AAI Asks Seventh Circuit for Better Monopolization Standards (Viamedia v. Comcast)

The American Antitrust Institute (AAI) and Public Knowledge have filed an amicus brief in the Seventh Circuit Court of Appeals urging the court to reverse a district court’s dismissal of refusal-to-deal and tying claims based on overly demanding monopolization standards.

Among other things, the brief argues that the district court improperly extended the defendant-friendly Trinko decision to mean that a refusal-to-deal claim can only be brought if a plaintiff shows that the monopolist’s conduct had no potential rational purpose. And it improperly extended the defendant-friendly Masushita decision to mean that a plaintiff cannot avoid summary judgment unless it presents evidence that “tends to exclude” the possibility that the monopolist’s conduct was lawful.

The case involves the sale by local cable companies and other multi-video program distributors (MVPDs) of “Spot Cable Avails,” which are two-to-three-minute commercial advertising slots on cable networks that are sold to advertisers. A portion of those avails are sold through regional “interconnects,” or platforms that provide a single access point for advertisers to purchase ads capable of reaching all MVPD subscribers within a designated market area (DMA).

The plaintiff, Viamedia, facilitates the sale of Spot Cable Avails by offering “ad representation services” to smaller MVPDs, including targeted local advertising sales, spot insertion, encoding, validation, IT, monitoring, traffic, billing, and collection services. Comcast, a large and powerful MVPD, controls the interconnects in several DMAs and is vertically integrated into the ad representation services market. Comcast, like other interconnect managers, had an open access policy in order to maximize the reach of the interconnects.

Viamedia alleges that Comcast, in an effort to monopolize the market for ad representation services, terminated its interconnection agreement with Viamedia and insisted that MVPDs seeking to use its interconnects employ Comcast, rather than Viamedia, for their ad representation services.

Viamedia brought Section 2 claims in the Northern District of Illinois. The district court first granted a motion to dismiss the refusal-to-deal claim and then granted summary judgment to Comcast on the remaining tying and exclusive-dealing claims.

The AAI brief argues that the district court applied an overly demanding test for refusals to deal. A plaintiff need not show that a monopolist’s refusal to deal serves no potential procompetitive purpose. Here, the court should have given more weight to the fact that Comcast’s refusal to deal enabled it to extend or preserve its monopoly in markets for ad representations services, and that it acted with a predatory intent by sacrificing profits and discriminating on the basis of rivalry (i.e., by being willing to deal with non-competitors but not rivals).

The brief also argues that the district court erred in accepting Comcast’s “disintermediation” defense, namely that Comcast’s refusal to deal was potentially procompetitive because it eliminated Viamedia as a middleman. A “potential” procompetitive justification is insufficient; defendants have the burden to prove efficiencies as a matter of fact, and here, the efficiencies were doubtful since MVPDs preferred to use an independent company like Viamedia rather than Comcast, their largest rival, as their ad representative.

The brief also argues that the district court applied an overly demanding summary judgment standard for monopolization claims in general. The “tends to exclude” dictum from Matsushita is limited to conspiracies and should not be extended to antitrust claims generally. In addition, the district court’s disaggregation of the plaintiff’s monopolization claims was improper. Under Continental Ore, antitrust plaintiffs are to be given the full benefit of their proof without tightly compartmentalizing the various factual components. Here, the district court should have recognized that the refusal-to-deal and tying claims reinforced each other, given the common object of Comcast’s conduct to monopolize the ad representation services market.

The brief, which was joined by leading technology nonprofit Public Knowledge, was written by AAI General Counsel Rick Brunell, with assistance from AAI Associate General Counsel Randy Stutz.