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Laumann v. National Hockey League


December 5, 2012


The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.



Plaintiffs bring this consolidated putative class action against the National Hockey League ("NHL") and Major League Baseball ("MLB"), various clubs within the Leagues, regional sports networks ("RSNs") that televise the games, and Comcast and DirecTV, multichannel video programming distributors ("MVPDs").*fn1 Plaintiffs challenge "defendants' . . . agreements to eliminate competition in the distribution of [baseball and hockey] games over the Internet and television [by] divid[ing] the live-game video presentation market into exclusive territories, which are protected by anticompetitive blackouts" and by "collud[ing] to sell the 'out-of-market' packages only through the League [which] exploit[s] [its] illegal monopoly by charging supra-competitive prices."*fn2 Plaintiffs claim that these agreements "result in reduced output, diminished product quality, diminished choice and suppressed price competition" in violation of the Sherman Antitrust Act,*fn3 and request statutory damages and injunctive relief on behalf of themselves and the class.*fn4 Defendants jointly move to dismiss all claims pursuant to Federal Rule of Civil Procedure 12(b)(6).*fn5


A. The Agreements to Telecast Baseball and Hockey

Plaintiffs are subscribers to television*fn7 and/or Internet*fn8 services that include live hockey and baseball telecasts. Defendant National Hockey League is an unincorporated association of thirty major league professional ice hockey clubs, nine of which are named as defendants in Laumann.*fn9

Defendant Office of the Commissioner of Baseball, doing business as Major League Baseball, is an unincorporated association of thirty professional baseball clubs, nine of which are named as defendants in Garber.*fn10 The Complaints also name subsidiaries of the Leagues that pursue their commercial opportunities, including Internet operations (together with the NHL, MLB and the named individual clubs, the "League defendants").*fn11 Plaintiffs allege that "[p]ursuant to a series of agreements between and among Defendants, the League[s] ha[ve] obtained centralized control over distribution of live video programming of [hockey and baseball] games" and "the clubs have agreed not to compete in business matters related to the video presentation of live major-league men's professional [hockey and baseball] games."*fn12

Both the NHL and MLB are "ultimately controlled by, and operate for the benefit of the clubs."*fn13 "Though necessarily cooperating to produce inter-club games, each club operates as an independently owned and managed business, competing against each other in various markets."*fn14 In both the NHL and MLB, each team owns the initial right to control telecasts of its home games, and keeps the revenues it generates from the sale of these rights.*fn15 The teams in each League have mutually agreed to permit the visiting team to produce a separate telecast of the games.*fn16

1. "In-Market" Agreements

The vast majority of telecasts are produced by arrangement between individual teams and RSNs, a number of which are named as defendants.*fn17 RSNs are local television networks that negotiate contracts with individual NHL or MLB clubs to broadcast the majority of the local club's games within that club's telecast territory.*fn18 Several defendant RSNs are owned and controlled by defendant Comcast,*fn19 several are owned and controlled by defendant DirecTV,*fn20 and two are independent of the MVPDs, but share ownership with an individual club.*fn21

RSNs produce the games and sell their programming to MVPDs including Comcast, a cable distributor, and DirecTV, a satellite distributor (the upstream market).*fn22 MVPDs, in turn, sell programming to consumers (the downstream market).*fn23 Pursuant to agreements with the RSNs, MPVDs make RSN programming available as part of standard packages sold to consumers within the RSN's designated territory, and black out games in unauthorized territories, in accordance with the agreements between the RSNs and the Leagues.*fn24 The Complaints allege that the "regional blackout agreements," made "for the purpose of protecting the local television telecasters," are "[a]t the core of Defendants' restraint of competition."*fn25 "But for these agreements," plaintiffs allege, "MVPDs would facilitiate 'foreign' RSN entry and other forms of competition."*fn26 Plaintiffs argue that the "MVPDs also directly benefit from the blackout of Internet streams of local games, which requires that fans obtain this programming exclusively from the MVPDs."*fn27

A small percentage of games are produced under national contracts between the Leagues (pursuant to rights granted by the individual teams) and national networks.*fn28 These limited nationally televised games provide the only opportunity for fans to watch a game not involving a local team without purchasing an out-of-market package.

