DOJ Settles DirecTV Lawsuit Regarding Illegal Information Sharing

On March 23, 2017, the U.S. Department of Justice (“DOJ”) announced that it reached a settlement that will prohibit DIRECTV Group Holdings, LLC (“DirecTV”) and its parent corporation, AT&T Inc. (“AT&T”), from illegally sharing confidential, forward-looking information with competitors.

On November 2, 2016, the DOJ’s Antitrust Division filed suit alleging that DirecTV was the ringleader of a series of unlawful information exchanges between DirecTV and three of its competitors – namely, Cox Communications Inc. (“Cox”), Charter Communications Inc. (“Charter”) and AT&T (before it acquired DirecTV) – during the companies’ negotiations to carry the SportsNet LA “Dodgers Channel.”

SportsNet LA holds the exclusive rights to telecast almost all live Dodgers games in the Los Angeles area.  According to the complaint, DirecTV’s Chief Content Officer, Daniel York, unlawfully exchanged competitively-sensitive information with his counter-parts at Cox, Charter and AT&T while they were each negotiating with SportsNet LA for the right to telecast the Dodgers Channel.  Specifically, the complaint alleges that DirecTV and each of these competitors agreed to and 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. The complaint also alleges that the companies engaged in this conduct in order to unlawfully obtain bargaining leverage and to reduce the risk that they would lose subscribers if they decided not to carry the channel but a competitor chose to do so. The complaint further alleges that the information learned through these unlawful agreements 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. The DOJ allegations make out a buyer conspiracy case that violate Section 1 of the Sherman Act.  The DOJ further claims that the illegal information sharing corrupted the competitive bargaining process and likely contributed to the lengthy blackout.

The settlement is designed to ensure that when DirecTV and AT&T negotiate with providers of video programming, including negotiations to telecast the Dodgers Channel, they will not illegally share competitively-sensitive information with their rivals. The settlement also requires the companies to monitor certain communications their programming executives have with their rivals, and to implement antitrust training and compliance programs.

Lesson Learned:

The DOJ’s settlement demonstrates its resolve to prevent pay-television providers and specifically AT&T and DirecTV from engaging in illegal conduct that thwarts the competitive process. Moreover, the enforcement action indicates that the DOJ will take information that it learns regarding illegal activity through its antitrust review of a merger and pursue it.  So, the lesson is that the DOJ will bring civil and/or criminal actions against illegal conduct discovered during merger reviews.  Executives should understand that texting and emailing competitors to share competitively and strategically sensitive information to avoid competing is illegal.  While most of us would agree that the Dodgers may be holding out for too much money, the pay tv providers cannot engage in illegal conduct that thwarts the competitive process.  Fortunately, for DirecTV, the DOJ did not bring a criminal case rather it treated the conduct as a civil matter.  But, executives should be mindful that this type of conduct could potentially result in criminal as well as civil penalties.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com