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Netflix subscribers Judge throws out Netflix pricing lawsuit

November 26th, 2011 by Joseph Ruthaford

Millions of Netflix subscribers received an email about the price fixing issue. Well it looks like in a ruling handed down yesterday in San Francisco, a federal judge dismissed a class action suit that accused Netflix of colluding with Wal-Mart.com in 2004 to divvy up the DVD market. According to the complaint, the CEO’s of the two companies struck a deal over dinner in which Netflix agreed not to sell DVD’s if Wal-Mart said it wouldn’t rent them. Lawyers for the plaintiffs said that the scheme resulted in Netflix subscribers overpaying for DVDs between 2005 and 2010. The dismissal is a surprise because Netflix’s alleged conspirator agreed to settle the suit earlier this year. The email last week announced that Wal-Mart had set aside $27 million and provided a website that will soon announce the terms of collection. In her ruling, U.S. District Judge Phyllis Hamilton said the existence of a promotion agreement between the two companies coupled with Wal-Mart’s decision to exit the online DVD market shortly after, was not enough to establish an automatic antitrust violation. She added that a court would normally determine the effects of the agreement of the agreement on the market—but there was no reason to do so. The court had this to say on the issue: ” no reasonable juror could believe that Netflix would have lowered its 3U price to $15.99 in response to continued competition from Walmart, whose 3U price was set at $17.49 – particularly when those facts demonstrate that Netflix chose not to lower its price in the face of Blockbuster’s $14.99 price cut, despite the fact that Blockbuster had a higher market share than Walmart.”

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