Viacom Must Face Cablevision Suit Over Channel Bundling

Viacom Inc. (VIAB) must face a lawsuit accusing it of threatening Cablevision Systems Corp. with financial penalties unless it bought rights to channels it didn’t want, a judge ruled.

U.S. District Judge Laura Taylor Swain in Manhattan said today that Cablevision’s case was strong enough to support “an inference of anticompetitive effects.” The Bethpage, New York-based company accuses Viacom of illegally forcing it to accept all of its programming to have access to its most desirable networks, such as Nickelodeon, Comedy Central, BET and MTV.

Cablevision said in its complaint unsealed in March 2013 that Viacom threatened it with a penalty of at least $1 billion if it didn’t take less popular channels along with the ones it wanted.

The judge rejected Viacom’s contentions that there were weaknesses in Cablevision’s claims that should prevent the case from moving forward.

While the fifth-largest U.S. cable operator said it only wanted to license Viacom’s highly rated networks, the penalty it would have paid to avoid taking low-rated networks such as Logo and Palladia was more than its “entire programming budget,” according to the complaint.

“This anti-consumer abuse of market power is a key reason cable bills continue to rise and programming choice remains limited,” Cablevision said in a statement at the time.

Flexible, Competitive

In an e-mailed statement today, Jeremy Zweig, a spokesman for New York-based Viacom, said the company’s programming licensing arrangements are “flexible, competitive and the result of good-faith negotiations with distributors” and that Cablevision is trying to “renege on a long-term business agreement.”

“Although we are disappointed that the court did not dismiss these claims at the outset, we are confident that Cablevision will fail to prove the facts required to prevail in their case,” Zweig said.

The case is Cablevision Systems Corp. (CVC) v. Viacom International Inc., 13-cv-01278, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Christie Smythe in federal court in Brooklyn, New York, at

csmythe1@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg

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