Netflix Dodges Claims of Monopoly With Wal-Mart

(CN) - Netflix has convinced a federal judge to dismiss a class action claiming that it conspired with Wal-Mart to illegally divide the market for selling and renting DVDs.

The plaintiffs sued Netflix and Wal-Mart in 2009, saying the companies' 2005 promotion agreement "had the effect of illegally dividing the markets for sales and online rentals of DVDs in the United States," according to court documents.

In September, an Oakland, Calif., judge granted preliminary approval for a class action settlement with Wal-Mart, and Netflix moved for summary judgment.

U.S. District Judge Phyllis Hamilton said last week she was not persuaded that Netflix and Walmart reached their promotion agreement to illegally remove Wal-Mart from the online DVD rental market.

"Not only does the agreement expressly acknowledge the 'independent' nature of Walmart's decision to exit the market, but it furthermore expressly states that Walmart is free to re-enter the same market," Hamilton wrote on Nov. 22.

"Under these circumstances, the court cannot agree that the agreement on its face reflects a blatant agreement to eliminate Walmart from the online DVD rental market as a form of market allocation," the 29-page decision states.

Hamilton also found that there was no evidence that Netflix would have lowered its prices without the promotion agreement with Wal-Mart.

"While the record is disputed with respect to whether Netflix internally viewed Walmart as a strong competitor at various points in time, there is simply no material dispute as to whether Walmart in fact impacted Netflix's pricing decisions," the judge wrote.

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