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Week In Review

By Chris Helsel

European Union Opens Antitrust Case Against U.S. Movie Studios and U.K.'s Sky for "Geo-Blocking" and Monopolistic Practices

The European Union (EU) launched an antitrust case this week against six major U.S. movie studios and British satellite provider Sky UK, contending that some of the companies' contractual provisions violate EU competition law.

Specifically, officials charge that Sky engages in "geo-blocking," or improperly restricting EU consumers outside Britain from accessing its services online or via satellite. Additionally, the regulators contend that Sky's "absolute territorial exclusively" contractual clauses and its practice of requiring movie studios to prevent their services from being made available in the UK and Ireland to companies other than Sky are unduly restrictive and therefore violate European free market ideals.

The American studios named are NBCUniversal, Paramount Pictures, Sony, Twentieth Century Fox, Disney and Warner Bros.

According to the EU Executive Commission, which sent a "statement of objections" to the companies outlining the charges, the exclusivity clauses in their contracts run counter to the European cornerstone of removing barriers to trade within the EU.

In addition to the American studios and Sky UK, the Commission confirmed that it is also investigating similar cases involving Canal Plus of France, Sky Italia of Italy, Germany's Sky Deutschland and DTS of Spain. Commission spokesman Ricardo Cardoso said that: "We continue to examine cross-border access to pay-TV services in these member states."

If the Commission ultimately determines that the companies' practices are in violation of EU law, they could face fines as high as 10% of gross revenue.


Fans' Class Action Suit Calls on Major League Baseball to Install Additional Protective Netting at Ballparks

Earlier this month, Oakland Athletics season ticket holder Gail Payne filed a lawsuit in California federal court against Major League Baseball (MLB, league) and its commissioner, Rob Manfred, seeking to compel the league to expand the area in stadiums shielded by protective netting. The suit, which seeks class certification, comes on the heels of an ugly incident at Fenway Park in Boston last month in which a spectator was struck with a flying broken bat and seriously injured.

According to Bloomberg, about 1,750 spectators are injured in MLB ballparks each year by balls hit into the stands. For over a century, many of these injured fans have sought compensation through the legal system - with virtually no success.

"The Baseball Rule," which stems from a landmark 1913 Missouri appellate court decision, holds that those who choose to attend a MLB game knowingly assume the risk of injury caused by balls or other objects flying into the stands. Provided that the stadium operator provides a reasonable number of seats behind protective netting (typically those directly behind home plate, which is the most dangerous area), it is not liable for the injuries suffered by fans who choose to purchase tickets elsewhere in the ballpark. This immunity extends even to the events prior to a game: In 2013, a Texas court denied recovery to a fan injured by a batting practice home run in Houston.

Unlike the vast majority of (if not all) the previous lawsuits, the current action is not on behalf of an injured spectator. Ms. Payne, whose season tickets are not behind protective netting, has never been injured by a projectile at the stadium, but claims that she is "constantly ducking and weaving to avoid getting hit by foul balls or shattered bats."

Her suit, brought on behalf of every MLB season-ticket holder with an unnetted seat in foul territory, charges that MLB is "negligent in failing to provide a reasonably safe facility for spectators sitting in the exposed areas along the first and third base lines, between the foul poles." In addition to constituting negligence, she says, MLB's failure to adequately protect fans also violates certain California consumer protection laws.

Ms. Payne contends that MLB and Mr. Manfred are fully aware of the risks associated with failing to provide more netting and have "turned a blind eye" to the problem. She also posits that only the most fortunate fans can afford to purchase protected seats, as those behind the netting tend to be closest to home plate and therefore the most expensive.

To date, MLB clubs have resisted calls to increase netting, arguing that most fans prefer a clear view of the game and that installing additional netting would detract from the ballpark experience.

While Ms. Payne's suit may raise some valid points, from a legal perspective, her suit appears doomed to fail. First, there is the question of standing. The Federal Rules of Civil Procedure require an aspiring litigant to have suffered a "concrete and particularized injury." As such, the uninjured Ms. Payne will have a very difficult time convincing the court to enjoin MLB to act in prevention of a potential future harm.

Second, Ms. Payne's argument that only the most well-heeled baseball fans can afford to sit in "safe" areas is shaky at best. In Oakland, for example, where Ms. Payne attends games regularly, there are many "protected area" tickets available at a price equal to or below the face value of the plaintiff's seats. Perhaps more importantly, the vast majority of seats at any MLB stadium are sufficiently high above and far away from the action that no real risk of injury from flying bats or balls exists. MLB can therefore present a strong argument that nothing compels fans to purchase tickets in the more dangerous areas of the stands.

The third and final major impediment to Ms. Payne's chances of success is precedent. As mentioned earlier, courts have repeatedly denied recovery to injured baseball fans under a theory of assumption of the risk. It seems highly unlikely that the court will change course in the current case, especially considering that Ms. Payne herself was never injured.

Despite these legal obstacles, Ms. Payne is not alone in her belief that MLB clubs should do more to protect their paying customers. In Japan, for instance, professional baseball stadiums are required to provide protective netting guarding the entirety of foul territory. In addition, MLB players have indicated that they would prefer not to risk being responsible for a fan getting hurt. The MLB players' union, Major League Baseball Players Association (MLBPA), proposed twice during collective bargaining sessions in 2007 and 2012 to extend the netting in every stadium further down the foul lines. Both times, club owners shot them down.

Prior to the commencement of the current suit, in the days that followed the aforementioned Boston incident, the Red Sox and Mr. Manfred publicly discussed ways that baseball could more effectively keep its fans safe. The commissioner spoke of the possibility of expanded netting, as well as instituting regulations on how bats are made, and mandating that bat handles be wrapped in order to prevent them breaking so easily.

