Viamedia, Inc. v. Comcast Corporation et al

Filing 60

MEMORANDUM Opinion and Order Signed by the Honorable Amy J. St. Eve on 2/22/2017:Mailed notice(kef, )

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
VIAMEDIA, INC.,
Plaintiff,
v.
COMCAST CORPORATION and
COMCAST SPOTLIGHT, LP,
Defendants.

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Case No. 16-cv-5486
Hon. Amy J. St. Eve

MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, District Court Judge:
Defendants Comcast Corporation (“Comcast”) and its wholly owned subsidiary Comcast
Spotlight, LP (“Comcast Spotlight”),1 (R. 40, Am. Compl., ¶ 1), have moved, pursuant to Federal
Rule of Civil Procedure 12(b)(6), to dismiss with prejudice Counts I-V of Plaintiff Viamedia,
Inc.’s (“Viamedia”) amended complaint, “to the extent the monopolization claims asserted are
based on alleged refusal to deal.” (R. 45.) For the following reasons, the Court grants
Defendants’ motion.

1

The Court refers to Comcast and Comcast Spotlight collectively as “Defendants.”

BACKGROUND2
In the 1990s, competing cable service providers—called, according to industry
terminology, “multichannel video program distributors” (“MVPDs”)—developed Interconnects,
cable industry cooperatives that facilitate the sale of spot cable advertising across particular
Designated Media Markets (“DMAs”). (R. 40, Am. Compl., ¶¶ 23, 34-36.) Specifically, an
“Interconnect functions as the central marketplace around which all regional Spot Cable
Advertising sales in [a] DMA are transacted.” (Id. at ¶ 37.) Regional spot cable advertising
sales are one of the three ways in which MVPDs sell spot cable advertising time. (Id. at ¶ 34.)
Initially, “Interconnects were open to all MVPDs and their representatives, and MVPDs
were encouraged to participate in order to maximize the numbers of households advertisers could
reach in that DMA.” (Id. at ¶ 38.) Following the formation of the Chicago and Detroit
Interconnects, Comcast acquired competing MVPDs in the Chicago and Detroit DMAs, which
allowed Comcast to gain “majority interest in” and “assume unilateral control of regional
advertising through” the Interconnects in the two DMAs. (Id. at ¶ 102.)
Between 2002 and 2012, Viamedia, a spot cable advertising representation company,
participated in the Interconnects for Chicago and Detroit “on behalf of two of its then most
significant MVPD clients,” Wide Open West (“WOW”) and RCN Corporation (“RCN”). (Id. at
¶ 103.) During this period, “Viamedia paid over $23 million to Comcast in its role as
Interconnect manager to participate in the Chicago and Detroit Interconnects.” (Id. at ¶ 157).

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The Court takes the facts presented in the Background from Plaintiff’s Amended Complaint and presumes them as
true for purposes of resolving the pending motion to dismiss under Rule 12(b)(6). See Teamsters Local Union No.
795 v. Burlington N. Santa Fe, LLC, 741 F.3d 819, 823 (7th Cir. 2014); Alam v. Miller Brewing Co., 709 F. 3d 662,
665-66 (7th Cir. 2013); see also Bell Atl. v. Twombly, 550 U.S. 544, 555 (2007). The Court also presumes the
parties’ familiarity with the Court’s prior opinion in this case. See Viamedia Inc. v. Comcast Corp., No. 16-cv-5486,
2016 WL 6568074 (N.D. Ill. Nov. 4, 2016) (published op.).

