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

The Justice Department has strongly backed FuboTV in its fight against Venu, the faltering sports streaming app joint venture between Walt Disney, Warner Bros. Discovery and Fox.

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

“The evidence that the defendants (Fox, Disney and WBD) had incentives to exclude distributors such as Fubo from access to unbundled sports content and ‘the market power to enforce those incentives’ suggested that the creation of Venu significantly increased competition “could decrease,” the DOJ argued.

The DOJ’s filing was confirmed by a separate amicus filing 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 accuses Venu of stifling competition because the company is not required to buy non-sports TV programming, only the 14 sports channels of the three joint venture partners. On the other hand, if the trio negotiates individually with distributors such as Fubo, sports channels will be bundled with entertainment and news channels. Fubo therefore claims that Venu is an attempt to capture the market for the so-called skinny sports package.

We are grateful for the support we have received from DOJ and state agencies nationwide. Consumers deserve better: more choice, more innovation and fair prices. Today we are more convinced than ever of the merits of our cause. Happy Thanksgiving 🍁 https://t.co/80uWMSQwQB

– David Gandler (@davidgandler) November 27, 2024

A lower court judge issued a preliminary injunction in August days before Venu’s launch, ruling that Fubo had made compelling arguments that the app would violate the country’s antitrust laws. Fox, WBD and Disney immediately appealed the ruling, and a trial is expected to take place in January 2025.

Disney, WBD and Fox claim Venu adds to the competitive mix and that the lower court judge incorrectly included bundling in her decision, drawing heavy criticism of the practice. While bundling is not at issue in the programmers’ appeal to the 2nd Circuit to overturn the lower court’s preliminary injunction, the practice appears to be hovering in the background.

Fubo’s core lawsuit, which is being heard in the lower court, is an attack on bundling. And the industry is certainly reading the DOJ’s amicus brief on tea leaf bundling. The term “bundling” is mentioned 24 times and the word “bundle” 21 times in the Justice Department’s 44-page amicus, with the feds writing: “Defendants point to the district court’s comment that bundling appears ‘bad for consumers,’ but That’s exactly what the court wanted to say. “Many consumers demand a smaller TV package, which is excluded due to the defendant’s existing bundling practices.”

The DOJ has no opinion on whether channel bundling, a decades-old practice, violates antitrust law. But the agency certainly isn’t scolding the lower court judge for launching a broadside against the practice – completely unfounded, according to the pay-TV programs.

Normally it’s a big deal for the federal government to get involved in a case. Whether it plays a role here is another question. Given the impending change in administration in Washington, DC, the next Justice Department could take over the contract or even submit a request on behalf of pay-TV programmers. A group of red states led by Florida has already filed a lawsuit on behalf of pay-TV programmers. While she was not Florida’s attorney general at the time of this filing, former Florida AG Pam Bondi will be President Donald Trump’s nomination to be attorney general.

Part of the litigation stems from a Supreme Court decision that monopolistic companies are not required to negotiate 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 are not obligated to treat Fubo similarly to Venu.

What the lower court ruled and the DOJ supported and called a “red herring” is that the no-duty-to-deal doctrine applies only to individual companies, not to mergers or joint venture matters.

While the appeals court may hear arguments in January, the lower court’s arguments on motions to dismiss the case are scheduled to be heard on Dec. 13. Given the judge’s injunction, this seems very unlikely. She will also hear a request from Fox to move his part of the case to California.

In an earlier order, the judge noted that she might lock the courtroom because of the sensitive financial information that would be discussed at the hearing.