Credit: The Walt Disney CompanyThe Walt Disney Company has failed not once but twice at attempting to eliminate a pretty substantial antitrust lawsuit in court.
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The Walt Disney Company Now Dealing with Second Failure of Removing Antitrust Lawsuit in Court
U.S. District Judge Edward J. Davila has once again rejected Disney’s attempts to dismiss an antitrust class action brought by streaming subscribers. However, the company will not be liable for any financial damages. In his ruling, Judge Davila stated, “The Court once again finds Plaintiffs’ allegations sufficient to plead Disney’s market power in a well-defined SLPTV market in the United States.”
The class action, filed in November 2022 by YouTube subscribers in four states, claims that Disney’s control over ESPN and Hulu has allowed the company to “inflate prices marketwise by raising the prices of its own products” and “set a price floor.”
The complaint argues that Disney’s requirement for streamers like YouTube TV and Sling TV to include ESPN in their base packages results in higher subscription costs for consumers. Additionally, the 82-page complaint alleges antitrust violations, asserting that Disney’s control over content and distribution, including Hulu and Hulu + Live TV, creates barriers to market entry.
Judge Davila’s recent order partly grants and partly denies Disney’s motion to dismiss the action filed in November 2022. While the case will proceed in a more limited form, the judge has removed any claims for financial damages, leaving only the possibility of injunctions to prevent Disney from future antitrust violations.
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Judge Davila explained, “Because Plaintiffs have specifically alleged that the terms of the MFN provision permit Disney to set a price floor and raise its competitors’ ESPN prices (which translate to the subscription package prices) whenever it raises Hulu’s prices, the Court finds Plaintiffs’ allegations sufficient to plead Disney’s market power in a well-defined SLPTV market in the United States.”
This is not the only antitrust issue Disney is facing; the company, along with Warner Bros. Discovery and Fox, is also contending with a February antitrust action from Fubo regarding their planned Venu sports streaming service, set to launch in the fall to coincide with the NFL season.
For The Walt Disney Company, Judge Edward J. Davila’s decision to allow the antitrust class action to proceed, albeit without the potential for financial damages, carries several significant implications.
Disney will continue to incur legal expenses as it defends itself against the allegations in court. Although the threat of financial damages has been removed, the costs associated with prolonged litigation can still be substantial. The case now focuses on injunctive relief, which could result in court orders requiring Disney to change its business practices.
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If the court rules against Disney, the company may be forced to alter its pricing and bundling strategies. This could mean more flexibility for streaming services like YouTube TV and Sling TV, possibly lowering consumer prices and affecting Disney’s revenue from these deals. The decision underscores the importance of antitrust compliance. Disney must be more vigilant in ensuring its business practices do not violate antitrust laws.
Disney must manage its public relations carefully to maintain consumer trust and investor confidence. Moving forward, Disney will likely emphasize compliance and risk management strategies more. The outcome of this case could set important precedents for the streaming industry.
Disney and other major players might face more frequent and detailed investigations into their business practices. In summary, while the immediate financial threat has been alleviated, Disney must navigate ongoing legal, operational, and reputational challenges. The company must adapt its strategies to ensure compliance with antitrust laws while maintaining its competitive edge in the rapidly evolving streaming market.