2

Viamedia’s participation in the Chicago and Detroit Interconnects ended, however, in
June of 2012. (Id. at ¶ 110.) “Comcast informed WOW and RCN that if they wished to regain
access to the Interconnects, they would be required to cease using Viamedia as their Spot Cable
Advertising Representative and would instead be required to retain Comcast Spotlight.” (Id. at
¶ 113.)
Viamedia alleges that, as an Interconnect manager, Comcast has an incentive to
maximize participation in the Interconnect by eligible MVPDs because Comcast collects fees
from Interconnect participants and “[t]he economic value of each Interconnect is derived from its
ability to provide a single point of access for advertisers to purchase Spot Cable Avails that are
capable of reaching all subscribers within a DMA.” (Id. at ¶ 154–55, 157 (emphasis in
original).) According to Viamedia, when Comcast refused to deal with Viamedia, it prevented
WOW and RCN from participating in regional ad sales through the Interconnects. (Id. at
¶¶ 159–60.) This refusal allegedly “reduced significantly the number of cable subscribers
covered by the [Chicago and Detroit] Interconnect[s].” (Id.) Additionally, it reduced the fees
Comcast would have collected if WOW and RCN had continued to participate in the
Interconnects. (Id.) Accordingly, Viamedia claims that Comcast’s exclusion of Viamedia was
“irrational and contrary to” Comcast’s economic incentives. (Id. at ¶ 158–60.) Additionally,
Viamedia alleges that dealing with Viamedia “would have entailed no cost to Comcast as the
Interconnect manager, would have provided the Interconnect and Comcast . . . with immediate
benefits, and would have served the interests of the Interconnect customers, namely the regional
advertisers, to reach all subscribers in the market.” (Id. at ¶ 158.)3

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Viamedia alleges that Comcast repeated its conduct in other DMAs outside of Chicago and Detroit. (R. 40 at
¶¶ 161–62.)

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Comcast continued to exclude WOW and RCN from the Chicago and Detroit
Interconnects until they retained Comcast Spotlight as their spot cable advertising representative.
(Id. at ¶¶ 113, 124, 126.) Eventually, at least by January 1, 2016, WOW and RCN capitulated to
Comcast’s demands and retained Comcast Spotlight as their sole spot cable advertising
representative in the Detroit and Chicago DMAs. (Id. at ¶¶ 126–31.) Viamedia also alleges that
Comcast has used this coercive tactic in other DMAs. (See, e.g., id. at ¶¶ 132–35.)
On May 26, 2016, Viamedia filed a six-count complaint against Defendants Comcast and
Comcast Spotlight, asserting, among other things, that Defendants violated Section 2 of the
Sherman Act through attempted monopolization and “unlawful monopolization in markets for
spot cable advertising representation in DMAs where Comcast controls the Interconnect[].” (R. 1
at ¶¶ 164–82.) Specifically, Viamedia alleged that Defendants, “[b]y refusing to deal with
Viamedia and MVPDs represented by Viamedia, by conditioning access to Interconnects upon
an MVPD’s agreement to deal with Comcast Spotlight, [and] by requiring that MVPDs deal
exclusively with Comcast Spotlight as a Spot Cable Advertising Representative” and “by
conditioning access to Interconnects upon an MVPD’s agreement to deal with Comcast
Spotlight,” imposed upon RCN and WOW an invalid tying arrangement and engaged in
impermissible exclusive dealing. (Id. at ¶¶ 168, 176.) In other words, Viamedia alleged that
Defendants violated the Sherman Act through tying, exclusive dealing, and a refusal to deal. (R.
36, Mem. Op. & Order, 18.) Viamedia repeats those allegations in its amendment complaint.
(R. 40 at ¶¶ 183, 191.)
On July 22, 2016, Defendants filed a Motion to Dismiss, (R. 22), which the Court denied
in part and granted in part, Viamedia, 2016 WL 6568074, at *17. Specifically, the Court
dismissed Viamedia’s refusal to deal claim without prejudice but denied Defendants’ motion

