Today's Ridiculous Lawsuit: Wal-Mart, Netflix Sued Over Conspiracy To Create A Monopoly

from the ugh dept

Wed, Jan 7th 2009 9:34am — Mike Masnick

Way back in 2002, Wal-Mart decided to enter the online DVD rental business, launching an almost exact replica of Netflix. Of course, Wal-Mart quickly discovered what almost every other player in that marker discovered: just offering a competing service to Netflix isn't enough to get anyone to use it. Wal-Mart had a lot of difficulty signing up customers (and keeping them once they signed up). The whole project was going nowhere fast, and eventually, Wal-Mart decided that it was a waste of time to throw more money into a project that was pretty far removed from its main business, and decided to simply let Netflix take over its online DVD rental service. This was a reasonable business move.

However, nearly four years later, a lawsuit has been filed claiming that Netflix and Wal-Mart "conspired to create a monopoly" in the online video rental market, and as a result of that monopoly, Blockbuster raised its prices. Read that sentence again. Netflix and Wal-Mart are being accused of creating a monopoly -- and because of that monopoly another major player in the space raised its prices.

If there's another major player in the space, there is no monopoly.

Besides, the folks bringing the lawsuit are going to have to convince a judge that the relevant market is online DVD subscription services, rather than any kind of home movie viewing service (which includes store rentals, purchases, internet downloads, subscription services and more). This seems like a random bogus lawsuit targeted at a company with deep, deep pockets (Wal-Mart), rather than anything serious.

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Filed Under: antitrust, dvd, monopoly, online rental
Companies: blockbuster, netflix, wal-mart

28 Comments

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Joe Smith, 7 Jan 2009 @ 9:48am

Going broke
And I suppose when Chrysler finally goes broke the same litigants will allege it is a conspiracy by Ford and GM to increase prices.
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Phillip, 7 Jan 2009 @ 10:24am

I hope the judge gets up there, reads the case, and just laughs at them and ask if they understand what a monopoly is.

Ridiculous.
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Ed Kless, 7 Jan 2009 @ 10:33am

I'm confused
In a sense, isn't every business conspiring to create a monopoly? I.e., I want everyone to buy from me.

Forget the charges, how can there even be a law in place against this idea.
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StaySkeptical, 7 Jan 2009 @ 11:19am

The only monopoly is the government.
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Avatar28, 7 Jan 2009 @ 11:21am

not illegal?
Correct me if I'm wrong, but in the US at least, having a monopoly or near monopoly is not, in and of itself, illegal. After all, a patent is a government granted monopoly for a certain length of time on a new idea. Likewise, Microsoft virtually has a de facto monopoly in operating systems and office suites and they are not in trouble for that. It is only when you start ABUSING your monopoly position that it becomes illegal. That is what got Microsoft, the old Ma Bell, et al into trouble.
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- Anonymous Coward, 7 Jan 2009 @ 11:37am
  
  Re: not illegal?
  Having a monopoly is illegal in the united states and the only exception to this is certain utilities because, for example, having two competing electric companies in a small city is stupid to say the least and would result in a loss for everyone since neither company can get enough customers to make money to stay in business. All monopolies in terms of railroads, oil, computers, phone, etc. are illegal and will be broken up. Just look in the mid 90s when Microsoft was forced to sell off parts of its company because they had pretty much enveloped the entire market. Right now MS has to compete with Apple/Mac and free Linux distros.
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  - Anonymous Coward, 7 Jan 2009 @ 12:54pm
    
    Re: Re: not illegal?
    "Having a monopoly is illegal in the united states"
    
    No, it's not. ABUSING a monopoly position is illegal, and CONSPIRING to act as a monopoly (price fixing, other restraints on trade) is. BEING a monopoly is not illegal at all.
    
    "All monopolies in terms of railroads, oil, computers, phone, etc. are illegal and will be broken up."
    
    Wrong. Just.. wrong. On all counts.
    