2. "Out-of-Market" Agreements

With the limited exception of nationally televised games, standard MVPD packages only televise "in-market" games (i.e., games played by the team in whose designated home territory the subscriber resides). For a consumer to obtain out-of-market games, there are only two options -- television packages and Internet packages -- both of which are controlled by the Leagues.*fn29 Television packages-- NHL Center Ice and MLB Extra Innings -- are available for purchase from MVPDs, in accordance with agreements between the MVPDs and the Leagues. These packages require the purchase of all out-of-market games even if a consumer is only interested in viewing a particular game or games of one particular non-local team. They also require a subscription to the standard digital television package.*fn30 Internet packages -- NHL Gamecenter Live and -- are available directly through the Leagues and also require the purchase of all out-of-market games. Neither local games nor nationally televised games are available through these packages.*fn31

Thus, "there is no authorized method for viewing [local] games on the Internet."*fn32 For example, an NHL Gamecenter Live subscriber in New York cannot watch New York Rangers games through any Internet source, but instead must subscribe to MSG through an MVPD. The alleged purpose of the limitation on Internet programming is to protect the RSNs' regional monopolies and insulate MVPDs that carry them from Internet competition.*fn33

Plaintiffs allege that the market divisions and centralization of rights to distribute out-of-market games in the Leagues have "adversely affected and substantially lessened competition in the relevant markets" by reducing output of live MLB and NHL game presentations, raising prices, and rendering output "unresponsive to consumer preference to view live [MLB and NHL] games, including local games, through both Internet and television media."*fn34

B. The Alleged Markets and Products

The Complaints allege relevant product/service markets for "the provision of major league professional ice hockey [and baseball] contests in North America."*fn35 In addition, and "[m]ost importantly for this action, there is a relevant market for live video presentations of [professional baseball and hockey] games over media such as cable and satellite television and the Internet."*fn36 These markets are "characterized by high barriers to entry" in which the NHL and MLB, as the only providers of these games, acting through and with the independent clubs that own and control the Leagues, have market power.*fn37 The NHL's and MLB's dominance in the production of professional hockey and baseball games respectively "give [them] the ability, together with [their] television partners, to exercise market power in the market for live video presentations of [professional baseball and hockey] games."*fn38

C. The Claims

Based on the foregoing facts, plaintiffs allege four antitrust violations:

(1) for Television plaintiffs, violation of Section 1 of the Sherman Antitrust Act based on agreements to "forbid[] the carrying or online streaming of any [NHL/MLB] game in any geographic market except those licensed by the [NHL/MLB] team in that geographic market" (Claim I);*fn39 (2) for Television plaintiffs, violation of Section 1 based on agreements "that [NHL/MLB] will be the exclusive provider of live 'out-of-market' games distributed through television providers" (Claim II);*fn40 (3) for Internet plaintiffs, violation of Section 1 based on agreements "that [NHL/MLB] will be the exclusive provider of live 'out-of-market' games over the Internet" (Claim III);*fn41 and (4) for all plaintiffs, violation of Section 2 for conspiracy to monopolize the "market for video presentations of major league [hockey/baseball] games and Internet streaming of the same" (Claim IV).*fn42

Defendants make six arguments why plaintiffs' claims must be dismissed. First,plaintiffs have not alleged harm to competition.*fn43 Second, plaintiffs lack standing on the following grounds: (1) plaintiffs are "indirect purchasers;" (2) plaintiffs' injuries are "too attenuated and remote from the alleged horizontal conspiracy;" (3) the Garber plaintiffs lack standing to assert claims concerning the MLB Extra Innings television package, because none of them purchased that product; (4) five of six plaintiffs are "former subcribers who assert no intention to subscribe to any of the challenged television or Internet services in the future," and therefore lack standing to request injunctive relief.*fn44

