Viamedia, Inc. v. Comcast Corp.

951 F.3d 429

VIAMEDIA, INC., Plaintiff-Appellant,

v.COMCAST CORPORATION and Comcast Cable Communications Management, LLC, Defendants-Appellees.

No. 18-2852

United States Court of Appeals, Seventh Circuit.

Argued February 7, 2019

Decided February 24, 2020

Rehearing En Banc Denied April 7, 2020^*

Table of Contents

I. The Markets and the Competitors...

A. Cable Television: History, Revenue Sources, and Competition...

1. Television Programming and Advertising...

2. Revenue Sources: Competition and Cooperation...

a. Competition for Advertising Dollars and Cooperation Through Interconnects...

b. Competition for Subscribers...

i. Growing MVPD Competition...

ii. Incumbent Cable Companies' Efforts to Stymie Competition for Subscribers...

B. The Ad Rep Services Market...

1. The Role of Viamedia...

2. Vertically Integrated MVPDs...

3. Back to the Interconnects...

C. Comcast Refuses Interconnect Access to Viamedia...

II. District Court Proceedings...

III. Legal Standards and Analysis...

A. Sherman Act Section 2—Illegal Monopolization...

B. Claims of Anticompetitive Conduct: Refusals to Deal and Tying...

1. Refusals to Deal...

a. Monopolists and Refusals to Deal...

b. Aspen Skiing and Comcast...

c. Refusals to Deal and Motions to Dismiss...

i. Comcast's Proposed Legal Standard...

ii. Inapposite Vertical Integration Cases...

2. Tying...

a. Summary Judgment Standard...

b. Tying and Comcast's Conduct...

i. Definition...

ii. Separate Products or Services...

iii. Forced Purchase...

C. Section 2 Monopolization: Harms, Efficiencies, & Remedies...

1. Harm to Competition...

a. Ad Rep Services...

b. The MVPD Market: MVPDs, Advertisers, Cable Subscribers...

c. Back to the Interconnects...

2. Procompetitive Justifications?...

a. The Interconnects...

b. The Ad Rep Services Market...

3. Remedies...

D. Antitrust Injury...

E. Role of Expert Witnesses...

1. Standard...

2. Economic Expert Witness...

3. Lack of Expert Witness on Causation...

IV. Conclusion...

Plaintiff Viamedia, Inc. has sued defendant Comcast Corporation for violating Section 2 of the Sherman Act, 15 U.S.C. § 2. Viamedia accuses Comcast of using its monopoly power in one service market to exclude competition and gain monopoly power in another service market. The district court dismissed Viamedia's case, in part on the pleadings and in part on summary judgment. We reverse. Viamedia's allegations and evidence are sufficient to state and support claims that should be presented to a jury.

Because the district court dismissed part of the case on the pleadings and the rest on summary judgment, we must treat as true Viamedia's factual allegations and give it the benefit of factual disputes and favorable inferences from the evidence. To make sense of this case, we explain some basic business arrangements in the markets that put television programming in American homes, as well as market definitions necessary in evaluating the antitrust claims.

The parties agree on the definitions of the relevant geographic and service markets. Viamedia asserts claims against Comcast for monopolization in three geographic markets: the Chicago, Detroit, and Hartford metropolitan areas. In each of those three geographic markets Comcast now has monopoly power over two separate service markets: Interconnect services and advertising representation services. Interconnect services are cooperative selling arrangements for advertising through an "Interconnect" that enables providers of retail cable television services to sell advertising targeted efficiently at regional audiences. Advertising representation services for retail cable television providers assist those providers with the sale and delivery of national, regional, and local advertising slots. This market in advertising representation services is the one in which Viamedia competed with Comcast. In each geographic market, according to Viamedia's evidence, Comcast used its monopoly power over the cooperative Interconnects to force its smaller retail cable television competitors to stop doing business with Viamedia, thereby gaining monopoly power over the market for advertising representation services.