    "Just look in the mid 90s when Microsoft was forced to sell off parts of its company because they had pretty much enveloped the entire market."
    
    No, wonder boy. MS was NOT forced to sell ANYTHING. MS even weaseled out of most of the fines. MS was NOT on trial for being a monopoly. MS was on trial because they cut deals with the big OEMs to give those OEMs massive discounts on Windows as long as they agreed to only sell Windows. In some other cases, MS offered no discounts, but tacked on tons of fees and other punitive measures if you dealt in any non-MS products.
    
    "Right now MS has to compete with Apple/Mac and free Linux distros."
    
    Yep, but this is totally irrelevant. This has NOTHING to do with MS being a monopoly or not.
    
    You fail. All of it. A lot. Play again later.
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  - Vincent Clement, 7 Jan 2009 @ 7:00pm
    
    Re: Re: not illegal?
    Ugh.
    
    1. Being a monopoly is not illegal.
    
    2. How do you know for certain that having two electric companies "would result in a loss"?
    
    3. MS was never declared a monopoly and it never was forced to sell off any parts of itself.
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David, 7 Jan 2009 @ 11:34am

I haven't seen the lawsuit but I assume it is based on Section 1 of the Sherman Act, which prohibits agreements or conspiracies IN RESTRAINT OF TRADE. It doesn't say you have to actually create a monopoly, in fact if you had a monopoly you wouldn't have anyone else to conspire with. All you have to do is make an agreement that basically reduces competition. Part of the proof can be an increase in prices of another player in the market. For instance, it is illegal for 5 funeral homes in a town to agree to not hold funerals on Fridays or Saturdays, since that restrains trade by reducing the number of days people can buy funerals, thereby reducing competition.

If that news release accurately summarizes the lawsuit, then that doesn't seem like a well-drafted complaint, but that doesn't mean the lawsuit is groundless.
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Wally, 7 Jan 2009 @ 11:39am

"and as a result of that monopoly, Blockbuster raised its prices."

Now this may be completely backwards but, wouldn't Blockbuster be forced to LOWER it's prices in response to a "monopoly" in order to compete with them?
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- Anonymous Coward, 7 Jan 2009 @ 1:05pm
  
  Re:
  That was my thought, but apparently we know nothing. Which doesn't really surprise me.
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NullOp, 7 Jan 2009 @ 1:15pm

Monopoly
Funny story for sure. But the goal of all businesses is to, if possible, become a monopoly. No joke. Of course that goal is rarely reached but businesses keep trying. Example: pharmeceuticals.
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Fushta, 7 Jan 2009 @ 1:20pm

Monopoly, no, but...
This sounds like anti-trust to me (maybe), but not monopoly. Wal-mart is using Netflix as a vendor because they do it better. Nothing monopolistic about that.
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Erv Server, 7 Jan 2009 @ 2:32pm

stupidity
reminds me of that guy who sued a dry cleaners for millions for losing his pants, stupid and pointless
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Crazy Coyote, 7 Jan 2009 @ 4:19pm

That guy that sued the dry cleaners was a judge.
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Michael, 7 Jan 2009 @ 7:39pm

Someone wiser than I once said,
The only thing worse than a monopoly is a duopoly.
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PLP, 8 Jan 2009 @ 12:09pm

Interesting.
Somebody criticizing Walmart for a supposedly unethical act to squash competition is pretty funny. I guess they crawled out from under the rock they were hiding for the last 20 years. Oh. . . .snap. But anyway, Netflix managment should be proud they were able to convince Walmart to not try and beat 'em, but to join 'em. As far as BB having to raise their prices, this is a result of what it takes to stay competative with the Netflix/Walmart collusion. Ceteris paribus, yes, a competitors enter price wars to compete; but in this case, Blockbuster claims that it isn't even a legitimate competitor (crying Monopoly!) so it has to (unfairly) raise its prices just to be able to compete. Just a guess but BB is probably citing an artificial market force on supply. It would be sad, for me, if Blockbuster discontinued this service because I live next door to one of their distribution centers and I get my rentals the next day. Hard to get flicks I can pick up at the library or the local video store.
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phil, 8 Jan 2009 @ 2:19pm

