Cablevision Seeks Voiding of Viacom Carriage Agreement in Lawsuit

Cablevision alleged Viacom engaged in an illegal tying arrangement, which violates federal antitrust laws, the operator said in a news release on the lawsuit that was filed under seal and not available in a redacted version. Viacom “coerced Cablevision by threatening to impose massive financial penalties unless Cablevision complied with Viacom’s demands,” Cablevision said. It said the programmer “effectively forces Cablevision’s customers to pay for and receive little-watched channels in order to get the channels they actually want."

Viacom said it will “vigorously defend this transparent attempt by Cablevision to use the courts to renegotiate our existing two-month old agreement.” At the request of distributors, Viacom and other programmers “have long offered discounts to those who agree to provide additional network distribution,” it said in a statement. “Many distributors take advantage of these win-win and pro-consumer arrangements. Reflecting the highly competitive cable programming business, these arrangements have been upheld by a number of federal courts and on appeal.”

Cablevision is seeking declaratory relief that voids the December carriage agreement and asked the court to require Viacom permit it “to carry the core networks and ancillary products on terms pending negotiation of a new, lawful agreement.” The cable company said there would be no immediate disruption in programming offerings pending a resolution.

This kind of suit is uncommon, said Scott Flick, a Pillsbury Winthrop broadcast lawyer. It seems that by signing the agreement, Cablevision “secured the programming that they need and now are trying to use this lawsuit as a way of cherry-picking the content,” he said. It’s very common for a cable operator to make sure that networks that are found on a competing system and favored by consumers are also found on its systems, he said. But to bring an antitrust suit, “they're going to have to demonstrate that, without MTV, they couldn’t function, and as a result, they were forced to take all these other networks that they otherwise never would've taken in order to get MTV,” he said.

The suit is unusual, but not surprising, another broadcast lawyer said. “Cable operators are feeling increasingly squeezed by rising programming costs, and [by] the question as to how much of those costs that they can pass through before subscribers revolt.” They have for many years expressed concerns about programmers “tying” carriage of popular channels with a mandatory requirement to carry multiple other channels from the programmer, he said: “It would not surprise me to see more of these suits filed.” It remains to be seen how a court will rule on this claim, and “if it will even make it to trial,” he said. “Such cases are commonly settled before trial."

The American Cable Association reiterated that the “tying” and bundling practices of the major cable companies forces cable operators to pay for channels they don’t want to offer their customers. “It’s a problem, not just for Cablevision, but also for hundreds of small and medium-sized cable operators,” ACA said in a press release. “If the courts can address this problem, then we believe this would be a good outcome for consumers."

If the court allows the case to proceed, cable, satellite and broadcast companies will be looking at it closely, Flick said. It’s fairly common to accept carriage of other networks as a form of compensation for granting cable networks, he said. “If the court said you can’t do that, then that would affect a lot of people’s negotiations and how they come about it.”