The Department of Justice sued DirecTV, and its parent company, AT&T (T) , Wednesday for acting as the ringleader in a series of illegal information exchanges between DirecTV and three of its competitors during the companies' negotiations to carry SportsNet LA, which holds exclusive rights to telecast Dodgers games in the Los Angeles area.
The lawsuit, filed in the U.S. District Court for the Central District of California, alleges that DirecTV unlawfully exchanged competitively sensitive information with Cox Communications, Charter Communications (CHTR) and AT&T during the companies' negotiations for the right to telecast SportsNet LA's Dodgers Channel.
Specifically, DirecTV and its pay-TV competitors exchanged non-public information about their companies' ongoing negotiations to telecast the Dodgers Channel, as well as their companies' future plans to carry -- or not carry -- the channel in order to obtain bargaining leverage in their respective talks with SportsNet LA.
The unlawful information sharing was also intended to reduce the risk that pay-TV operators would lose subscribers if they decided not to carry the channel but a competitor chose to do so.
According to the DOJ, the information learned through these unlawful discussions was a material factor in the companies' decisions not to carry the Dodgers Channel. The Dodgers Channel is still not carried by DirecTV, Cox or AT&T.
"Dodgers fans were denied a fair competitive process when DirecTV orchestrated a series of information exchanges with direct competitors that ultimately made consumers less likely to be able to watch their hometown team," said Deputy Assistant Attorney General Jonathan Sallet of the Justice Department's Antitrust Division. "Competition, not collusion, best serves consumers, and that is especially true when, as with pay-television providers, consumers have only a handful of choices in the marketplace."
AT&T's General Counsel David McAtee, noted that negotiations with SportsNet LA occurred before AT&T acquired DirecTV but added that the pay-TV firms acted independently in choosing not to carry the Dodgers Channel.
"The reason why no other major TV provider chose to carry this content was that no one wanted to force all of their customers to pay the inflated prices that Time Warner Cable was demanding for a channel devoted solely to LA Dodgers baseball," McAtee said in a prepared statement. "We make our carriage decisions independently, legally and only after thorough negotiations with the content owner. We look forward to presenting these facts in court."
At the time of the talks, SportsNet LA was owned by the Los Angeles Dodgers and Time Warner Cable. Ironically, Charter one of the participants in the alleged conspiracy, acquired TWC in May 2016 and is now the part owner of SportsNet LA.