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with respect to Viamedia’s other claims. Id. The Court reasoned that “Viamedia has not alleged
or explained how Defendants’ refusal to deal with it—separate from Defendants’ other conduct
like conditioning MVPDs’ access to Interconnects on accepting Comcast Spotlight’s services
even for advertising sales that do not involve an Interconnect—has no rational competitive
purpose.” Id. at 16.
Viamedia filed an Amended Complaint on November 21, 2016. (See R. 40.) Defendants
subsequently filed a Motion to Dismiss the Refusal to Deal Claims as Restated in the Amended
Complaint. (R. 45.)
LEGAL STANDARD
“A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the
viability of a complaint by arguing that it fails to state a claim upon which relief may be
granted.” Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014). Under
Rule 8(a)(2), a complaint must include “a short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The short and plain statement under Rule
8(a)(2) must “give the defendant fair notice of what the . . . claim is and the grounds upon which
it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355
U.S. 41, 47 (1957)). A plaintiff’s “[f]actual allegations must be enough to raise a right to relief
above the speculative level.” Id. Put differently, “a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). In determining the
sufficiency of a complaint under the plausibility standard, courts must “accept all well-pleaded
facts as true and draw reasonable inferences in [a plaintiff’s] favor.” Roberts v. City of Chicago,
817 F.3d 561, 564 (7th Cir. 2016).

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ANALYSIS
The only issue before the Court is whether Comcast’s alleged refusal to deal plausibly
constitutes the type of anticompetitive conduct that violates Section 2 of the Sherman Act.4 (See
R. 45.) The Supreme Court has long held that “[a]s a general rule, businesses are free to choose
the parties with whom they will deal, as well as the prices, terms, and conditions of that dealing.”
Pac. Bell Tel. Co. v. Linkline Commc'ns, Inc., 555 U.S. 438, 448 (2009) (citing United States v.
Colgate & Co., 250 U.S. 300, 307 (1919)). Accordingly, a business’s refusal to deal is generally
not actionable. See id.; see also Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, 540
U.S. 398, 408 (2004). The Supreme Court has explained that “[c]ompelling . . . firms to share
the source of their advantage is in some tension with the underlying purpose of antitrust law” for
three central reasons. Trinko, 540 U.S. at 408-09. First, court-mandated cooperation among
businesses “may lessen the incentive for the monopolist, the rival or both to invest in” the capital
projects that give them a competitive advantage. Id. at 409. Second, “[e]nforced sharing . . .
requires antitrust courts to act as central planners, identifying the proper price, quantity, and
other terms of dealing-a role for which they are ill suited.” Id. Third, “compelling negotiation
between competitors may facilitate the supreme evil of antitrust: collusion.” Id.; see also Schor
v. Abbott Labs., 457 F.3d 608, 610 (7th Cir. 2006) (“[A]ntitrust law does not require monopolists
to cooperate with rivals by selling them products that would help the rivals compete.
Cooperation is a problem in antitrust, not one of its obligations.” (emphasis in original) (citation
omitted)).
Nevertheless, the Supreme Court explained that “[t]he high value that we have placed on
the right to refuse to deal with other firms does not mean that the right is unqualified.” Trinko,

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The Court previously outlined the standards for monopolization and attempted monopolization under Section 2 of
the Sherman Act. See Viamedia, 2016 WL 6568074, at *17-18.

