Netflix, Wal-Mart targets of federal class action case

CHARLESTON –- West Virginia has joined a series of class action lawsuits filed across the country against Netflix and Wal-Mart that allege the two companies conspired to raise prices and to eliminate competition in the DVD sales and online rental market.

Lead class plaintiffs Brandon and Jennifer Walters claim in the federal suit filed Feb. 9 they paid artificially high subscription fees to Netflix because of an agreement reached between Wal-Mart and Netflix on May 19, 2005.

Before the alleged agreement, Wal-Mart had been selling DVDs online.

However, under the agreement, Wal-Mart asserted it would stop selling DVDs online, thereby leaving Blockbuster as Netflix's only competition, according to the complaint.

In return, Netflix agreed not to sell DVDs online and instead to promote DVD sales at Wal-Mart, the suit states.

"Defendants' Market Division Agreement effectively eliminated competition in the Online DVD Rental Market and enabled Netflix to charge its subscribers higher subscription prices for the online rental of DVDS than it otherwise would have," the suit states.

Soon after the alleged agreement, Wal-Mart placed a link to the Netflix Web site, urging its subscribers to transfer their subscriptions to Netflix, the Walters allege.

With Wal-Mart competition out of the way, Netflix raised its subscription price from $14.99 per month to $17.99 per month for up to three titles, according to the complaint.

The company currently charges $16.99 monthly for up to three titles.

Because of the agreement, the Walters fear Netflix may have a monopoly on the online rental of DVDs.

"If Netflix does not already have monopoly power, then Netflix has a dangerous probability of success in achieving monopoly power in the Online DVD Rental Market," the suit states.

A Netflix spokesman told the Associated Press the company does not comment on pending litigation.

A spokeswoman for Wal-Mart told the Associated Press that the company did nothing wrong when it decided to stop renting DVDs.

"We made our own independent decision to exit the DVD rental business and our subsequent agreement with Netflix is entirely proper," Wal-Mart spokeswoman Michelle Bradford said in a statement. "We intend to defend vigorously our decisions regarding the products and services offered to our customers."

The Walters and the putative class are asking the court to declare the agreement between Wal-Mart and Netflix void and that the court prohibit the companies from engaging in similar conduct in the future.

They are also seeking compensatory damages, costs, pre- and post-judgment interest and additional relief the court deems just.

Harry F. Bell Jr. and William L. Bands Jr. of Bell and Bands in Charleston will be representing Walters and the putative class.

U.S. District Court case number: 2:09-CV-00110