Third, plaintiffs allege "no cognizable conduct by Comcast, DirecTV or any of the RSN Defendants" because "[t]he only plausible allegations as to these Defendants relate to their vertical distribution, which is presumptively legal."*fn45 Fourth, the alleged horizontal activities of the NHL and MLB defendants are "lawful on their face" as the "very core of what professional sports league ventures do -- sell their jointly created product."*fn46 Fifth, plaintiffs' "proposed relevant market is insufficient as a matter of law" because plaintiffs fail to "allege facts regarding reasonable interchangeability or cross-elasticity of demand."*fn47 Sixth, plaintiffs' Section 2 claims must be dismissed for: (1) failure to allege any anticompetitive effect; (2) failure to allege any plausible "conspiracy" among the Leagues, the clubs and the RSNs and distributors; and (3) failure to allege any of the necessary elements of a monopolization claim.*fn48


Federal Rule of Civil Procedure 12(b)(6) provides that a complaint must be dismissed if it "fail[s] to state a claim upon which relief can be granted." In deciding a motion to dismiss the court "accept[s] all factual allegations in the complaint as true, and draw[s] all reasonable inferences in the plaintiff's favor."*fn49

For the purposes of such a motion, "a district court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint"*fn50 as well as "documents that, although not incorporated by reference, are integral to the complaint."*fn51

Under the "two-pronged approach" set forth by the Supreme Court in Ashcroft v. Iqbal, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice" to withstand a motion to dismiss.*fn52 However, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief."*fn53 To survive a Rule 12(b)(6) motion to dismiss, the allegations in the complaint must meet a standard of "plausibility."*fn54 A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."*fn55 Plausibility "is not akin to a probability requirement;" rather, plausibility requires "more than a sheer possibility that a defendant has acted unlawfully."*fn56


A. Antitrust Standing*fn57

The Clayton Act permits private parties to institute actions under the federal antitrust laws for damages and injunctive relief.*fn58 However, a private plaintiff has standing to enforce Sections 1 and 2 of the Sherman Act only if he or she suffered "antitrust injury" and is a "proper party" to bring suit.*fn59 In making this determination a court must "evaluate the plaintiff's harm, the alleged wrongdoing by the defendants, and the relationship between them."*fn60 The Second Circuit analyzes antitrust standing under a two part test.*fn61

First, a "'plaintiff must show . . . injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful.'"*fn62 Second, a plaintiff must show that he is a proper plaintiff in light of four 'efficient enforcer' factors: (1) the directness or indirectness of the asserted injury; (2) the existence of an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement; (3) the speculativeness of the alleged injury; and (4) the difficulty of identifying damages and apportioning them among direct and indirect victims so as to avoid duplicative recoveries.*fn63

B. Sherman Act Section 1

Section 1 of the Sherman Act prohibits "[e]very contract,combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States." The Supreme Court has clarified that Section 1 "outlaw[s] only unreasonable restraints."*fn64 To establish a Section 1 violation, a plaintiff must allege: "(1) concerted action between at least two legally distinct economic entities; (2) that constitute[s] an unreasonable restraint of trade either per se or under the rule of reason."*fn65

Certain agreements which courts, after "considerable experience with the type of restraint at issue," determine to have "manifestly anti-competitive effects and lack any redeeming virtue," are deemed per se violations of the Sherman Act.*fn66 Outside this category of "necessarily illegal" restraints, "[t]he rule of reason is the accepted standard for testing whether a practice restrains trade in violation of § 1."*fn67 "The rule [of reason] distinguishes between restraints with anticompetitive effect that are harmful to the consumer and restraints stimulating competition that are in the consumer's best interest."*fn68 A court must "determine whether the [] restriction is a naked restraint on trade, and thus invalid, or one that is ancillary to the legitimate and competitive purposes of the business association and thus valid."*fn69

Under the rule of reason plaintiffs bear an initial burden to demonstrate the defendants' challenged behavior had an actual adverse effect on competition as a whole in the relevant market . . . evidence that plaintiffs have been harmed as individual competitors will not suffice. . . . If the plaintiffs satisfy their initial burden, the burden shifts to the defendants to offer evidence of the pro-competitive effects of their agreement. . . . Assuming defendants can provide such proof, the burden shifts back to the plaintiffs to prove that any legitimate competitive benefits offered by defendants could have been achieved through less restrictive means. . . .*fn70

Finally, certain challenged practices warrant an "abbreviated or quick-look rule of reason analysis"*fn71 either "because the great likelihood of anticompetitive effects can be easily ascertained"*fn72 or,on the flip side, where "restraints on competition are essential if the product is to be available at all [such that] the agreement is likely to survive the Rule of Reason."*fn73

C. Sherman Act Section 2

Section 2 of the Sherman Act states that "[e]very person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony . . . ."

