Feds launch antitrust investigation into online video competition

The U.S. Department of Justice wants to know whether multichannel video programming distributors (MVPDs) are giving online video distributors a fair chance to compete, The Wall Street Journal reported.

Justice officials have had chats with folks at online video sources Netflix (Nasdaq: NFLX), Hulu and the cable companies that carry their services such as Comcast (Nasdaq: CMCSA), Time Warner Cable (NYSE: TWC) and others.

The discussions revolved around MVPD data caps that limit the amount of data subscribers can download. Everyone involved, of course, declined to comment, the Journal reported.

The probe is part of the government's slow awakening that online is changing the way people access everything. It follows on the heels of Justice Department Antitrust Division lawsuits in the e-book publishing space that alleged publishers and Apple (Nasdaq: AAPL) were colluding to fix prices.

In the case of video, Justice wants to know how operators who have built the broadband pipes handle those who want to ride on those pipes with competitive services. There have always been background rumblings from the OTT crowd that they're not getting a fair shake and rumblings in return from MVPDs that everyone's free to ride on the pipes they built.

Justice, the story said, is also looking at the sometimes special relationships between programmers and service providers--many of whom own or have a stake in the programmers--that could shut out competitors by giving MVPDs lower prices for the same content.

Shares in cable companies dropped Wednesday morning on news of the investigation. 

By 10 a.m. ET, shares in Comcast dropped 54 cents, or 1.77 percent, to $29.91. Time Warner Cable was trading at $76.80, down $1.08, or 1.39 percent, and Charter Communications (Nasdaq: CHTR) dropped 43 cents, or 0.66 percent, to $64.30. Cablevision (NYSE: CVC) dropped a penny to $11.53.

Major cable programmers were also trading slightly lower. Disney (NYSE: DIS) was trading at $46.12, down 26 cents, or 0.56 percent. Viacom (NYSE: VIA) was trading at $52.09, down 12 cents, or 0.22 percent, and Discovery Communications (Nasdaq: DISCA) stock dipped about 2 percent, to $51.03.

FierceCable editor Steve Donohue contributed to this story.

For more:
 - see the WSJ story
 - see the FierceCable story

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