Netflix to Face Class Action Suit
US District Court Judge Phyllis Hamilton has granted class action status to subscribers of Netflix Inc. Also included in the suit is Wal-Mart Stores Inc. and the case stems from the companies collusion and antitrust practices.
The suit was originally filed in 2009 alleging that both Netflix and Walmart.com colluded to control the sale and distribution of DVDs. The complaint further adduces that Netflix and Wal-Mart conspired in 2005 to divide the market on the sale and rent of DVDs with the aim of reducing competition. As proof of such collusion, the companies entered into an agreement that Wal-Mart.com would stop renting DVDs online while Netflix on its part would not offer DVDs for sale on its site.
When Walmart.com closed its online rental business, Netflix allegedly then took over the subscriber’s list of Walmart yet avoiding the full responsibilities involved in the retail disc business. In doing so, former Walmart.com subscribers were obliged to pay “supracompetitive prices” when they ordered through Netflix.
Walmart for its part has already reached a settlement with the class action complainants but Netflix refused to enter into compromise and vows to fight the good fight. According to one Netflix spokesperson, the suit has no basis and merit. The settlement by Walmart is worth as much as $40 million in cash and approval of such settlement would be heard on Feb.9.
The order to consolidate the case into a class action suit was ordered last December 23 in federal court at Oakland, California. The order of consolidation stated that the cases were “united by common and overlapping issues of fact and law”. The case is set for hearing in the early part of 2011.
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