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DOJ sues AT&T's DirecTV for blocking Dodgers channel

A federal suit against AT&T's satellite TV business over alleged collusion with other providers could throw a monkey wrench into AT&T's Time Warner buyout.

The Department of Justice has accused satellite TV provider DirecTV of being the ringleader in an illegal pact among pay TV companies to block wide distribution of the channel that has exclusive rights to broadcast Los Angeles Dodgers games.

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The Justice Department has accused DirecTV of colluding with competitors.

US Department of Justice

In a lawsuit filed Wednesday, the DOJ says that DirecTV, before it was owned by AT&T, colluded with three of its competitors -- Cox Communications, Charter Communications and AT&T itself -- to illegally exchange private information during negotiations to carry Time Warner Cable-owned SportsNet LA.

SportsNet LA holds the exclusive rights to telecast almost all live Dodgers games in the Los Angeles area.

The suit also alleges the companies used the information as the basis for not carrying the Dodgers Channel. Neither DirecTV, Cox nor AT&T carry the Dodgers Channel today.

"Dodgers fans were denied a fair competitive process when DirecTV orchestrated a series of information exchanges with direct competitors that ultimately made consumers less likely to be able to watch their hometown team," Jonathan Sallet, deputy assistant attorney general for the DOJ, said in a statement.

The Justice Department's suit comes a week after AT&T, DirecTV's new parent-company, announced its $85 billion acquisition deal with media giant Time Warner. The DOJ has to review the deal, and its strong stance against AT&T in the DirecTV matter could spell trouble for the potential merger, which has already been criticized by several politicians on both sides of the aisle.

Both presidential candidates were already critical. Republican nominee Donald Trump said when the deal was announced that he'd block it. Democratic nominee Hillary Clinton also expressed concern, urging regulators to take a thorough look.

AT&T said the lawsuit is without merit.

"We respect the DOJ's important role in protecting consumers," David McAtee, general counsel for AT&T, said in a statement. "But the reason why no other major TV provider chose to carry this content was that no one wanted to force all of their customers to pay the inflated prices that Time Warner Cable was demanding for a channel devoted solely to LA Dodgers baseball. We make our carriage decisions independently, legally and only after thorough negotiations with the content owner. We look forward to presenting these facts in court."

Consumer interest group Public Knowledge, however, called DirecTV's alleged misconduct an example of why it's a bad idea for big companies like AT&T to get even bigger and amass more market power. Public Knowledge also said this case demonstrates that executives from big companies can still find ways "to unlawfully collude or otherwise violate competition law or evade merger conditions."

"This case raises obvious concerns about whether AT&T would have the incentive and ability to harm consumers if it were permitted to acquire Time Warner," John Bergmayer, senior counsel at Public Knowledge, said in a statement.

"More broadly, this suit is evidence that merger conditions that are designed to control the behavior of large companies can be difficult to enforce."

Cox, which was not named as a defendant in the DOJ's suit, issued the following statement.

"We are gratified that we were not named as a defendant. We continue to be committed to making independent decisions on program content."

Charter, not named as a defendant either, did not respond to a request for comment.