In order to state a claim for monopolization under Section 2, plaintiffs must establish "'(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.'"*fn74 Specifically, "a plaintiff must establish '(1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power.'"*fn75


A. Antitrust Standing*fn76

While "[r]educed consumer choice and increased prices . . . when they are the result of an anticompetitive practice, constitute antitrust injury,"*fn77 the Supreme Court recognized that "Congress did not intend antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation."*fn78 Defendants challenge Television plaintiffs' standing to sue on the grounds that they are indirect purchasers of the product in question, and that their injuries are too remote from the alleged conduct.*fn79

1. Illinois Brick Direct Purchaser Requirement

The Supreme Court's decision in Illinois Brick Co. v. Illinois established that "[g]enerally only direct purchasers have standing to bring civil antitrust claims."*fn80 The rule serves to avoid the difficulties of "apportion[ing] recovery among all potential plaintiffs . . . from direct purchasers to middlemen to ultimate consumers" and eliminate the possibility of duplicative recovery, and promotes enforcement by purchasers who have been most directly injured by the alleged violation.*fn81 Because Television plaintiffs purchased programming from the MVPDs, they must show why Illinois Brick does not bar their claims for damages against the remaining defendants.*fn82

Plaintiffs argue that these claims fall under two recognized exceptions to Illinois Brick -- the "ownership or control exception" and the "co-conspirator exception."*fn83 The Supreme Court expressly recognized an exception to Illinois Brick "where the direct purchaser is owned or controlled by its customer," *fn84 and courts have "expanded [the exception] to include instances where the defendant owns or controls the intermediary that sold the goods to the indirect-purchaser plaintiff."*fn85 Additionally, courts have held that "'Illinois Brick does not limit suits [where] [t]he consumer plaintiff is a direct purchaser from the dealer who . . . has conspired illegally with the manufacturer with respect to the very price paid by the consumer.'"*fn86 The two exceptions share a common logic -- where the relationship between the parties in a multi-tiered distribution chain is such that plaintiffs are the first or only victims of alleged anticompetitive agreements, the rationale for the Illinois Brick bar disappears.

The Second Circuit has not addressed the "co-conspirator exception,"*fn87 and those circuits that have addressed it have not taken a uniform view of its scope. The Fourth and Ninth Circuits have limited the exception to situations in which "[d]efendants have conspired to fix the price that [p]laintiffs paid directly"*fn88 -- a requirement that, if adopted, would be fatal to the Television plaintiffs' claims, as they do not allege that the Leagues or RSNs had any role in setting prices for television programming.*fn89 In contrast, in Paper Systems Inc. v. Nippon Paper Industries Co., Ltd., the Seventh Circuit eschewed the notion of a "co-conspirator exception" instead stating simply that Illinois Brick "allocate[s] to the first non-conspirator in the distribution chain the right to collect 100% of the damages."*fn90 Thus, where intermediate purchasers in the chain of distribution (here the RSNs and MVPDs) are alleged to be participants in the conspiracy, the first purchasers who are not part of the conspiracy "are entitled to collect damages from both the manufacturers and their intermediaries if conspiracy and overcharges can be established."*fn91

While mindful of the Supreme Court's admonition against even the "most meritorious of exceptions" to the direct purchaser requirement, the purpose of Illinois Brick was not to prevent the only non-conspirators in a multi-level distribution chain -- consumers no less -- from bringing a private antitrust suit.*fn92