Viamedia has presented evidence that Comcast's elimination of its only competitor in the advertising representation services market has harmed competition in violation of Section 2. According to Viamedia's evidence, its customers for advertising representation services (i.e., Comcast's retail cable competitors) did not switch to Comcast because it offered a better-quality or lower-priced service. They switched because Comcast used its monopoly power over the Interconnects to present its cable competitors with a Hobson's choice: either start buying advertising representation services from us and regain access to the Interconnects, or keep buying those services from Viamedia and stay cut off from the Interconnects they needed to compete effectively. According to Viamedia's evidence, Comcast deliberately adopted a strategy it knew would cost Comcast itself millions of dollars in the short run, but the strategy eventually gave it monopoly power in these local markets for advertising representation services. Giving Viamedia the benefit of its allegations and evidence, this is not a case in which Section 2 is being misused to protect weaker competitors rather than competition more generally. See Leegin Creative Leather Products, Inc. v. PSKS, Inc. , 551 U.S. 877, 906, 127 S.Ct. 2705, 168 L.Ed.2d 623 (2007), quoting Atlantic Richfield Co. v. USA Petroleum Co. , 495 U.S. 328, 338, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990) (purpose of the antitrust laws is to protect "competition, not competitors ").

As now the sole provider of advertising representation services to its cable competitors, Comcast can also damage competition beyond the relatively narrow markets for advertising representation services in Chicago, Detroit, and Hartford. This control allows it to undercut competition in two more markets: cable television services to retail customers, and the sale of advertising spots to local retailers. By establishing itself as the gatekeeper for its cable competitors' advertising, Comcast has gained access to their sensitive marketing and promotional pricing information. And because Comcast took control of its rival cable companies' inventory of local ads, local retailers no longer have a choice of cable companies from whom they buy ad time.¹

Viamedia has thus offered evidence to defeat summary judgment on its claim that Comcast unlawfully used its monopoly power over the Interconnects to tie those services to its advertising representation services. Viamedia has also adequately stated a claim that Comcast has unlawfully refused to deal with Viamedia and any cable competitor that bought advertising representation services from Viamedia. On the pleadings and the summary judgment record, Viamedia's prima facie claims of monopolization are similar to but stronger than the successful plaintiff's Section 2 claim in Aspen Skiing Co. v. Aspen Highlands Skiing Corp. , 472 U.S. 585, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985). We remand this case for any further necessary discovery and for trial.

In Part I, we lay out the key facts: in Part I-A, the structure of the cable television markets; in Part I-B, the specifics of Comcast's and Viamedia's businesses, including the advertising representation services they both offer and the critical role that Interconnects play for providers of cable television programming; and in Part I-C, Comcast's refusal to continue providing Interconnect access to Viamedia or any of its customers in Chicago, Detroit, and Hartford. In Part II, we review the district court proceedings. Then, in Part III-A, we lay out the legal standards under Section 2 that apply to Viamedia's claims. In Part III-B-1, we apply that law to Comcast's decision to refuse to allow Viamedia or its customers access to the Interconnects. In Part III-B-2, we apply that law to Viamedia's claim that Comcast illegally tied Interconnect services to advertising representation services. In Part III-C, we evaluate in greater detail the harm to competition alleged by Viamedia and the procompetitive justifications offered by Comcast, highlighting considerations that will be relevant on remand. Finally, in Parts III-D and III-E, we address issues of antitrust injury and the district court's exclusion of expert witnesses.

I. The Markets and the Competitors

Because the district court dismissed one claim on the pleadings and the other on summary judgment, we present the relevant allegations and evidence in the light reasonably most favorable to plaintiff Viamedia, the non-moving party. The parties agree on the definition of the relevant geographic markets, and the relevant service-product markets are not disputed on appeal. The relevant geographic markets are the Chicago, Detroit, and Hartford metropolitan areas, called Direct Marketing Areas or DMAs. The monopolized service market in each metropolitan area is that for the sale of advertising representation services ("ad rep services" in industry terms) related to so-called spot advertising on cable systems. To assess the harm to competition that can result from monopolization of the market for ad rep services, we must explain the related markets for retail cable television services to consumers, as well as access to the cable companies' cooperative advertising distribution platforms called Interconnects.

A. Cable Television: History, Revenue Sources, and Competition

Understanding these markets' competitive dynamics requires a bit of history about the evolution of television in the United States, including the challenges that cable companies have faced in competing with over-the-air broadcast programming.

1. Television Programming and Advertising

An awkward acronym, MVPDs, stands for "multichannel video programming distributors." That umbrella term includes cable companies like Comcast and Cox, as well as "overbuilders" like RCN and Wide Open West, known as WOW!. Beyond cable companies, MVPDs also...