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540 U.S. at 408 (quoting Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 601
(1985)). “Under certain circumstances, a refusal to cooperate with rivals can constitute
anticompetitive conduct and violate § 2.” Id. “The leading case for § 2 liability based on refusal
to cooperate with a rival . . . is Aspen Skiing.” Id.
Aspen Skiing concerned the four mountains that constituted the Aspen ski area. 472 U.S.
at 587–95. The defendant owned three of the mountains, and the plaintiff owned the fourth. Id.
at 589–91. For a number of years, the owners cooperated by selling a joint ticket, providing
customers access to all of the mountains. Id. Later, however, the defendant demanded an
increasingly greater percentage of the revenue generated from the joint ticket until the
cooperative relationship between the defendant and the plaintiff ended. Id. at 591–93; see also
Trinko, 540 U.S. at 408–09 (analyzing Aspen Skiing). The plaintiff tried what the Trinko Court
referred to as “a variety of increasingly desperate measures to re-create the joint ticket, even to
the point of in effect offering to buy the defendant’s tickets at retail price.” Trinko, 540 U.S. at
408–09 (citing Aspen Skiing, 472 U.S. at 593–94. The defendant rebuffed these efforts. Aspen
Skiing, 472 U.S. at 592–94; see also Trinko, 540 U.S. at 408–09.
The Supreme Court affirmed a jury verdict for the plaintiff. Aspen Skiing, 472 U.S. at
610. As the Trinko Court described it, the Aspen Skiing Court “found significance in the
defendant’s decision to cease participation in a cooperative venture.” Trinko at 540 U.S. at 409
(citing Aspen Skiing, 472 U.S. at 608, 610–11). “The unilateral termination of a voluntary (and
thus presumably profitable) course of dealing suggested a willingness to forsake short-term
profits to achieve an anticompetitive end.” Id. (emphasis in original) (citing Aspen Skiing, 472
U.S. at 608, 610–11). Additionally, “the defendant’s unwillingness to renew the ticket even if
compensated at retail price revealed a distinctly anticompetitive bent.” Id. Thus, “the evidence

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suggested that the defendant’s decision was ‘irrational but for its anticompetitive effect.’” VBR
Tours, LLC v. Nat’l R.R. Passenger Corp., No. 14-cv-804, 2015 WL 5693735, at *7 (N.D. Ill.
Sept. 28, 2015) (quoting Novell, Inc. v. Microsoft Corp., 731 F.3d 1064, 1075 (10th Cir. 2013)
(Gorsuch, J.), and citing 3B Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 772, at
223 (3d ed. 2008) (“the refusal must be ‘irrational’ but for its anticompetitive tendencies”)).  
The Supreme Court has made clear that “Aspen Skiing is at or near the outer boundary of
Section 2 liability.” Trinko, 540 U.S. at 409. To state it more clearly, “[s]ince Aspen [Skiing],
the Supreme Court has refused to extend liability to various other refusal to deal scenarios,
emphasizing that Aspen [Skiing] represents a ‘limited exception’ to the general rule of firm
independence.” Novell, 731 F.3d at 1074 (quoting Trinko, 540 U.S. at 409).
“To invoke Aspen[] [Skiing’s] limited exception, the Supreme Court . . . explained, at
least two features present in Aspen [Skiing] must be present in the case at hand.” Id. First, “there
must be a preexisting voluntary and presumably profitable course of dealing between the
monopolist and rival.” Id. Second, “the monopolist’s discontinuation of the preexisting course
of dealing must ‘suggest[] a willingness to forsake short-term profits to achieve an anticompetitive end.’” Id. (quoting Trinko, 540 U.S. at 407). Importantly, courts “require proof not
just that the monopolist decided to forsake short-term profits. Just as in predatory pricing cases,
[courts] also require a showing that the monopolist’s refusal to deal was part of a larger
anticompetitive enterprise.” Id. at 1075 (emphasis in the original). “Put it simply, the
monopolist’s conduct must be irrational but for its anticompetitive effect.” Id. (citing, among
other authorities, Trinko, 540 U.S. at 407, and 3B Areeda & Hoevnkamp, supra, ¶ 772, at 223).
In opposing the first motion to dismiss in this case, Viamedia relied on the Aspen Skiing
exception to courts’ general aversion to imposing antitrust liability on the basis of a unilateral

