Netflix Class Action Lawsuit Filed Over Unfair Internet DVD Pricing

Published: February 3rd, 2009

A class action lawsuit has been filed against Netflix and Wal-Mart, alleging that they colluded to limit competition for on-line DVD rentals and created an illegal monopoly.

The Wal-Mart and Netflix class action lawsuit seeks damages for Netflix subscribers who paid higher subscription rates than they otherwise would have paid.

The complaint stems from a 2005 agreement made between the companies, which plaintiffs allege created an unfair monopoly in the online DVD rental market.

At a time when both Netflix and Walmart were competing for internet DVD rental business, the companies reached an agreement where Wal-Mart agreed to exit the on-line rental business in exchange for Netflix agreeing to stop DVD sales.

Prior to the agreement, Netflix was charging a monthly subscription fee of $14.99 and Wal-Mart’s competing service was priced at $12.97 per month. Following the allegedly illegal agreement which promoted unfair trade, Netflix raised their subscription fee $3.00, to $17.99 per month.

The internet DVD rental lawsuit was filed in the U.S. District Court for the Western District of Arkansas, seeking recovery of three times the financial damages suffered by Netflix subscribers, plus attorney fees.

Earlier last month, a similar lawsuit was filed in the U.S. District Court for the Northern District of California. The plaintiffs in that case also allege that the companies engaged in unfair trade practices that created a monopoly, but also claims that it caused Blockbuster, Inc., a third competitor in the on-line DVD rental business, to raise their subscription prices by $3.