Thus, holding that the first purchaser who is not party to the unlawful agreements to restrain trade has standing to sue is not an exception to Illinois Brick, but rather a recognition that Illinois Brick "bans Clayton Act lawsuits by persons who are not direct purchasers from the defendant antitrust violator[s]."*fn93

As discussed in depth below, plaintiffs have alleged complex arrangements in which the RSNs -- the level at which the directly relevant market (for video presentation) is divided -- are affiliated with the club for whom they provide programming and/or are owned by the MVPDs which ultimately sell the programming to consumers.*fn94 In addition, plaintiffs allege that the MVPDs benefit directly from the agreements that limit Internet broadcasting of games.*fn95 Even if the RSN and MVPD defendants could hypothetically "change sides and align themselves as plaintiffs," they have shown no inclination to do so, and plaintiffs allege that doing so would run counter to their interests in maintaining the challenged agreements.*fn96 Where all middlemen are alleged to be co-conspirators, the problems of apportioning recovery among all potential plaintiffs and duplicative recovery simply do not arise, and the principle of permitting the purchasers who have been most directly injured is honored.*fn97

2. Standing Under Associated General Contractor Factors

Although they are not barred by the specific Illinois Brick rule, plaintiffs must still establish that they are "efficient enforcers" of the antitrust laws under the factors set forth in Associated General Contractors.*fn98 Defendants argue that plaintiffs' claims are based on "[s]ome unidentified overcharge in the price TV plaintiffs pay Comcast or DirecTV for television service generally, regardless of whether they have ever watched, or even desired to watch an NHL or MLB game."*fn99 Moreover, "the allegedly overpriced RSN channel itself includes more than just MLB or NHL programming and is but one channel among tens or hundreds of channels included in the general television packages offered by Comcast and DirecTV" and therefore "it would be impossible to ascertain what effect, if any at all, the alleged violation had on the pricing of the various packages sold by Comcast and DirecTV to consumers."*fn100

Here the relevant markets are for professional hockey and baseball programming. While plaintiffs argue that "'consumers . . . generally do meet [the standing] test,'"*fn101 only "consumers in the market where trade is allegedly restrained are presumptively the proper plaintiffs to allege antitrust injury."*fn102

Purchasers of the out-of-market packages, whether television or Internet, are clearly consumers in the relevant market of professional hockey and baseball games, and allege not only increased price, but also reduced consumer choice from lack of competition.*fn103 Moreover, because no innocent parties stand between them and the alleged agreements, they are the most efficient enforcers.

In contrast, plaintiffs who merely subscribe to Comcast and DirecTV, but do not subscribe to an out-of-market package, allege that they are consumers of television generally, not that they are consumers of professional hockey or baseball games.*fn104 Neither Garber nor Herman alleges that she or he was prevented from viewing games as a result of the black-out agreements, nor do they claim that they were charged supracompetitive prices for games that they wished to view. These plaintiffs' only claims are based on some unidentified increased price of their overall cable package allegedly stemming from the absence of competition from out-of-market baseball clubs and their RSNs. Their alleged injuries are both speculative and difficult to identify and apportion in light of the packaged nature of television services, not to mention their remoteness from the primary agreements among League defendants, which makes determination of the causal connection even more difficult.*fn105 Permitting any plaintiff who simply purchased cable or satellite programming to sue would create a class of plaintiffs for whom "it is merely coincidental that they purchased [MLB and NHL programming] at all."*fn106

Thus, plaintiffs Garber and Herman are dismissed for failure to establish that they are "proper plaintiffs" under the Associated General Contractor factors.*fn107 Silver is dismissed from the Garber case, because he does not allege that he subscribed to an out-of-market baseball package.*fn108

B. Section One Claims Regarding "In-Market" and "Out-of-Market" Agreements

1. Agreements Among Defendants

As discussed briefly in the context of standing, plaintiffs allege a multi-level conspiracy consisting of horizontal and vertical agreements implicating the League defendants, the RSNs and the MVPDs."The question whether an arrangement is a contract, combination, or conspiracy is different from and antecedent to the question whether it unreasonably restrains trade."*fn109

a. League Defendants

Plaintiffs' allegations arise initially out of agreements by the individual clubs, as a league, to establish exclusive local telecast territories for each club and to grant the Leagues the exclusive rights to market those games outside the local territories. In American Needle, Inc. v. National Football League the Supreme Court held that when it comes to "marketing property owned by the separate teams," individual sports teams that together comprise a league "do not possess either the unitary decisionmaking quality or the single aggregation of economic power" of a single entity and "their objectives are not common."*fn110

