Netflix Wins Summary Judgment in Purchaser Class Antitrust Suit

Professor Janusz Ordover and a Compass Lexecon team led by Doug Fontaine and Assaf Eilat in our Oakland office, were retained by Jonathan Jacobson, Dylan Liddiard, and David Reichenberg at Wilson Sonsini Goodrich & Rosati, counsel for Netflix, and Stephen Morrissey and Genevieve Vose at Susman Godfrey L.L.P., counsel for Wal-Mart, to analyze Plaintiffs’ claims that (i) Defendants entered into a market allocation arrangement pursuant to which Wal-Mart would exit the online DVD rental marketplace in exchange for Netflix’s agreement to refrain from entry into the business of new DVD sales, and (ii) Wal-Mart’s exit from the DVD rental business materially lessened the competitive constraints on Netflix and led to higher subscription prices for its rental plans. Professor Ordover and the Compass Lexecon team analyzed the purported market allocation agreement with respect to the economics of cartels, examined the competitive viability of Wal-Mart’s online DVD rental service in terms of its actual results and its quality and features vis-à-vis Netflix (and Blockbuster), studied the economic factors that influenced Netflix pricing decisions, and developed a comprehensive critique of Plaintiffs’ economic expert demonstrating his failure to show any causal connection between Wal-Mart’s exit from the online DVD rental business and Netflix’s subsequent pricing behavior. The Court granted defendants’ motion for summary judgment, holding that Wal-Mart had no impact on Netflix’s pricing, and similarly that the evidence provided no reasonable basis on which to conclude that Wal-Mart’s continued operation would have compelled Netflix to reduce its then-current prices consistent with Professor Ordover’s conclusions.