Netflix and Wal-Mart sued for 'injuring' consumers with DVD prices
Hot on the heels of similar lawsuits against Netflix and Wal-Mart in other states, a new court action in West Virginia charges that the two companies colluded over dinner to drive DVD prices "artificially higher."
A newly filed suit by a West Virginia law firm alleges that Netflix and Wal-Mart have broken antitrust laws and caused "damage" to past and current Netflix customers in the US by divvying up various segments of the online and retail DVD market between themselves.
Similar legal actions are reportedly also under way against Netflix and Wal-Mart in at least eight other states, including California, Pennsylvania, Minnesota, and Arkansas.
The suit in West Virginia contends that, during a dinner meeting in 2005, Netflix agreed to stay out of DVD sales if Wal-Mart in turn would refrain from online DVD rentals.
"Faced with increasing competition and decreasing profits, [Netflix Chairman and CEO Reed] Hastings invited Walmart.com's CEO John Fleming to dinner to discuss their companies' DVD sales and rental businesses," the lawsuit reads. "This meeting marked the beginning of defendants' conspiracy to reduce competition in both markets."
Prior to that fateful dinner, enough competition existed between Wal-Mart, Netflix and their chief rival Blockbuster to push prices down, according to the plaintiffs in the West Virginia case, husband and wife Brandon and Jennifer Walters. But afterward, Wal-Mart and Netflix inked a "Market Division Agreement," enabling both Netflix and Blockbuster to hike their prices a couple of months later.
Wal-Mart and Netflix "would not have entered into their Market Division Agreement absent an illegal, anti-competitive agreement not to compete," the Walters said in the filing.
Although the suit was initially filed on behalf of the couple, the Walters want US District Judge John T. Copenhaver, Jr. to certify the suit as a class action so that others can join in, too.
"Plaintiffs bring this class action on behalf of themselves and other similarly injured consumers in the United States who paid a subscription fee to rent DVDs from Netflix during the period May 19, 2005 to the present," the two plaintiffs told the court. "At all relevant times, Defendants agreed, combined, and conspired with each other to monopolize, eliminate competition, and to restrain trade. As a results of Defendants' unlawful conduct and conspiracy, Plaintiffs and the other members of the Class paid artificially high subscription fees and have been damaged thereby."