Dumb jealous lawsuits!
I opened the first VIDEO store im my area. 25 years ago I have been out of business for 10 years BB put me out Maybe I should sue them...LOL

PS my area was brooklyn!
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Jack Steen, 9 Jan 2009 @ 12:50pm

Well, Walmart is getting there
Walmart is the nation's largest retailer and as they grow, their product gets worse. Does this remind you of something? In the Soviet Union, the government had a monopoly and their product was obviously horrible. If we allow Walmart to continue to grow to this mammoth sizes (Target is the nearest competitor and is only about 1/5 of their size), we're going to see many of the same problems that the Soviet Union saw.
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Jennifer, 26 Jan 2009 @ 6:17pm

Walmart and Netflix
Whenever a company has something to do with Walmart I spit them out.
WM is the anti-christ of retail. The reasons are many AND with the money that I save by NEVER shopping there I went to Morocco last year, Venezuela the year before that and Italy the year before that, etc.
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Opinion only, 9 Sep 2009 @ 10:16pm

No monopoly, just a the ultimate bully
So Walmart moves into your community, opens a supercenter. All mom and pops, all other small business owners are put out of business - can't compete with the prices. Businesses close one by one until Walmart is the only game in town. At this point, let's see if they keep their super low prices really low. Let's see if they contribute back into the community like regular small businesses do. With the economy already suffering, when Walmart is the only game in town, try to get anyone to borrow and open a business to compete. It won't happen. How do I know all this? I'm an accountant, in a small town. I watched the community beg Walmart to come in set up, and start. I watched many of the businesses in town close, and others I was doing the bookkeeping for expect to close in the coming year. I also watched Walmart do virtually nothing, and I mean NOTHING in comparison to what I have seen small businesses give back to the communities. I also know Walmart pays their employees and treats them like nothing. But you can keep believing your fairy tales as well. I agree, many, many Walmarts is a big plus - for Walmart and their shareholders.
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Anonymous Coward, 4 Aug 2010 @ 10:30am

The information provided here sounds extremely thin. I think you should get all the info on the lawsuit before writing an opinion. You are basically proliferating unsubstantiated information as the truth and in essence starting a large scale game of telephone.

As it is, the "factual" information in your paragraph is very shady. And anyone who does not read this with a grain of salt or any semblance of questions after reading it needs to go back to school a learn a little more.
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nomas, 26 Nov 2010 @ 8:27pm

Small Businesses contribute back to the community ? ? ha ha ha ha that's a good one.

The only reason a small business will contribute something is if it will give them a tax break and/or the one they are contributing to happens to be their own charity of which the make profit from.

Fuck small businesses, I'd rather see a store like Wallmart provide great service, so what if they are the only game in town.
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scott, 15 Jan 2011 @ 1:59am

are you all really siding with walmart about getting sued? trust me theyre not a target cause theyre rich. most cases its their own neglegence
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Anonymous Coward, 11 Oct 2015 @ 8:12pm

Walmart does have a monopoly! They are putting small businesses out of business by selling everything you can imagine....they sale everything at prices small business can't compete!!!
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Anonymous Coward, 11 Oct 2015 @ 8:12pm

Walmart does have a monopoly! They are putting small businesses out of business by selling everything you can imagine....they sale everything at prices small business can't compete!!!
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Anonymous Coward, 11 Oct 2015 @ 8:12pm

Walmart does have a monopoly! They are putting small businesses out of business by selling everything you can imagine....they sale everything at prices small business can't compete!!!
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Anonymous Coward, 11 Oct 2015 @ 8:19pm

Coward....coward of what? Lol I just don't think yo blog is worthy of my name lol fuck this website lol
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