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refusal to deal. (R. 28 at 10–14.) Once again, Viamedia relies on the Aspen Skiing exception,
contending that Comcast’s actions were irrational but for their anticompetitive effects. (R. 56,
Pl.’s Opp., 4–10.) As the Court concluded in resolving the first motion to dismiss, Viamedia
fails to meet its pleading burden.
Viamedia argues that “[t]he immediate effect of” Comcast terminating Viamedia and its
clients’ access to the Chicago and Detroit Interconnects “was to significantly reduce the number
of eligible cable subscribers to the Interconnects in those DMAs, reducing the value of the
Interconnect regional advertisers and forfeiting fees Comcast otherwise would have received as
the Interconnect manager.” (Id. at 4.) Accordingly, Viamedia contends that Comcast “was
exercising its monopoly power to simply exclude Viamedia and Viamedia’s clients from the
Interconnect[s], to Comcast’s own economic detriment.” (Id. at 4–5.)
While these allegations, taken as true, establish that Comcast’s discontinuation of its
business relationship with Viamedia caused Comcast to suffer short-term losses, this is not by
itself necessarily indicative of anticompetitive conduct.5 As the Tenth Circuit recognized in
Novell:
[F]irms routinely sacrifice short-term profits for lots of legitimate
reasons that enhance consumer welfare (think promotion discounts).
Neither is it unimaginable that a monopolist might wish to withdraw
from a prior course of dealing and suffer a short-term profit loss in
order to pursue perfectly competitive ends—say, to pursue an
innovative replacement product of its own.
731 F.3d at 1075. Accordingly, plaintiffs seeking to establish an unlawful refusal to deal must
show that the defendant’s actions serve no rational procompetitive purpose. See id; see also VBR

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The Court also notes that Comcast’s refusal to deal with Viamedia did not, by itself, exclude MVPDs from
participating in the Interconnects. Instead, it had the temporary effect of excluding such MVPDs, presumably
because of their representation contracts with Viamedia. Comcast’s alleged tying arrangement, however, resulted in
the temporary exclusion of MVPDs.

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Tours, 2015 WL 5693735, at *9 (“[T]he question is not whether [the defendant] chose the most
competitive offer but whether it had any procompetitive purpose. . . . Aspen Skiing’s limited
exception authorizes intervention only when a defendant’s decision is ‘irrational but for its
anticompetitive effect.’” (quoting Novell, 731 F.3d at 1075)). As, Judge Easterbrook explained,
Aspen Skiing and arguments “demanding[ing] that holders of market power cooperate with
rivals” represent “the last gasp of the old school antitrust.” Frank H. Easterbrook, The Chicago
School and Exclusionary Conduct, 31 Harv. J.L. & Pub. Pol'y 439, 441–42 (2008). Post-Trinko,
“[m]any of these themes bit the dust”; no longer does “even a monopolist ha[ve a] general duty
to cooperate with rivals.” Id. at 442.
Thus, Viamedia must adequately allege that Comcast’s refusal to deal was irrational but
for its anticompetitive effects. In the Court’s previous decision, it explained that, based on
Plaintiff’s allegations, “[a]fter Comcast’s refusal to deal, for the portion of [spot cable
advertising] sold through an Interconnect, MVPDs simply deal with Comcast directly.”
Viamedia, 2016 WL 6568074, at *16. The Court reasoned that this offered “potentially
improved efficiency” because it replaced an intermediary with a direct relationship. Id. This
type of vertical integration or elimination of a middleman, the Court explained, represented a
“prototypical valid business purpose.” Id. (quoting Port Dock & Stone Corp v. Oldcastle Ne.,
Inc., 507 F.3d 117, 124 (2d Cir. 2007)); see also It’s My Party, Inc. v. Live Nation, Inc., 811 F.3d
676, 689 (4th Cir. 2016) (Wilkinson, J.) (“A single firm incorporating separate but closely
related production processes can often be far more efficient than various independent entities
transacting to produce the same good or bundle of goods.”); Jack Walters & Sons Corp. v.
Morton Bldg., Inc., 737 F.2d 698, 710 (7th Cir. 1984) (“We just said that vertical integration is
not an improper objective. But that puts the matter too tepidly; vertical integration is usually

