NFL and DirecTV Hit With Antitrust Class Action Lawsuit

The NFL and DirecTV are under fire for their exclusive Sunday Ticket package that gives DirecTV exclusive rights to distribute out-of-market games. A class action lawsuit (meaning multiple entities have come together to file the suit) with The Mucky Duck, a bar in San Francisco, batting leadoff on the list of plaintiffs.

Currently, when you watch football, it's a specifically localized plate of games. CBS and FOX will show a different Sunday line-up in New England than they would in California. If you're in San Diego and a Chargers game is on CBS, but you want to watch the Patriots, you won't be able to because of the NFL bylaws. Per Article X of the NFL bylaws, teams are granted specific geographic lines designated as "home territory" (75 mile radius from the team's city) which receives priority for games on television.

If you wanted to watch an out-of-market game, the only possible option would be to head to a bar and watch DirecTV's Sunday Ticket. Each team, per the bylaws, has granted the NFL ability to negotiate broadcast rights. Patriots owner Robert Kraft is the chairman of the NFL's Broadcast Committee and was a major player in the league's deal with CBS. The Broadcast Committee is packed with the biggest owners in the league, as the Cowboys' Jerry Jones and Washington's Dan Snyder are also on the committee. Jones, Kraft, and Snyder own the three most valuable franchises in football.

The lawsuit claims that the NFL and DirecTV have colluded (there's that word again!) to use their monopoly power to inflate the prices of the Sunday Ticket package beyond what they would be with open competition. The lawsuit notes that the costs for Sunday Ticket is roughly three times more expensive than the corresponding package for MLB, as MLB doesn't offer exclusive rights to a single distributor.

The suit cites American Needle, Inc vs National Football League, 560 U.S. 183 (2010), where the U.S. Supreme Court rejected the league's claim that the NFL could negotiate an exclusive contract with Reebok for merchandise and apparel, and that the NFL was still subject to antitrust laws (ie: the NFL is prevented from taking business actions that are deemed "anti-competitive").

As the NFL has sold exclusive rights to DirecTV (and DirecTV markets the deal as exclusive), there is a fairly viable case by the plaintiffs. The plaintiffs note that the cost for large audience Sunday Ticket packages has jumped from $41,895 in 2010 to $86,446 in 2014.

The plaintiffs are claiming damages equal to the premiums they have been paying for Sunday Ticket above what it would have been priced at in an open market.

There are two major side effects should the plaintiffs win their case.

First, AT&T's $48.5 billion acquisition for DirecTV could fall through because AT&T baked in a stipulation that if DirecTV lost their Sunday Ticket exclusivity, then AT&T could withdraw their bid.

Second, more options to watch out-of-market games should surface, whether that's through cable providers, or a la carte offerings as streaming options are a viable next step.

This is a game changing lawsuit and definitely worth following.