Appeals Court: ‘Bundling’ Cable Service Is Not Illegal

TV Cables (cord cutting)

A lot of people don’t like “bundling”-the practice of selling consumers access to a big chunk of cable channels, rather than allowing “a la carte” purchases of only the channels people want. But whatever issues consumers and their advcoates might have with bundling, the companies that do it aren’t breaking any antitrust laws, according to a recent opinion issued by the U.S. Court of Appeals for the 9th Circuit.

The case originated in 2007, with a class action lawsuit filed in federal court claiming that the practice of “bundling” reduced consumer choice and increased prices. The plaintiffs in the case sued programmers like NBC Universal (NSDQ: CMCSA), Viacom (NYSE: VIA), and Disney (NYSE: DIS), as well as cable and satellite providers like Time Warner (NYSE: TWX), Comcast, Cox, Cablevision (NYSE: CVC), DirecTV (NYSE: DTV) and Echostar (NSDQ: SATS). But in 2009, a lower court ruled that when it came to antitrust, the plaintiffs had no case, and that’s now been upheld by the 9th Circuit, the large federal appeals court that covers most of the Western U.S.

The opinion, which was issued on Friday, essentially says that the plaintiffs have failed to show that the practice of bundling hurts competition at all. While bundling has become current business practice, and some consumers clearly resent it, that doesn’t make it illegal. “The complaint does not allege that Programmers’ practice of selling tied “must-have” and low-demand channels excludes other sellers of low-demand channels from the market,” writes Circuit Judge Sandra Ikuta, who authored the opinion of a three-judge panel.

And the complaint didn’t allege that the defendant media companies who sell their content in bundles had any effect on competing programmers, or on the cost and quality of cable service. If consumer advocates want to fight the bundling battle over again, it looks like they’ll have to head to Congress or regulators at the FCC, and not the courts.

The internet era has ushered in dramatic “un-bundling” in other content industries, like music-where full-album sales were demolished by iTunes-and newspapers, where many consumers check only online news that they care most about rather than buying a big paper “bundle” with a variety of information. But cable looks like it is one industry that will be able to keep its bundles for awhile, as long as it can keep the policy arguments about cable bundling from getting out of control.

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