Bombarded On All Sides, Disney Must Face Federal Antitrust Lawsuit

Suing the Walt Disney Company appears to be a pastime for some attorneys. Every time someone falls or slips at one of Disney’s theme parks, out come the lawsuits. When Disney’s stock fell because of streaming profits, another lawsuit was filed again. A woman is suing Disney over a “wedgie” she received while on Walt Disney World Resort vacation. But now, the Disney Company is being brought into an antitrust class action lawsuit that could alter how the company does business.

U.S. District Judge Edward Davila in San Jose ruled earlier this week that YouTube TV and Direct TV subscribers could sue Disney for “onerous” contracts that were unfair to its competitors. The lawsuit argues that Disney has caused the prices of both YouTube TV and Direct TV, both competitors to Disney-owned Hulu TV Live, to raise their prices to include Disney-owned television channels on their streaming platforms.

The argument is one that Disney has heard before in its fight with Charter/Spectrum over television tiers. In their agreements with cable and streaming providers, Disney negotiated the inclusion of ESPN in all packages, substantially raising the prices. This was the main sticking point in Disney’s fight with Charter Communication, and ultimately, Disney caved, allowing Spectrum customers to have packages that did not include ESPN and its family of networks. Disney also allowed Spectrum to cut many Disney-owned channels, including Disney Junior.

The plaintiffs in this case are saying that because Disney owns its streaming platforms, Hulu and Disney Plus, the company has no incentive to cut the cost of its networks, creating a barrier against competition. Not only does Disney’s controlling content providers and streaming services create barriers to competition, but it also unfairly increases the price of its channels on other streaming services to keep competition at a minimum.

However, attornies for Disney argued:

This lawsuit misconstrues basic antitrust and economic concepts. The antitrust laws exist to protect competition, not individuals.

The Federal judge ruled that the consumers would have to modify their lawsuit if they were seeking financial compensation and gave them until the end of the month to do so. They would have to show that there were unlawful agreements between streaming competitors to receive a financial settlement.

Should Disney lose this antitrust lawsuit, it could alter how it can do their television business. The Walt Disney Co. would no longer be able to overcharge consumers for channels they don’t use, like ESPN and National Geographic. This would allow American families more choices in their cable lineup at a cheaper rate.

District Judge Edward Davila is allowing the case to move forward but cautioned that it is still in its early stages.

Disney has considered selling some of its television assets, including ABC, and moving ESPN to a streaming-only platform to avoid lawsuits like these and maximize profits.

We will continue to update this breaking news at Disney Fanatic.