasons that the Decrees may no longer be necessary in what the DOJ official sees as today’s highly competitive, consumer-driven content market. Given the volatility of the content licensing space, film licensors and licensees will have to carefully consider how the DOJ’s actions will affect their content rights and options going forward.

Since 2008, cable customers have been suing cable operators across the country claiming operators violate the antitrust laws by forcing customers to lease set-top boxes from the operator to access “premium” cable services.  Plaintiffs claim that the operators have “tied” one product (the service) to another product (the box) and that the arrangement is a per se violation of the antitrust laws (i.e., unlawful regardless of any alleged pro-competitive benefits).

The lawsuits have taken a number of different paths—with some surprising twists and turns:

  • The first jury trial resulted in a verdict against Cox in 2015.  But the trial court then set aside the verdict on the grounds it had rejected earlier on summary judgment.
  • When another operator agreed to settle claims in a Philadelphia case, the district court refused to approve the deal, finding that the settlement class was not “ascertainable.”  But last week, the Third Circuit quietly reversed in a summary decision, ruling that ascertainability is not relevant where the parties have agreed to the settlement class definition.
  • Meanwhile, the FCC has jumped (back) into the fray by proposing rules to force cable operators to “Unlock the Box” —or, perhaps, give the FCC the keys.

A number of courts have dismissed set-top box tying claims for failure to plead or prove that the cable operator has sufficient “market power” to coerce a customer into leasing the set-top box because cable operators face competition from “overbuilders” and/or satellite services.  Others dismissed because there was no proof that anyone would have sold stand-alone boxes “but for” the alleged tying.

Just before the Labor Day weekend, however, the Second Circuit established a new and different path.  In Kaufman v. Time Warner, No. 11-2512-cv (2d Cir. Sept. 2, 2016), a panel affirmed 2-1 the district court’s ruling that the plaintiffs failed to allege market power.  But that ruling was only a backstop.  The majority’s principal ground for affirming dismissal was that premium cable services and the interactive boxes used to access them are not separate products at all.  As such, the fundamental premise of any “tying” claim—two otherwise separate products tied together by the seller—simply does not exist.