PHILADELPHIA (CN) – Comcast can’t change the channel on an antitrust class action by customers who say they paid higher rates for cable-television because the media giant perpetrated a “clustering scheme” in the greater Philadelphia area, the 3rd Circuit ruled.
The 98-page decision upholds certification for a class consisting of roughly two million cable-television subscribers in parts of Pennsylvania, New Jersey and Delaware.
Six Comcast customers filed suit in December 2010, accusing the cable giant of trying to monopolize the market for non-basic-cable-television in the tri-state area through a series of acquisitions and swaps with competing cable providers.
Those acquisitions allowed Comcast to increase its market share in the area from 24 percent in 1998 to about 70 percent by 2007, they claimed.
A federal judge certified the class in January 2010 after a four-day evidentiary hearing that included submission of 32 expert reports.
The plaintiffs say Comcast engaged in similar anticompetitive conduct in the Chicagoland area, and a suit over an alleged Boston cluster is pending, but a three-judge panel of the 3rd Circuit addressed only the Philadelphia accusations on Tuesday.
The plaintiffs say Comcast purchased and swapped for competing cable systems as part of a monopoly-minded “clustering scheme” to fortify its presence in Philadelphia and surrounding counties.
They accuse Comcast of participating in “conduct intended to exclude competition from … RCN Telecom Services… by denying it access to [cable-television channel] ‘Comcast Sportsnet,’ requiring contractors to enter non-compete agreements” and “inducing potential customers to sign up for long contracts with special discounts and penalty provisions” in the areas where RCN intended to establish a competing cable operation, the court summarized.
A key issue on appeal was how to define the geographic market for non-basic-cable-television in the greater Philadelphia area – or, as one 3rd Circuit judge put it during oral argument: “What’s the region in which claims could sensibly be brought together and looked at for common proof?”
Comcast said the geographic market should be limited to the individual household.
“Because an individual can choose only among providers offering video programming services to his household, Comcast asserts that the geographic market must be the household,” Judge Ruggero Aldisert wrote for the majority.
But the plaintiffs say the market should include a bundle of counties home to millions in the tri-state area.
The District Court found that to be an appropriate definition at this stage in the litigation, and the 3rd Circuit agreed, noting that the multicounty definition could still be disputed at trial.
Comcast’s narrow, household-based market-definition ignores the realities of the cable-television industry and the scope of the market in which suppliers “effectively compete,” the panel found.
The panel also rejected Comcast’s claim that there was no genuine competition to eliminate in the so-called multicounty market, and that it was RCN Telecom’s own financial woes that were preventing RCN from establishing a serious regional presence.
Evidence thus far “demonstrates that Comcast’s alleged clustering conduct indeed could have reduced competition, raised barriers to market entry [by another provider] … and resulted in higher cable prices to all of its subscribers in the [multi-county] Philadelphia Designated Market Area [DMA],” the panel found.
In a disstenting opinion, Judge Kent Jordan said he would vacate certification and ask the District Court to consider creating sub-classes, as proving damages would be difficult with a single class.
“The variation in conditions within the nearly 650 franchise areas in the Philadelphia DMA means that the issue of [proving and calculating] damages is more fractured than a single class can accommodate,” Jordan wrote.