Class Wins Certification in Netflix Antitrust Case

     (CN) – A federal judge granted class certification to Netflix subscribers who accuse the online DVD rental service of monopolizing the market by conspiring with Wal-Mart Stores and Walmart.com.




     Consumers say Netflix was able to overcharge for subscription fees because it convinced the superstore to withdraw from the DVD rental market, leaving only Blockbuster as a competitor.
     The class will involve millions of members around the country, arguing the same points, according to the federal ruling in Oakland, Calif.
     “All purchased the same product from the same company, through the same channel of distribution, and all paid supra-competitive prices to Netflix as a result of the alleged conspiracy,” U.S. District Judge Phyllis Hamilton wrote.
     Netflix argued that the class’s claims may be barred by the four-year statute of limitations, since some have speculated that the alleged conspiratorial conduct began as early as 2004.
     The Netflix subscribers had claimed in their complaint that the Wal-Mart meetings started in 2005 – within the statute’s window.
     Hamilton found that the start of the conspiracy does not alter the fact that Netflix, Wal-Mart and Walmart.com announced their allegedly illegal market allocation agreement on May 19, 2005.
     “That is the trigger date for plaintiffs’ alleged injury – and thus, for the running of the statute of limitations,” the ruling states.
     The subscribers submitted expert testimony from Dr. John C. Beyer, an economist, to bolster their claims that Netflix would have had to compete more in pricing if Wal-Mart had not left the market.
     Netflix and Wal-Mart argued that their witness, Dr. Janusz Ordover, examined variables that Beyer ignored, including Netflix’s subscriber growth from three million since May 2005 to 14 million today and uncertainty over how Wal-Mart would have performed in the marketplace.
     Hamilton agreed that the defendants raised valid, even “troubling,” objections to Beyer’s testimony, but they did not prove that the case will require individualized evidence.
     “Contrary to defendants’ contentions, Dr. Beyer’s reports and the analyses contained therein are supported by actual documentary evidence and data thus far produced in the action, and provide an adequate basis from which plaintiffs propose to demonstrate with proof common to the class that Wal-Mart’s exit from the online DVD rental market harmed class members,” Hamilton wrote.
     Hamilton had heard arguments over whether the class had standing in September 2009.

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