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Plaintiffs Try Hail Mary Appeal in Antitrust Suit Over NFL's 'Sunday Ticket'

Tampa Bay Buccaneers play against the Washington Redskins at FedExField stadium. November 16, 2014. Photo: Keith Allison via Wikimedia Commons.

Plaintiffs plan to argue Friday that a federal appeals court should revive their antitrust claims against the National Football League Inc. over its “Sunday Ticket” subscription package.

The package offers football fans an opportunity to view games outside their local broadcast area by signing up to DIRECTV at a cost of $2,314 to $120,000 a year. But plaintiffs in a consolidated class action brought in multidistrict litigation alleged that the arrangement restricts competition in violation of federal antitrust law.

Last year, a federal judge in Los Angeles disagreed and dismissed the case, prompting plaintiffs to petition the U.S. Court of Appeals for the Ninth Circuit, which will hear oral arguments on Friday.

“The arrangement is a classic restraint of trade, with predictable results: less consumer choice, less telecast availability, lower viewership, higher prices, and monopoly profits for the participants,” wrote attorney Marc Seltzer in the plaintiffs’ opening brief before the Ninth Circuit. “Affirming the decision below would provide a roadmap for firms in every industry to evade antitrust liability, even though the Supreme Court has consistently rejected the elevation of form over substance.”

Seltzer, a partner in the Los Angeles office of Susman Godfrey, will argue against Gregg Levy, a partner at Covington & Burling in Washington, D.C., who represents the NFL.

“Plaintiffs challenge long-standing and procompetitive broadcast arrangements of the National Football League,” Levy wrote in the NFL’s response brief. “Those broadcast arrangements ensure that fans across the country can view NFL football games in multiple ways, including through free, over-the-air television broadcasts every Sunday afternoon during the NFL season.”

Levy declined to comment, and Seltzer did not respond to a request for comment.

The litigation is among several cases tackling how sports leagues and satellite and cable providers sell out-of-market games through bundled packages available on televisions, computers or other electronic devices. In 2015, a federal judge approved the settlement of a similar class action against the National Hockey League.

Unlike in other sports, the DIRECTV arrangement is exclusive. It was a big part of AT&T Inc.’s $48.5 billion merger with DIRECTV, which the Federal Communications Commission approved in 2015.

Plaintiffs are individual and commercial subscribers of the package, such as restaurants and sports bars, that allege they overpaid for out-of-market games in violation of the U.S. Sherman Antitrust Act. The NFL brought in a big defense team in the case that included Levy and Beth Wilkinson of Wilkinson Walsh + Eskovitz. Kirkland & Ellis represented DIRECTV, which pushed to send the cases into arbitration.

U.S. District Judge Beverly Reid O’Connell in Los Angeles granted the NFL’s dismissal motion with prejudice and denied DIRECTV’s arbitration motion as moot.

In her ruling, O’Connell divided the case into two: a horizontal agreement between the NFL teams to pool their broadcasting rights, and a vertical agreement between the NFL and DIRECTV to sell those rights.

O'Connell upheld the horizontal arrangement because, without pooling the teams, there would be no way to broadcast game footage and, in any event, plaintiffs lacked standing since they did not purchase the Sunday Ticket package from the NFL.

As to the vertical arrangement, she found that the exclusive deal with DIRECTV did not reduce output—the total number of broadcast football games. O'Connell relied on the U.S. Supreme Court’s 1984 decision in National Collegiate Athletic Association v. Board of Regents, which held that the NCAA had violated antitrust laws by restricting the output of its broadcast games.

“This artificial compartmentalization of plaintiffs’ case was wrong because the agreements are designed to work together to minimize competition,” Seltzer wrote in his brief.

Joining plaintiffs were a group of 11 “economists,” all professors, who filed an amicus brief before the Ninth Circuit that reiterated plaintiffs’ argument on dividing the agreements, among other things.

“The court’s definition of output flies directly in the face of the economic definition of output for this relevant market, namely, NFL game broadcasts actually viewed or purchased by fans on television or via games streamed by the individual team owners, themselves,” they wrote.

Levy, in his response brief, disagreed.

“Plaintiffs do not—and cannot—allege facts that support an inference that the NFL Sunday Ticket agreement reduces output,” Levy wrote. “This is the product that the defendants collectively produce and that plaintiffs ultimately consume.”