In re Local TV Advert. Antitrust Litig.
| Decision Date | 06 November 2020 |
| Docket Number | No. 18 C 6785,MDL No. 2867,18 C 6785 |
| Parties | IN RE: LOCAL TV ADVERTISING ANTITRUST LITIGATION |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
The Judicial Panel on Multidistrict Litigation consolidated before this Court antitrust actions pending in multiple jurisdictions because the cases involve common questions of fact and centralization will promote the just and efficient conduct of this litigation. (Dkt. 1). The actions each allege a conspiracy to artificially inflate the prices of local television spot advertisements throughout the United States. Before the Court are three Motions to Dismiss Plaintiffs' Consolidated Second Amended Antitrust Class Action Complaint for failure to state a claim and a Motion to Strike the Class Allegations. For the reasons set forth below, the Broadcaster Defendants' Motion to Dismiss (Dkt. 328) is denied, Gray TV's Motion to Dismiss (Dkt. 330) is granted, Katz's Motion to Dismiss (Dkt. 346) is denied, and the Motion to Strike the Class Allegations (Dkt. 328) is denied.
On a motion to dismiss under Rule 12(b)(6), the Court accepts the Complaint's well-pleaded factual allegations and draws all reasonable inferences in the non-moving party's favor. See Smoke Shop, LLC v. United States, 761 F.3d 779, 785 (7th Cir. 2014). The facts below come from Plaintiffs' Consolidated Second Amended Antitrust Complaint ("Complaint") (Dkt. 292) and the Court accepts them as true for purposes of reviewing this Motion. See Vinson v. Vermillion Cty., Ill., 776 F.3d 924, 925 (7th Cir. 2015).
Plaintiff Thoughtworx, Inc. is an advertising company that purchases broadcast television spot advertising time for advertiser clients. (Dkt. 292 ¶ 18). Thoughtworx purchased spot advertising from several Defendants during the Class Period.1 (Id.). Plaintiff One Source Heating & Cooling is a company that purchased broadcast television spot advertising during the Class Period directly from Defendants Raycom Media and Sinclair Broadcast Group. (Id. ¶ 19). Defendants are broadcasters and advertising sales firms who sold television spot advertising during the Class Period. (Id. ¶¶ 21-41).
Plaintiffs allege that during the Class Period, Defendants2 secretly orchestrated a unitary scheme to supra-competitively raise the prices of broadcast television spot advertisements by agreeing to fix prices and exchange sales data, including pacing data.3 (Dkt. 292 ¶ 2). The existence of the data exchange and the data itself were kept secret from the purchasers of broadcast television spot advertising. (Id. ¶ 3). The information Defendants exchanged included both localand national broadcast television spot advertising data and was shared, with the Broadcaster Defendants'4 knowledge and at their direction, with individuals within the Broadcaster Defendants' organizations with authority over pricing. (Id. ¶ 4). The scheme derailed the competitive process and allowed the Broadcaster Defendants to avoid price competition, harming direct purchasers of broadcast television spot advertising in Designated Market Areas ("DMAs") throughout the United States because it enabled the Broadcaster Defendants to better understand the availability of their would-be competitors' inventory through the exchange of pacing data. (Id.).
Cox Media and Katz, the "Sales Rep Firms," function "as extensions of a station's sales staff and are familiar with various rate cards (prices) and program research demographics." (Id. ¶ 41). The Sales Rep Firms are industry participants that regularly communicate with each Broadcaster Defendant to serve the Broadcaster Defendants' demands. (Id.). The Sales Rep Firms facilitated the "exchange [of] real-time pacing information" between Defendants. (Id.). Defendants' alleged price-fixing cartel was facilitated in large part through a reciprocal exchange of competitively sensitive information, which included: (1) pacing information, (2) average price data through a third-party called Kantar, available at a granular level broken down by DMA and inventory type (e.g., early news, late news, prime time), and (3) other forms of competitively sensitive sales information. (Id. ¶ 50).
