LOS ANGELES (CN) — The U.S. Department of Justice sued DirecTV and its parent AT&T on claims they colluded with rival pay-TV companies in an illegal scheme that has kept Dodgers baseball games off most televisions in Southern California since 2014.
In a federal antitrust lawsuit filed Wednesday, Justice Department attorneys say DirecTV was the "ringleader" in the scheme to exchange private information with cable providers Cox Communications, Charter Communications and AT&T during their negotiations to carry the sports channel with the exclusive rights to telecast the games.
Because negotiations were "corrupted by DirecTV's orchestration of unlawful information sharing agreements," all the companies refused to carry the Dodgers Channel, which was distributed by Time Warner Cable, the government says.
AT&T later acquired DirecTV, and Charter acquired Time Warner Cable.
"The ultimate result: many consumers in LA had fewer — or no — means by which to watch the Dodgers Channel," the Justice Department says.
"Hundreds of thousands of LA area residents — essentially, everyone living outside Time Warner Cable's service area — were unable to watch most televised Dodgers games" during the 2014-16 baseball seasons, according to the lawsuit.
The action comes as regulators — including the Justice Department — are beginning to digest AT&T's newly announced plan to acquire Time Warner Inc. for $85.4 billion.
In a statement Wednesday, AT&T said it disagrees with the Justice Department's view of the Dodgers Channel negotiations. "We see the facts differently," general counsel David McAtee said in the statement.
He said the reason none of the pay-TV services carry the games "was that no one wanted to force all of their customers to pay the inflated prices that Time Warner Cable was demanding for a channel devoted solely to LA Dodgers baseball."
Media reports said Time Warner Cable may have been seeking as much as $5 per month per subscriber, according to the lawsuit.
A spokesperson for Charter declined to comment on the suit. Cox said it is "gratified that we were not named as a defendant," adding in a statement that it makes "independent decisions on program content."
The Justice Department claims that the companies' collusion over the Dodgers Channel traces to 2011, when Time Warner Cable acquired rights to locally distribute a channel for Lakers games. The provider successfully offered "most-favored nations" deals with the cable companies, guaranteeing them the same price for the channel that larger pay-TV company, such as DirecTV, might achieve — provided the cable companies signed up quickly.
The result was that Cox ended up paying 60 percent more for the Lakers Channel than it thought the channel was worth, and DirecTV paid 50 percent more, the lawsuit says.
"Having been burned by this experience, DirecTV approached the Dodgers Channel negotiations determined not to allow Time Warner Cable to successfully employ such a strategy again," the government says.
DirecTV's chief content officer, Daniel York, undertook the "unlawful bilateral information-sharing agreements" with the cable companies. The Justice Department's 57-page complaint describes numerous meetings, emails and text messages between York and his counterparts at Cox, Charter and AT&T discussing their strategies and negotiations with Time Warner Cable. It goes on to detail discussions and decision-making within the companies over carrying the channel.
"Dodgers fans were denied a fair competitive process when DirecTV orchestrated a series of information exchanges with direct competitors that ultimately made consumers less likely to be able to watch their hometown team," Deputy Assistant Attorney General Jonathan Sallet, of the Justice Department's Antitrust Division, said in a statement announcing the lawsuit. "Competition, not collusion, best serves consumers and that is especially true when, as with pay-television providers, consumers have only a handful of choices in the marketplace."
The suit, which accuses DirecTV of one count of violating the Sherman Antitrust Act for each of the three cable companies, seeks court orders prohibiting any further information sharing and requiring the defendants to put training and compliance programs in place.
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