A federal judge in California on Tuesday foiled an attempt by The Walt Disney Co. to dismiss an antitrust lawsuit over the entertainment giant's dual role as a content supplier and distributor, including its use of Hulu, to drive fees for ESPN.
In a 32-page ruling, U.S. District Judge Edward Davila, a Barack Obama appointee, of the Northern District of California, refused to dismiss the lawsuit brought by YouTube TV subscribers in November 2022.
Davila ruled that Disney, which owns ESPN, could have leveraged its purchase of Hulu to raise prices of live TV streamed over the internet across the market, according to The Hollywood Reporter.
The suit alleges that cable consumers, most of whom never even watch ESPN, have seen their cable bills spike because of Disney's anti-competitive moves.
Davila ruled Disney might have imposed anti-competitive terms on its rivals, including AT&T's DirectTV and Dish's Sling TV, by forcing them to carry ESPN as part of the cheapest bundle they offer and instituting "most favored nation" clauses, which ensure that ESPN affiliate fees negotiated with any given competitor represented an industrywide price floor for the channel.
But Davila did rule the plaintiffs were barred from seeking damages on federal antitrust claims in the case because they weren't directly harmed by the allegedly anticompetitive conduct.
They could recover damages if they prevail with alleged violations of state competition and consumer protection laws.
YouTube TV subscribers claimed in the lawsuit that Disney inflated the prices for live TV streamed over the internet, according to The Hollywood Reporter.
The case involves Disney's control of a highly desired channel in ESPN and streaming live pay TV (SLPTV) options with Hulu, and whether the entertainment giant negotiated anti-competitive carriage agreements for ESPN, which raised subscription prices across the market.
The complaint, which seeks to represent roughly 5 million YouTube TV subscribers, claimed a violation of the Sherman Act pertaining to unreasonable restraints of trade and various state competition and consumer protection laws.
Disney argued the imposition of allegedly anti-competitive contractual terms harmed only SLPTV providers and not consumers.
But Davila countered that the lawsuit properly alleges that Disney leverages the deals "and its control of Hulu" to suppress competition, with the aim of selling subscription packages to consumers.
He pointed to allegations that Disney, from the moment it obtained control over Hulu in May 2019, "raised prices with impunity — as well as the primary cost input of its competitors" in ESPN.
Davila stated the first major carriage agreement renegotiation Disney faced after taking control of Hulu was with AT&T's DirecTV, which at the time offered an SLPTV product called AT&T TV Now or DirecTV Now (now named DirecTV Stream).
As the agreement was set to expire in the fall of 2019, Disney began to publicly warn DirecTV subscribers that they would soon lose access to ESPN and other Disney-controlled channels.
Disney began running warnings during ESPN's "Monday Night Football," with messages such as "AT&T has refused to reach a fair, market-based agreement with us" and "ATTENTION CUSTOMERS, DON’T LOSE ESPN. CALL NOW" with a toll-free number.
A new carriage agreement was reached requiring AT&T to include ESPN in its SLPTV base package, pushed AT&T to raise its monthly base package price from $50 to $65, but Disney's price increase for Hulu+ Live TV remained about $10 less than AT&T's offering.
Newsmax reached out to Disney for comment.
Michael Katz ✉
Michael Katz is a Newsmax reporter with more than 30 years of experience reporting and editing on news, culture, and politics.
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