Plaintiffs allege that, as revealed in the DOJ's investigations, related court filings, and the investigation of counsel, Defendants' exchange of competitively sensitive information took at leasttwo forms. First, Defendants agreed to regularly and reciprocally exchange local sales pacing information through the Sales Rep Firms, including real-time pacing information regarding each station's revenues, and reported the information to the Broadcaster Defendants in the DMA. (Id. ¶¶ 52-53). The information exchanges included data on individual stations' booked sales for current and future months as well as comparisons to past periods. (Id. ¶ 55). These information exchanges occurred in DMAs across the United States. (Id. ¶ 58). Specifically, at least once per quarter, the Sales Rep Firms in a given DMA exchanged real-time pacing information regarding the broadcast stations within that DMA and reported the information to the Broadcaster Defendants and to the station owners in the DMA. (Id.). In those DMAs in which the Sales Rep Firms represented more than one Broadcaster Defendant, they erected firewalls intended to prohibit and prevent the dissemination of competitively sensitive information between the teams representing different Broadcaster Defendants. (Id. ¶ 56). In those DMAs, the Sales Rep Firms facilitated these information exchanges among rival Broadcaster Defendants in violation of and in intentional disregard of those firewalls. (Id.). Once the Sales Rep Firms shared the information with the Broadcaster Defendants, their competitors' pacing information was then disseminated to individuals within the Broadcaster Defendants with authority over pricing and sales. (Id. ¶ 57).
Second, Plaintiffs allege that in some DMAs, the Broadcaster Defendants also exchanged sensitive information directly with one another, without using the Sales Rep Firms as intermediaries. (Id. ¶ 59). The Broadcaster Defendants accomplished this by exchanging DMA-specific pacing data and national pacing data. (Id. ¶ 60). Broadcaster Defendants also facilitated their information exchange by providing data to a third-party, Kantar, which then disseminated that data in an aggregated form back to Defendants in its SRDS Media Planning Platform. (Id. ¶ 61). Kantar collects advertisement airing data by continuously monitoring local televisionstations' broadcast feeds. (Id. ¶ 62). The Broadcaster Defendants in turn provide retrospective (45-90 days' old) average pricing data for broadcast television spot advertising to Kantar. (Id.) Kantar uses this information to create reports that the Broadcaster Defendants purchase from Kantar. (Id.) Kantar's SRDS Media Planning Platform's data is broken down granularly by, among other things, DMA and inventory type (e.g., early news, late news, prime time) and tells the Broadcast Defendants the price for broadcast spot television advertising broken down by specific DMA and by time of day. (Id. at ¶¶ 62-63). If one multiplies the average cost-per-point for a particular market profile (e.g., daytime in a given DMA) by the Nielsen ratings for that program, one can estimate how pricing would be set for that given program in a given DMA. (Id. ¶ 63). Defendants' ability to make this calculation increases the efficacy of the pacing data exchange and allows the Broadcaster Defendants to better rule out the possibility that an increase or decrease in revenue pacing was being driven by increases or decreases in the prices of broadcast spot television advertising. (Id. at ¶¶ 63-64).
The data exchanged among Defendants was not made available to Plaintiffs or, if it was publicly available, it was only available at a substantial cost. (Id. ¶ 65). Plaintiffs contend that "by concealing the exchange from their customers and making the information non-public, Defendants reveal that the exchange was for an anticompetitive purpose." (Id. ¶ 65).
In order to end what it characterized as "concerted action between horizontal competitors in the broadcast television spot advertising market," the United States Department of Justice brought civil antitrust complaints alleging unlawful restraints on trade under the Sherman Act against the Broadcaster Defendants on November 13, 2018, December 13, 2018, and June 17, 2019. (Id. ¶¶ 6, 89). The DOJ also filed proposed judgments, which included a number ofprovisions designed to "terminate Defendants' illegal conduct, prevent recurrence of the same or similar conduct, and ensure that Defendants establish an antitrust compliance program," thereby "putting a stop to the anticompetitive information sharing." (Id. ¶¶ 7, 90). Each of the defendants entered into consent decrees with the DOJ, except for Gray, Cox Media, and Katz. (Id. ¶ 21).
When announcing the consent decrees with Broadcaster Defendants, the DOJ described its theory of the anti-competitive nature of Defendants' alleged actions as follows: "[b]y exchanging pacing information, the broadcasters were better able to anticipate whether their competitors were likely to raise, maintain, or lower spot advertising price . . . harming the competitive price-setting process." (Id. ¶ 73). The DOJ's Assistant Attorney General for the Antitrust Division, Makam Delrahim, noted that "[a]dvertisers rely on competition among owners of broadcast television stations to obtain reasonable advertising rates, but this unlawful sharing of information lessened that competition and thereby harmed the local businesses and the consumers they serve." (Id.).
On November 13, 2018, December 13, 2018, and June 17, 2019, the DOJ filed complaints, which stated that "Defendants' agreements are restraints of trade that are...
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