Where teams compete against each other in the relevant market, their concerted action may "deprive the marketplace of independent centers of decisionmaking and therefore of actual or potential competition."*fn111 Like the intellectual property at issue in American Needle, the rights at issue here belong initially to the individual clubs.*fn112 Plaintiffs have alleged that absent these agreements the clubs would compete against each other in the markets for hockey and baseball programming.*fn113

The fact that the NHL and MLB are lawful joint ventures does not preclude plaintiffs from challenging the Leagues' particular policies under the rule of reason.*fn114 Defendants' argument that the teams cannot unlawfully conspire with respect to out-of-market games because only the Leagues can own those games assumes the legality of the very agreements challenged here. There is no distinction between in-market and out-of-market games other than that the clubs have agreed to cede to the Leagues the right to market the games, to which they have initial rights, outside their local territories.*fn115 American Needle conclusively established that these kinds of arrangements are subject to Section 1 scrutiny.

b. Role of RSNs

Plaintiffs argue that the RSNs have participated in a conspiracy to divide the market for professional baseball and hockey programming.*fn116 They assert that RSNs do not merely "pass through" the relevant product unchanged from the Leagues to the consumers: rather, RSNs purchase rights from the clubs, and produce video presentations of the games -- the product in question -- subject to anticompetitive agreements not to sell programming for a given hockey or baseball club outside the defined territory surrounding that club.*fn117 Plaintiffs argue that "[t]he fact that the clubs have a central role in orchestrating this horizontal agreement" does not negate the horizontal character of the alleged agreements by the RSNs, because "each RSN plainly understood that it was getting a regional monopoly in exchange for an agreement to respect other RSN's regional monopolies."*fn118 Thus, "[e]ven when the focus is on the horizontal agreement at the club level, the RSNs are still liable, as their role in carrying out the clubs' division of the market is not innocent."*fn119

Plaintiffs do not plausibly allege that the RSNs entered into actual agreements with one another to enforce the territorial market divisions established by the League defendants, but it is not necessary that they do so in order to implicate the RSNs in the conspiracy to divide the market. First of all, courts have recognized that "vertical agreements can [] injure competition by facilitating horizontal collusion."*fn120 It is well established, for example, that a distributor's coordination of horizontal agreements in restraint of trade at the next distribution level by entering into a series of identical vertical agreements with multiple parties may subject all participants to antitrust liability.*fn121 Moreover, where parties to vertical agreements have knowledge that other market participants are bound by identical agreements, and their participation is contingent upon that knowledge, they may be considered participants in a horizontal agreement in restraint of trade.*fn122 It defies reason to suggest that the RSNs lack knowledge that all other RSNs have analogous agreements with the respective individual clubs, and it is at least plausible that the terms of the agreement between the clubs and the RSNs are contingent upon that knowledge. Plaintiffs have therefore adequately alleged participation on the part of the RSNs in the conspiracy to geographically divide the market for professional hockey and baseball games.*fn123

c. Role of MVPDs

Plaintiffs claim that Comcast and DirecTV are active participants in the challenged schemes in two ways. "First, they actively control their subsidiary RSN's in the very matters that are the subject of this lawsuit . . . [and] second, the MVPDs are the only parties that can actively implement the geographical divisions for television programming . . . [and] have agreed to do just that."*fn124 In addition, plaintiffs claim that "MVPDs are the direct beneficiaries of restrictions that prevent Internet streaming of local games."*fn125

