2. Background
In February 2024, three broadcast companies (Disney, Fox, and Warner Brothers or “the JV Defendants”) entered into a joint venture agreement to create a new television streaming service focused on offering live sports content, to be branded as Venu or Venu Sports. Disney is the owner of ESPN and is a majority shareholder of the streaming service Hulu, Fox provides sports broadcasting through its Fox Sports division and operates the streaming service Tubi, and Warner Brothers owns TNT Sports and the streaming service Max
The live sports program value chain has three major (sometimes integrated) tiers: creation, programming, and distribution. First, the governing bodies of major sports (such as the NFL, NBA, or NHL) control the telecast rights to their events, which they contract to TV networks. Second, television networks program these live sports events, adding value by combining the live sports content with their own produced content such as commentary, editing, and interviews. Third, these programs are then distributed to viewers by distributors. Fubo sits at the third tier of the value chain, while the defendants are also vertically integrated throughout the second and third tiers and the newly created JV sits at the third tier.
Television networks have traditionally bundled their live sports coverage along with other content. For example, Disney could require distributors to provide Nat Geo Wild (a Disney channel) to at least 85 percent of all its subscribers and pay affiliate fees regardless of the number of customers who actually watch the channel. One point of difference of Venu relative to the existing offerings would be that Venu would only offer Live Sports, and would not offer other content that other distributors would normally be required to include.
Fubo is a distributor that offers a specialized streaming service focused on live sports. It contracts with the JV Defendants for the rights to license and distribute their programming and based on these contracts carries both live sports and other bundled content. Fubo alleged that the JV violated federal and state antitrust law and sought a permanent injunction. Specifically, Fubo alleged that the JV Defendants have violated Section 7 of the Clayton Act, Section 1 of the Sherman Act, and New York state law.
3. What legal standard was used?
In deciding whether to grant the preliminary injunction, Judge Garnett used a four-part legal test, which required that Fubo show: 1) it was likely to succeed on the merits, 2) it was likely to suffer irreparable harm if a preliminary injunction were not granted, 3) the “balance of equities tips in its favor,” and 4) an injunction would be in the public interest.
Judge Garnett applied this test only to Fubo’s Section 7 claims, finding in part that Fubo would likely succeed in demonstrating that the JV will substantially lessen competition and restrain trade. The next section will discuss in detail the economic reasoning behind this.
Given that the Section 7 claims passed the test, there was no need to further consider the Section 1 claims. Judge Garnett had previously expressed skepticism that Section 1 claims could constitute an emergency requiring injunctive relief.
4. How was economics applied in the decision?
This decision primarily relied on economic reasoning in the first two parts of the test — that is whether Fubo was likely to succeed on the merits and whether it would face irreparable harm if a preliminary injunction were not granted.
Judge Garnett first determined whether Fubo was more likely than not to ultimately succeed in its claims. To do so, she considered three questions – whether Fubo had shown a relevant market, whether Venu represented the JV Defendants granting an exclusive license to unbundled sports content, and whether this exclusive license would allow the JV Defendants to potentially realize anticompetitive effects.
Fubo had proposed three relevant product markets for the Court’s consideration — (1) a “Skinny Sports Bundle Market,” (2) a “Live Pay TV Market,” and (3) a “Sports Licensing Market.” In contrast, the JV Defendants contended that the relevant market was a broader “Pay TV Market.” The court found that Fubo would be likely to be able to show the JV would tend to substantially lessen competition in the Live Pay TV Market. Judge Garnett’s reasoning was that there were a large variety of consumers of live sports who would view various offerings in this market as potential substitutes. The key product excluded from this market was “Streaming Video on Demand” (“SVODs”) like Netflix or Amazon Prime. While Judge Garnett acknowledged that some SVODs offer some live sports programming, she reasoned that many sports fans would not view SVODs as an “acceptable substitute” for other Live Pay TV products as they would not be able to get all the lives sports they wanted purely from SVODs.
