A federal judge has granted class-action certification to Netflix Inc. subscribers in their lawsuit against the company and Wal-Mart Stores Inc. for an alleged agreement to monopolize the DVD market. U.S. District Judge Phyllis Hamilton in an order said that the subscribers bringing suit against the companies in 2009 were “united by common and overlapping issues of fact and law.” Wal-Mart and the Plaintiffs reached a preliminary settlement of the lawsuit that could pay them as much as $40 million in cash or equivalents. But the settlement doesn’t include Netflix.
The Plaintiffs charged that Netflix and Wal-Mart conspired in 2005 to divide the market for selling and renting DVDs in order to reduce competition. The companies formed an agreement in which Wal-Mart.com would stop renting DVDs online and Netflix wouldn’t offer them for sale. It was alleged that the agreement came after Blockbuster Inc. began offering DVD rentals online. Judge Hamilton said in her order: “As a result, millions of Netflix subscribers allegedly paid supracompetitive prices.”
It was alleged in the lawsuit that a conspiracy began when Reed Hastings, the chief executive officer of Netflix, met John Fleming, then the CEO of Wal-Mart.com, for dinner in January 2005 to discuss how to reduce competition in the DVD market in the U.S. At that time Netflix, based in Los Gatos, California, and Wal-Mart.com were competitors in online DVD rentals.
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