Plaintiffs do not allege that the MVPDs have agreed amongst themselves in any way, and in fact, it is clear that MVPDS compete with each other to sell packages containing hockey and baseball programming. However, plaintiffs allege that Comcast and DirecTV own and control a number of RSNs, and that the League restrictions on Internet dissemination of hockey and baseball games benefit both the RSNs and the MVPDs. These allegations indicate that the MVPD defendants are doing more than passively implementing the agreements among the Leagues and the RSNs.*fn126 They suggest "a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement" sufficient to allege an agreement between the MVPDs and the RSNs and League Defendants to restrain trade.*fn127 Thus, while plaintiffs have not alleged horizontal agreements among the MVPDs, they have plausibly alleged vertical agreements that not only facilitate, but are essential to the horizontal market divisions.*fn128

2. Harm to Competition

Plaintiffs do not argue that the agreements to divide the geographic market and cede control over out-of-market games to the Leagues constitute per se antitrust violations.*fn129 The question is whether these agreements have "anticompetitive effect that are harmful to the consumer" or whether they "stimulat[e] competition . . . in the consumer's best interest" -- in other words, whether they survive the rule of reason.*fn130 In order to overcome defendants' motion to dismiss, plaintiffs' "allegations must 'raise a reasonable expectation that discovery will reveal evidence of' an injury to competition."*fn131

Defendants argue that because the NHL and MLB are legitimate joint ventures, and some cooperation with respect to the production of games is necessary, that the conduct here -- the production and distribution of live telecasts of games -- is "core activity" immune from antitrust scrutiny.*fn132 However, the notion that "the exhibition of [] league games on television and the Internet" is clearly a "league issue"*fn133 is contrary to longstanding precedent that agreements limiting the telecasting of professional sports games are subject to antitrust scrutiny, and analyzed under the rule of reason.*fn134

Even if certain agreements by sports leagues with respect to telecasting games may be "essential if the product is to be available at all" this does not give league agreements regarding television rights blanket immunity from antitrust scrutiny.*fn135 To the contrary, the Supreme Court has held that an agreement that "define[s] the number of games that may be televised, establish[es] the price for each exposure, and . . . the basic terms of each contract between the network and a home team" with the result that "[m]any games for which there is a large viewer demand are kept from the viewers, and many games for which there is little if any demand are nonetheless televised" may constitute an antitrust violation.*fn136

a. "In-Market" Agreements

Plaintiffs allege that the Leagues' arrangements define the territory in which each individual team may televise its games, meaning that individual clubs are prohibited from telecasting their baseball and hockey games outside the designated home territory, irrespective of consumer demand for those games. Plaintiffs echo defendants MSG and the New York Rangers' argument, as plaintiffs in a different case, that "'[i]na fully competitive marketplace, the [individual clubs] could and would . . . increas[e] the opportunity to view [their] games throughout the country, whether through cable, satellite or on the Internet.'"*fn137 In other words,the agreements result in an arrangement by which the clubs have authority over the output of their own games in their home territory, but must "forego their own output" outside their home territory and cede to the Leagues' authority over out-of-market games. As numerous courts have recognized, "a horizontal agreement that allocates a market between competitors and restricts each company's ability to compete for the other's business may injure competition."*fn138

b. "Out-of-Market" Agreements

Defendants argue that the fact that the market division is part of a larger joint-selling arrangement, which makes all games available to the vast majority of viewers as "all-or-nothing" out-of-market packages, eliminates any harm to competition.*fn139 In contrast, plaintiffs allege that the agreements to centralize control of all baseball and hockey out-of-market programming in the Leagues, as exclusive distributors, are themselves unreasonable restraints of trade.*fn140 While Congress has exempted these types of joint agreements from antitrust scrutiny in sponsored telecasting, that exemption is inapplicable to the telecasts of the hockey and baseball games at issue here.*fn141

Contrary to defendants' argument, Brantley v. NBC Universal, Inc. does not sanction the alleged out-of-market "all or nothing" packages as a replacement for individual competition among the clubs. In Brantley, the court rejected allegations of unlawful tying where the tied television programs were owned in the first instance by the programmers who chose to market the programs as a package.*fn142 The court analogized to the professional sports context noting that there is no question that individual teams may package desirable and undesirable game tickets as part of a season package.*fn143 However, the arrangement here is more akin to the League commandeering the individual clubs' rights to sell tickets to sports fans outside their home territory, and, as a replacement, conditioning the purchase of a popular team's tickets on the purchase of other teams' tickets.

