A federal judge on Friday rejected Viacom Inc's (NASDAQ:VIA) effort to dismiss Cablevision Systems Corp's (NYSE:CVC) antitrust lawsuit accusing it of forcing cable providers and subscribers to buy channels they do not want.
U.S. District Judge Laura Taylor Swain in Manhattan said Cablevision's allegations, backed by subscription and demographic evidence, that Viacom engaged in illegal "bundling" were strong enough to "support plausibly an inference of anticompetitive effects."
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Cablevision had accused Viacom of engaging in "strong-armed" tactics to coerce it into paying for 14 low-rated or obscure "suite networks" if it also wanted eight "core networks," including four deemed "commercially critical": BET, Comedy Central, MTV and Nickelodeon.
It has said the alternative would have been a roughly $1 billion "penalty," and complained that Viacom's bundling practices hogged bandwidth that it could have used for more popular channels from other programmers.
In response, Viacom said bundling was a valid and longstanding industry practice, and that Cablevision's contract did not permit an "a la carte" approach to selecting channels. It also said Cablevision's legal position was the opposite of a position that the company had taken recently in a similar case.
"Viacom's programming licensing arrangements are flexible, competitive and the result of good-faith negotiations with distributors," the company said in a statement on Friday. "We are confident that Cablevision will fail to prove the facts required to prevail."
In a statement, Cablevision said it was gratified with Swain's decision. "We continue to believe that Viacom's tying of its popular networks to carriage of its lesser-watched ancillary networks is illegal, anti-consumer, and wrong," it said.
Cablevision had also asked Swain to issue an injunction requiring Viacom to license core networks without also licensing suite networks, but the judge said it was too early in the litigation to do so. The lawsuit began in February 2013.
Viacom is based in New York, and Cablevision in Bethpage, New York. The media industry has seen the case as a potential benchmark in the relationship between programmers such as Viacom and distributors such as Cablevision.
In Friday trading, Cablevision shares fell 6 cents to $17.38, and Viacom shares fell $1.24 to $85.76.
The case is Cablevision Systems Corp et al. v. Viacom International Inc et al., U.S. District Court, Southern District of New York, 13-01278.
(Reporting by Jonathan Stempel; Editing by Jonathan Oatis and Grant McCool)