Judge Garnett reasoned that Venu was able to show that the JV Defendants would grant an exclusive license to unbundled sports licensing: i.e., the JV Defendants would grant the JV unbundled services that they did not make available to Fubo or other TV distributors. Judge Garnett then argued that this unique offering could potentially give the JV Defendants a way to “capture demand” in the Live Pay TV Market that “only exists as a byproduct of their own historical (and ongoing) bundling practices”.
For the second part of the four-part test, Judge Garnett had to determine whether Fubo had shown it would face imminent and irreparable harm if the JV were allowed to proceed. She found the answer is yes: Fubo demonstrated that it would likely go out of business if the JV were allowed to proceed. In determining so, the judge considered two main potential defenses put forward by the JV Defendants, that Fubo’s claims lacked credibility, and that Fubo’s failure was likely regardless of the JV.
Fubo presented sworn declarations, live witness testimony, ordinary course business documents, and statistical data to support its position. In particular, Judge Garnett relied heavily on evidence Fubo put forward purportedly showing that most of its customers are primarily interested in its sports offerings. For example Judge Garnett pointed to evidence that Fubo mainly acquired customers during periods where they offer live sports broadcasts, that customers first and longest viewed programming tends to be live sports broadcasts, and that a significant number of customers tend to cancel their subscriptions at the end of sports seasons. Judge Garnett found this evidence particularly credible as it had been kept for years in the ordinary course and was consistent with the testimony of experienced Fubo employees. On this basis Judge Garnett found that Fubo relied on customers interested in live sports and would likely suffer from Venu providing the same services at half of Fubo’s price.
The JV Defendants argued that Fubo was a “weak competitor” that would likely be at risk of insolvency and collapse even absent the JV. Judge Garnett rejected this argument noting that Fubo was in its “relative infancy” having only existed for nine years. Judge Garnett also relied on projections by Fubo that it was likely to be profitable in 2025. She found that these projections were compelling as they had been announced to shareholders in advance of the litigation and Fubo presented evidence that its internal model underlying these projections was credible.
Having established that she was convinced the first two parts of the test were likely to be satisfied, Judge Garnett was able to cover the last two parts quickly. For the third part, i.e., the balance of hardships, the JV Defendants had failed to offer any witness testimony or documentary evidence on the harms they might face from a delay, while Fubo had already shown it was likely to suffer irreparable harm absent the injunction. Therefore Judge Garnett ruled that “the balance of the hardships tips firmly in Fubo’s favor.” Finally for the last part of the test, Judge Garnett ruled that an injunction would not harm the public interest, indeed, given that Fubo had shown that they were likely to succeed in their Section 7 claim and that the launch of the JV was likely to result in it exiting the market, Judge Garnett found that a preliminary injunction was likely to serve the public interest.
5. Mixed reactions from the public
Following the preliminary injunction, several parties submitted amici curiae briefs. In September, six Republican state Attorneys General and several economists submitted amici curiae briefs opposed to the preliminary injunction. In their brief the Attorneys General noted that antitrust complaints made by competitors “should be viewed with skepticism,” and claimed that the district court erred in viewing the joint venture’s procompetitive effects as an antitrust problem. The economists noted that the “district court [had] denied consumers access to a desirable product (i.e. Venu) [that was] likely to increase consumer welfare” and had “improperly assumed that consumers [would] be harmed.” In December, the Department of Justice and seventeen Democratic state and district Attorneys General submitted amici briefs. The Department of Justice stated that Supreme Court precedents on unilateral refusals to deal with rivals under Section 2 of the Sherman Act were irrelevant to Fubo’s claims under Section 7 of the Clayton Act and that Fubo was likely to succeed on its Section 7 claim. The Democratic State AGs stated that “no duty to deal” claims only applied to unilateral conduct, not joint conduct, and thus did not apply to the joint venture.Ultimately, these arguments are now rendered moot by the end of the joint venture. It remains uncertain how the courts may deal with similar issues in future.
