A lawsuit claiming television broadcasters conspired to gouge advertisers by fixing ad prices will continue, after a federal judge denied attempts to dismiss the complaint or break up the class action.
In 2018, a Pennsylvania car dealer filed an antitrust suit against Gray Television, Hearst Communications, Nexstar Media Group, Tegna, Tribune Media Company and Sinclair Broadcast Group. The suit came on the heels of an investigation by the U.S. Department of Justice looking for evidence of collusion between the media companies.
In the years that followed, a number of new lawsuits were filed by other television advertisers, some naming new defendants on the same charges. The suits were consolidated into a single action before Judge Virginia M. Kendall in U.S. District Court for the Northern District of Illinois.
On Nov. 6, Judge Kendall dismissed the claims against Gray TV, which is not alleged to have participated in the scheme. Gray was named in the initial suit as the successor to Raycom, which is accused of conspiring with the other defendants before being acquired by Gray. Since Raycom continues to exist as a subsidiary of Gray, Kendall ruled that the plaintiffs have other means to pursue action against Raycom besides suing its new parent.
The plaintiffs claim the media companies shared competitive data on ad spot inventory and pricing, both directly with one another and through media buying agencies. This data is usually kept secret between competitors. By knowing what their competitors’ inventories and pricing were, all the defendants were allegedly able to raise advertising prices even as the demand for TV ads fell off due to competition from digital media.
Defendant Katz Media Group hoped Kendall would dismiss the claims against it, as well, but was disappointed. Katz is a media buying group, not a broadcaster. It argued that it cannot be held liable in the alleged conspiracy because any actions it took were done only in the name of carrying out its clients’ wishes.
“Katz does not explain how it is not controlled by a single center of decision making when it is alleged to have conspired with 14 distinct economic actors, of whom only seven served as Katz principals, in a horizontal conspiracy,” Kendall wrote in the opinion. “Plaintiffs allege that Katz participated in two separate horizontal trade restraints: a price-fixing conspiracy and an information exchange, both of which violate Section 1 of the Sherman Act. Plaintiffs further allege that Katz joined the conspiracy in 2014 and collected and disseminated competitively sensitive information from each broadcaster defendant on a quarterly basis.”
Kendall also poured cold water on the defendants’ hopes of striking the class allegations. The broadcasters argued none of the elements of the consolidated suit can be resolved on a national basis because all the claims are inherently local to specific television markets.
Kendall responded that it is too early to decide if that argument has merit. The “inherently fact-intensive argument” would be better decided after class discovery, she said.
The class action plaintiffs are represented by attorneys from the firms of Freed Kanner London & Millen, of Bannockburn; Hausfeld LLP, of San Francisco, Washington, D.C., and Philadelphia; Robins Kaplan LLP, of New York; and Scharf Banks Marmor LLC, of Chicago.
The defendants are represented by attorneys from firms including: Paul Weiss Rifkind Wharton & Garrison, of New York; Shearman & Sterling, of New York; Mololamken LLP, of Chicago; Kirkland & Ellis LLP, of Chicago and San Francisco; Scandaglia Ryan LLP, of Chicago; Cooley LLP, of San Diego, San Francisco and Washington, D.C.; Saul Ewing Arnstein & Lehr, of Chicago; Honigman LLP, of Detroit and Chicago; and McAfee and Taft, of Oklahoma City.