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procompetitive.”); Institutional Foods Packing, Inc. v. Creative Prods., Inc., No. 89 C 4499,
1992 WL 111133, at *3 (N.D. Ill. May 12, 1992).
In an effort to establish that Comcast’s refusal to deal lacks any procompetitive purpose,
Viamedia argues that Comcast did not engage in procompetitive disintermediation. (R. 56 at 5–
7.) Instead, Viamedia contends, Comcast simply replaced one intermediary (Viamedia) with
another (Comcast Spotlight). (Id.)
Viamedia’s argument fails. Indeed, Viamedia’s allegations belie its argument that the
Court should treat Comcast and Comcast Spotlight as “two separate entities” that cannot achieve
efficiencies that can result from vertical integration. (See id. at 5.) In the amended complaint,
Viamedia treats Comcast and Comcast Spotlight as a single economic entity—a sensible thing to
do given that Comcast Spotlight is Comcast’s wholly-owned subsidiary. (See, e.g., R. 40 at
¶ 165 (alleging that Comcast’s refusal to deal requires that “MVPDs either transfer their Spot
Cable Advertising Representation from Viamedia to Comcast, a direct competitor, or cease
participating in the Interconnect at all.” (emphasis added)); id. at ¶ 155 (explaining that Comcast
competes, “through Comcast Spotlight” with representation firms like Viamedia); id. at ¶ 181
(“Comcast has monopoly power in Spot Cable Advertising Representation in each of the DMAs
where in controls the Interconnect.” (emphasis added)); id. at ¶ 174 (alleging that “Comcast has
or will monopolize the market for Spot Cable Advertising Representation in every DMA in
which Comcast manages the Interconnect” (emphasis added)); id. at ¶ 14 (“Comcast has acted
with the specific intent to monopolize the market for representing cable television service
providers . . . .” (emphasis added); id. at ¶ 166 (“Even if there were any potentially improved
efficiencies to be realized by consolidating management of an Interconnect with Comcast’s
provision of Spot Cable Advertising Representation services, refusing to deal with Viamedia is

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not necessary in order to realize any such efficiencies.”).) Because Viamedia’s complaint
consistently treats Comcast and Comcast Spotlight as a single entity, its arguments in its
opposition brief imploring the Court to do otherwise fall flat.
Viamedia’s argument that Comcast has not removed a middleman because Comcast
Spotlight will fill the role Viamedia used to play also is unavailing. Such replacement is a
common feature of vertical integration. If a firm, for example, sells its products directly to the
public at its own stores rather than through independent retail outlets, the firm is vertically
integrated even though it fills the role that independent retail outlets would otherwise play. See
Jack Walters, 737 F.2d at 770. The same goes for a computer manufacturer that makes its own
steel and creates and places its own advertising—though the manufacturer has replaced rather
than eliminated elements of production and distribution processes, the manufacturer nonetheless
has vertically integrated. See It’s My Party, 811 F.3d at 689. In this case, based on Viamedia’s
allegations, Comcast has engaged in a business practice that has a rational procompetitive
purpose: it has become “a one-stop shop” in certain DMAs for MVPDs wishing to sell
advertisements on a regional basis. See id. at 688.
Based on the above, the Court sees no reason to alter its prior conclusion that Comcast’s
refusal to deal potentially serves a procompetitive purpose. See Viamedia, 2016 WL 6568074, at
*16. Viamedia’s allegations in the amended complaint, which are effectively the same as its
allegations in its first complaint, fail to raise a plausible inference that Comcast’s refusal lacked
any rational, procompetitive business purpose. In other words, Viamedia has not adequately
alleged that Comcast’s elimination of a middleman in the regional spot cable advertising
business was irrational but for its anticompetitive effect.

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CONCLUSION
For the foregoing reasons, the Court grants Defendants’ motion.

DATED: February 22, 2017

ENTERED

______________________________
AMY J. ST. EVE
United States District Court Judge

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