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Summary:

Did Wal-Mart (NYSE: WMT) and Netflix (NSDQ: NFLX) illegally divide up the DVD market back in 2005? Wal-Mart has denied the allegations, but…

Wal-Mart Store
photo: Wal-Mart

Did Wal-Mart (NYSE: WMT) and Netflix (NSDQ: NFLX) illegally divide up the DVD market back in 2005? Wal-Mart has denied the allegations, but the retail giant is now set to cut a check-for anywhere from $29 million to $40 million-to make them go away.

The settlement Wal-Mart has agreed to is outlined in papers that were filed with the Oakland federal court that is hearing the class-action lawsuit. Wal-Mart will give either cash or a Walmart.com gift card to every “class member” who asks for one, and will spend no less than $29 million and no more than $40 million. The class-which has now been certified by the judge overseeing the case-includes everyone who has paid for a Netflix subscription since 2005. The exact size of the class still hasn’t been determined, but Netflix today has more than 16 million members in the U.S. and Canada. The settlement applies only in the U.S.

The judge overseeing the case still has to approve the settlement, which is a normal step in class-action lawsuits. Wal-Mart first agreed to settle the case back in August but didn’t disclose the cost of the settlement or any details.

For its part, Netflix is going to fight on. Contacted for this story, a Netflix spokesman said the company “believes the lawsuit lacks merit and we will defend it.”

The plaintiffs have passed an important hurdle by getting class certification from the Oakland federal judge. The certification of such an enormous class isn’t good news for Netflix, because it increases the potential damages it could have to pay out if it loses. In class-action suits, defendants often try to prevent the certification of a class, because class-actions can be more difficult and expensive to defend than complaints filed by individual plaintiffs. The order certifying the class doesn’t suggest anything about the actual merits of the suit, however.

The lawsuit stems from an agreement between Wal-Mart and Netflix in 2005. Wal-Mart agreed to get out of the business of renting DVDs online, even though it was doing well in that increasingly competitive market, while Netflix agreed it wouldn’t go into physical DVD sales, a core area for Wal-Mart. The pact came about shortly after Blockbuster (NYSE: BBI) got into the online rental business. The pact, which included a provision that called for the two companies to help market each others’ services, was reportedly widely in the press; Netflix had a 4 percent bump in its stock price the day the agreement was announced. The plaintiffs’ lawyers in the class-action case argue that the agreement by the two companies to help each other violated antitrust laws.

  1. On Wal*Mart’s China web page under “About Us.”

    “Wal-Mart China persists in local procurement which provides more job opportunities, supports local manufacture industry and promotes local economy. So far, 95% of merchandising sold at Wal-Mart China store are local products by which Wal-Mart has established business relations with nearly 20,000 suppliers. At Wal-Mart, we treat suppliers as partners and would like to develop with them. In 2008 Wal-Mart won the Supplier Satisfaction published by Business Information of Shanghai for five consecutive years.”

    5% foreign in China…

    That doesn’t support American exports and American jobs.

    Remember what Lance Winslow wrote in that article “The Flow of Trade in a Global Economy”….

    “Now let us look at Wal-Mart again; you buy a product there, 6% goes to the employees, 10-18% is profit to the company, 25% goes to other costs and 50% goes to re-stock or the cost of goods sold. Of the 50% about 20-25% goes to China, a guess, but you get the point. Now then, how long will it take at 433 Billion dollars at year for China to have all of our money, leaving no money flow for us to circulate? At a 17 Trillion dollar economy less than 40-years minus the 1/6 they buy from us. Some say that if we keep putting money into our economy, it would take forever, but if we do not then eventually all the money flow will go. If China buys our debt then eventually they own us, no need to worry about a war, they are buying America, due in part to our own mismanaged trade, so whose fault is that? Not necessarily China, as they are doing what’s in the best interests, and we should make sure that trade is not only free, but fair too.”

    Think for a moment about George Washington….yes the man that is on the US dollar bill….How do you think George feels being sent overseas in return for all that foreign so-call cheap items and being left in a foreign bank because the American worker doesn’t make anything for the foreigners to buy. Cheap items didn’t make this great union of 50 states the greatest place on the face of this Earth…..the American worker (union and non-union) did.

    You can’t have a strong country without having a strong currency and you can’t have a strong currency unless you keep it floating around within your 50 states. This is why the store with the star in the name puts 95% China made items in their stores in China….to keep their “yuan” in their country helping the nice people there. And with only 5% left for all the other 182 country’s that make stuff including the United States of America….that doesn’t produce very many jobs outside of China.

    Being an old person myself and knowing how it was back in the 40′s, 50′s and 60′s in this union of 50 states….I look at George each time I pull him out of my billfold and make a promise to send him out for items made in America so after floating around helping each hand he touches just maybe one day he will shake mine again.

    Fifteen cargo ships pollute as much as 760 million automobiles.

    $9 billion a year in hidden taxes to all American taxpayers to clean fish from ballast tanks of ships…

    think about all those facts the next time you pull that George out of your pocket….

    Retail makes NOTHING…

    Governments only make MORE DEBT…

    It’s time for less of those two and for America to get back to what it does best….MAKE STUFF..

    cause George Washington on that dollar can’t help anyone in the United States of America if he is being held in a foreign hand.

    Made In America is the only way out of this mess cause foreign made put US here.

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  2. Where can I find more information about becoming a “class member”? Is it something that I need to sign up for somewhere, or is it implied simply by being a subscriber? Thank you!

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  3. I would like to know how I become a “class member” as well… I have been a Netflix subscriber since 2005.

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  4. Will and Sam, typically the plaintiffs’ legal team will put together a plan on how to notify class members once the class has been certified (which just occurred). That might be by setting up a website, or emailing class members, depending on the particulars of this suit. And that plan for giving notice will need to be approved by the court. So, the litigation isn’t at that stage yet.

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