Disney is facing a lawsuit over alleged antitrust violations tied to its control of ESPN and its role as both a content supplier and distributor. A Fubo subscriber filed the proposed class action in New York federal court on Tuesday, claiming Disney uses its ownership of ESPN to impose anticompetitive terms on rivals in the streaming live pay TV (SLPTV) market.
The lawsuit alleges that Disney’s ownership of ESPN allows the company to “extract monopoly rents” by requiring streaming services to carry non-ESPN channels in order to offer ESPN. Additionally, ESPN must be included in the cheapest subscription package, which the complaint claims forces competitors like Fubo to charge higher prices than they would in a free market.
The complaint states, “These anticompetitive tactics restrain competition from rivals to Disney’s Hulu in the SLPTV market and force independent streaming services such as Fubo to charge higher prices to their customers than they would in a free market.”
The lawsuit follows Disney’s announcement, along with Warner Bros. Discovery and Fox Corp., that the sports-focused streaming service Venu will not move forward. Disney also recently revealed plans to merge Hulu + Live TV with Fubo, which would make it the second-largest streaming multichannel video programming distributor (MVPD) after YouTube TV.
The legal issues surrounding Disney’s bundling practices came into focus earlier when a court order temporarily blocked Venu’s release, citing that bundling requirements were “uniformly and systematically imposed on each distributor in the live pay TV industry except the JV, preventing any other distributor from offering a multi-channel sports-focused streaming service.”
Fubo’s case centers on allegations that Disney, Fox, and Warner Bros. Discovery leverage their control over essential sports channels to force distributors into bundling them with other, less popular and more expensive channels. The complaint argues that this practice leads to higher costs for consumers, who are required to pay for channels they do not watch.
Tuesday’s lawsuit builds on these claims, asserting that Disney enforces anticompetitive terms by making ESPN a mandatory part of the cheapest subscription bundle and instituting “most favored nation” clauses. These clauses, according to the lawsuit, ensure that ESPN affiliate fees set with any one competitor establish a price floor across the entire industry.
The complaint stated,“Disney’s anticompetitive conduct includes using its dominant share of broadcast licenses for commercially critical sports content to force Fubo to license and broadcast unwanted, expensive, non-sports content. This prevents Fubo from offering the sports-centric package of channels that its customers want.”
The lawsuit alleges violations of federal and state antitrust laws and seeks treble damages, disgorgement of profits, and a court declaration that bundling and most favored nation agreements violate antitrust regulations.