For the reasons discussed above, it does not seem likely that Ms. Payne will succeed in her current suit. However, the issue of fan safety is a real one, and it is encouraging that league officials have acknowledged it and seem intent on exploring ways to strike a balance between optimal ballpark experience and spectator safety.


Authors and Booksellers Accuse Amazon of Anticompetitive Practices

Just weeks after it was reported that Amazon faced antitrust scrutiny from EU regulators over its e-book business, the online retailer now finds itself facing similar accusations domestically. Last week, a collection of groups representing thousands of authors, agents and independent booksellers asked the U.S. Department of Justice to launch an inquiry into the company for antitrust violations.

According to the Authors Guild, the American Booksellers Association, the Association of Authors' Representatives and Authors United, Amazon uses its market dominance (2/3 of e-books sales and an unprecedented 1/3 of new print books) to artificially suppress prices to the point where smaller booksellers simply cannot compete. This, say its detractors, also harms both authors and the reading public as well.

The group told the Justice Department that "Amazon has used its dominance in ways that we believe harm the interests of America's readers, impoverish the book industry as a whole, damage the careers of (and generate fear among) many authors, and impede the free flow of ideas in our society."

The charges stem in part from a bitter dispute last year between the online retailer and the publisher Hachette, during which Amazon intentionally made it more difficult for customers to purchase the publisher's books. In addition, detractors alleged that Amazon intentionally engaged in content control last year by "selling some books but not others based on the author's prominence or the book's political leanings," sold some books below cost as loss leaders to drive competitors out of business, and pressured publishers for better deals by curtailing the sale of "millions of books by thousands of authors."

Amazon declined to comment on the current allegations, but in the past has defended its low-cost model by asserting that the best way to build "a healthy reading culture" was to keep prices as low as possible.

While those allied against Amazon acknowledge that market disruption is a healthy and inevitable byproduct of the industry, its leaders contend that in this case, the company has gone too far. According to Hachette author Douglas Preston, "There isn't a single example in American history where the concentration of power in one company has in the long run benefitted consumers."

The irony behind this whole saga is that just five years ago, it was Amazon who secretly complained to regulators about the allegedly anticompetitive business practices of the nation's largest book publishers. At that time, Apple and five major publishers attempted to wrest some control of the e-book market - of which Amazon controlled 90% at the time - from the online giant. Apple and the publishers argued that their apparent collusion was justified because the entrance of another major participant would increase market competition and therefore benefit consumers. Federal prosecutors disagreed, holding that the groups' efforts constituted illegal collusion to impose higher prices. The publishers eventually settled, and Apple lost at trial and then again on appeal last month. In his concurring opinion, Judge Raymond Lohier of the Second Circuit opined that while Apple's and the publishers' argument had some merit, "more corporate bullying is not an appropriate antidote to corporate bullying."

This time around, it appears that Amazon may have transformed itself from the bullied into the bully. It remains to be seen whether federal authorities will agree and take action against the seemingly insurmountable market leader.


Competitive Video Gaming To Introduce Performance-Enhancing Drug Testing

The Electronic Sports League (ESL), a leading competitive video gaming league, announced this week that it will begin testing competitors for performance enhancing drugs next month.

This announcement came on the heels of an interview with e-gamer Kory Friesen, during which the "Counter-Strike" champion admitted that he and many other competitors had used Adderall without a prescription during an ESL tournament in order to improve focus and gain a competitive advantage. "We were all on Adderall," Mr. Friesen said of his team. "Tons of people do it."

Adderall is a widely prescribed drug intended to combat attention deficit hyperactivity disorder, but often abused by those without the disease in order to improve focus. It is highly popular among college and graduate school students, especially around exam season.

E-sports, as professional video gaming has come to be known, is rapidly gaining in popularity and quickly evolving into a mainstream form of competitive entertainment. According to Newzoo, a gaming research firm, global revenue from e-sports is expected to surpass $250 million this year.

With that increased popularity and exposure comes increased regulation, as these new testing protocols demonstrate. ESL has long had a general prohibition against doping, but until now had failed to specify which drugs were prohibited or test competitors. The league now says that it will partner with the National Anti-Doping Agency of Germany to develop a new testing policy. In addition, ESL says it will meet with the World Anti-Doping Agency (WADA) to discuss how best to enforce the new policy. WADA is recognized as the global leader in the fight against doping and oversees the testing of Olympic athletes and professional cylists.

"We want to create a level playing field for all competitors and maintain the integrity of the sport," said James Lampkin, ESL's vice president of professional gaming.

Unlike traditional sports, however, e-gaming faces a unique challenge in policing its competitors. While sanctioned tournaments are generally held in a central location, many preliminary and qualifying competitions are held online, with players scattered across the globe. Testing each individual competitor at his or her home is obviously impossible - a fact not lost on ESL officials.

As a result, Mr. Lampkin said that in order to ensure compliance with the new drug testing policy, ESL would explore the possibility of converting from remote access to predominantly live, in-person games. While this would certainly allow for increased testing and a more level playing field, the obvious danger is that tournaments would suffer from decreased participation and the sport's overall reach - and therefore profitability - would decline.

"A lot of this is going to affect the nature of the entire industry," said Mr. Lampkin.

For many in the industry, however, these hurdles represent a necessary step on the path to establishing e-gaming as a legitimate sport. "The more e-sports grows, the more it is going to be sanctioned by a governing body, and it was only a matter of time before this was part of it," said Hector Rodriguez, owner of OpTic Gaming, a professional team. "We're becoming an actual sport, so that's why I welcome it. It's an indication of growth."


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This page contains a single entry from the blog posted on July 27, 2015 11:48 AM.

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