AAI Helps Deliver Substantial Victory for Monopolization Law in 7th Circuit; Stutz Commentary Analyzes Opinion’s Implications (Viamedia v. Comcast)

On February 23, 2020, in an important, long-awaited decision in Viamedia v. Comcast, the Seventh Circuit accepted AAI’s arguments to restore Section 2 refusal-to-deal and tying claims against a monopolist in the market for commercial advertising slots on cable television networks. AAI Vice President of Legal Advocacy Randy Stutz has published a commentary analyzing the implications of the opinion.

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 refusal-to-deal, tying, and exclusive dealing 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.

In its amicus brief, AAI argued that the district court applied an overly demanding test for refusals to deal and erred in accepting Comcast’s “disintermediation” defense, namely that Comcast’s refusal to deal was potentially procompetitive because it eliminated Viamedia as a middleman. The brief also argued that the district court applied an overly demanding summary judgment standard for monopolization claims in general.

In reversing both the district court’s dismissal and summary judgment orders, the Seventh Circuit’s opinion closely tracks AAI’s arguments.

Stutz’s commentary discusses Viamedia’s allegations, the issues on appeal, the Seventh Circuit’s holding, and the opinion’s implications, with a focus on the refusal-to-deal aspect of the case. He concludes that the court’s opinion is a substantial and important victory for competition and consumers. The opinion represents significant progress in eroding an ingrained bias in the courts that gives unwarranted deference to even implausible efficiencies defenses in monopolization cases. And it makes important advancements in the law by declaring that a plausible refusal-to-deal claim is not defeated on the pleadings by a theoretical efficiency defense, and that the defendant-friendly “profit-sacrifice” and “no-economic sense” tests are “relevant but should not always be dispositive” in refusal-to-deal cases.