The Second Circuit established in Major League Baseball Properties, Inc. v. Salvino, that agreements by individual clubs to grant the League the exclusive right to license use of certain rights originally held by the individual clubs are analyzed under the rule of reason.*fn144 At issue in Salvino was an agreement by MLB clubs to grant the League "the exclusive right -- subject to limited exceptions -- to license Club names and logos for use on retail products for national and international (i.e. not merely local) distribution . . . and to be sold at retail within the Clubs' respective local markets."*fn145 The court concluded that the agreement was lawful, but only after careful consideration of the district court's factual conclusions concerning the impact of the licensing agreement on output, and the viability of MLB's justifications for its decision to consolidate licensing rights in the League. Salvino suggests that granting the Leagues exclusive rights to distribute out-of-market programming, and the Leagues' decision to do so largely in the form of blanket licensing, may very well be reasonable and in compliance with antitrust law.*fn146 However, plaintiffs have alleged the anticompetitive effect of "forc[ing] . . . consumers to forego the purchase of [these games] from other distributors [the individual clubs]" resulting in decreased consumer choice and increased price -- an allegation that states an injury to competition.*fn147 Defendants have not even alleged that these restraints on trade are justified, for example, by arguing that "'individual [teams] are inherently unable to compete fully effectively'" or that the agreements are "necessary to maintain a competitive balance."*fn148

Plaintiffs have adequately alleged harm to competition with respect to the horizontal agreements among individual hockey and baseball clubs, as part of the NHL and MLB, to divide the television market. Making all games available as part of a package, while it may increase output overall, does not, as a matter of law, eliminate the harm to competition wrought by preventing the individual teams from competing to sell their games outside their home territories in the first place.*fn149 And plaintiffs in this case -- the consumers -- have plausibly alleged that they are the direct victims of this harm to competition.*fn150

C. Section 2 Claim for Conspiracy to Monopolize the Market for Video Presentation and Internet Streaming of Games The final claim, brought on behalf of all plaintiffs, is a Section 2 claim for conspiracy to monopolize the "market for video presentations of major league [hockey/baseball] games and Internet streaming of the same" and "use of that power for the purposes of unreasonably excluding and/or limiting competition."*fn151

Defendants argue that the Section 2 claims must be dismissed for failure to allege any of the necessary elements of a monopolization claim.*fn152

It is well established that "[t]here are peculiar and unique characteristics that set major league men's ice hockey [and baseball] apart from other sports or leisure activities, . . . that [c]lose substitutes do not exist"*fn153 and that the Leagues possess monopolies of their respective sports.*fn154 It is also established that "[a] monopolist may not . . . use its market power, whether obtained lawfully or not, to prevent or impede competition in the relevant market."*fn155 Having defined the relevant market as the market for television broadcasting of professional hockey and baseball games, plaintiffs have adequately alleged that NHL and MLB exercise monopoly power defined as "'[w]hen a product is controlled by one interest, without substitutes available.'"*fn156 Finally, as already discussed, plaintiffs have plausibly alleged that the NHL and MLB have used their monopoly power to restrict the broadcast of television programming in a manner that harms competition.*fn157 However, plaintiffs have not alleged any monopoly power on the part of RSNs or MVPDs in the market for production of baseball and hockey games, nor have they alleged facts in support of a conspiracy to monopolize the market. Claim Four is therefore dismissed against the RSNs and MVPDs.


For the foregoing reasons, Plaintiffs Garber and Herman are dismissed from both cases, and Silver is dismissed from the Garber case, for lack of antitrust standing. The Section Two claim (Claim FOUr) is dismissed against the RSN and MVPD defendants, but may proceed against the League defendants. The section One claims may proceed against all defendants. A conference in this matter is scheduled for December 18, 2012 at 5:00 p.m. The Clerk of the Court is directed to close these motions [Docket Entry No. 74, 12 Civ. 1817 and Docket Entry No. 65, 12 Civ. 3704].


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