Lawsuits Target Wal-Mart/Netflix Deal

A new series of lawsuits are targeting Netflix and Wal-Mart, alleging the Wal-Mart's exit from DVD rentals back in 2005 illegally benefited Netflix.

Remember back in 2005 when mega-retailer Wal-Mart abruptly left the DVD rental business and signed a deal with then-nascent Netflix to handle DVD rentals on its behalf? Turns out not everyone considers the deal to be water under the bridge. A new series of lawsuits are emerging, targeting both Wal-Mart and Netflix, alleging that the two companies negotiated Wal-Mart’s exit from the DVD rental business in a way that led to both companies benefitting illegally.

The lawsuits stem from a 2005 agreement that had Wal-Mart leave the online DVD rental businesses in exchange for Netflix stopping DVD sales. The lawsuits allege the deal amounts to a conspiracy to create a monopoly in the online DVD rental business (by getting Wal-Mart out of the market) and that Netflix benefited illegally by reducing competition, enabling both Netflix and competitor blockbuster to raise prices. It’s the classic argument in antitrust cases: reduced competition harms consumers.

Netflix has declined to comment on the suits; in a statement, Wal-Mart says it made an "independent" decision to leave the online DVD rental market.

Since the beginning of January, approximately 40 lawsuits have been filed around the United States on similar grounds; several are seeking class action status. Typically, the suits seek three times the amount of unspecified financial damages, as well as attorney’s fees.