DOJ files brief in support of Fubo in Venu Sports lawsuit… for now

The Justice Department came out strongly in support of FuboTV in its fight against Venu, the discontinued streaming app joint venture of Walt Disney, Warner Bros. Discovery and Fox.

In a friend of the court brief, or amicus curiae, the DOJ argued yesterday that the three pay-TV programmers’ arguments to overturn a preliminary injunction against Venu were a “red herring” and that the proposed streaming service posed a threat against the competition.

“The evidence that the defendants (Fox, Disney and WBD) would have incentives to exclude distributors such as Fubo from access to unbundled sports content, and the ‘market power to follow those incentives’, indicated that the formation of Venu may significantly lessen competition “, the DOJ argued.

The DOJ’s application was echoed by a separate amicus brief from the states of New York, California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, Oregon, Pennsylvania, Rhode Island, Vermont, Washington and the District of Columbia .

Fubo claims that Venu stifles competition because it is not required to buy non-sports TV programs, but only the 14 sports channels from the three joint venture partners. However, when the trio individually negotiates with distributors such as Fubo, sports channels are bundled with entertainment and news channels. So Fubo claims that Venu is an attempt to corner the market on the so-called skinny sports package.

We are grateful for the support we have received from the DOJ and state AGs nationwide. Consumers deserve better: more choice, greater innovation and fair prices. Now more than ever, we are convinced of the merits of our cause. Happy Thanksgiving

— david gandler (@davidgandler) 27 November 2024

A lower court judge in August granted a preliminary injunction days before Venu was due to launch, ruling that Fubo had made a compelling case that the app would violate the country’s antitrust laws. Fox, WBD and Disney immediately appealed the ruling, with a hearing tentatively set for January 2025.

Disney, WBD and Fox argue that Venu adds to the competitive mix and that the lower court judge mistakenly drew bundling into her decision, strongly criticizing the practice. Although bundling is not at issue in the programmers’ appeal to the 2nd Circuit to overturn the lower court’s preliminary injunction order, the practice is clearly hovering in the background.

Fubo’s central lawsuit, which continues in the lower court, attacks bundling. And the industry is certainly reading the DOJ’s tea leaf bundling amicus brief. The term bundling is mentioned 24 times in the DOJ’s 44-page amicus brief, and the word bundle 21 times, where the Feds write: “The defendants point to the district court’s comment that bundling appears to be ‘bad for consumers,’ but the court’s point was that many consumers demand the kind of smaller TV package that defendants’ existing bundling practices have precluded.”

The DOJ is not commenting on whether channel bundling, a decades-old practice, is an antitrust violation. But the bureau is certainly not scolding the lower court judge for taking a broadside against the practice – unwarranted in the opinion of pay TV programmers.

It is typically a big deal that the federal government initiates a lawsuit. Whether it matters here is another matter. With a change of administrations underway in Washington, DC, the next DOJ may withdraw the case or even file on behalf of pay TV programmers. A group of red states led by Florida has already filed on behalf of pay-TV programmers. While she was not Florida’s attorney general at the time of the filing, Pam Bondi, the former Florida AG, is incoming President Donald Trump’s nomination for Attorney General.

Part of the legal dispute stems from a Supreme Court ruling that said monopolistic companies have no duty to deal with distributors of the product (Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP (2001) and Pacific Bell Telephone Co .v. linkLine Communications, Inc., (2009) So this would mean that Fox, WBD and Disney have no duty to treat Fubo the same as Venu.

What the lower court ruled, and the DOJ seconded and called a “red herring,” is that the no duty to act doctrine applies only to individual companies, not mergers or joint ventures.

While the appeals court may hear arguments in January, the lower court is scheduled to hear arguments Dec. 13 on motions to dismiss the case. Given the judge’s preliminary injunction order, this seems highly unlikely. She will also hear a proposal from Fox to move her part of the case to California.

In an earlier ruling, the judge noted that because of the sensitive financial information that would be discussed during the hearing, she can seal the courtroom.