Ninth Circuit: Refusal to Allow Embedded Videos and Links in MySpace Not a Sherman Act Violation

by Lee Gesmer on January 19, 2009

Ninth Circuit: Refusal to Allow Embedded Videos and Links in MySpace Not a Sherman Act Violation

You would think that in a capitalist economy the right of one business to to say to another “I don’t want to deal with you” would be close to sacrosanct.  And, you would be right, with qualified exceptions in cases where the party refusing to deal has monopoly power.  Even then, the Supreme Court has narrowed the “duty to deal” to  fact situations so limited that antitrust liability can be avoided with careful planning.

The two leading Supreme Court cases in this area of the law are Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U. S. 585, 601 (1985) and Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004).  Post-Trinko, the consensus of the courts is that “refusal to deal” claims are viable only where there was no voluntary prior course of dealing between the parties, where the monopolist’s  conduct increased its short term profits, or where the refusal to deal is used to monopolize an adjacent market.

“Refusal to deal” cases involving Internet companies have been rare, but in a recent decision the 9th Circuit held that exclusionary conduct by MySpace.com, directed at another social networking site, Vidilife.com, did not constitute monopolization under the federal antitrust laws.

Both MySpace.com and Vidilife.com are “social networking” websites.  MySpace is very well known, Vidilife site much less so.

Vidilife.com, owned by LiveUniverse, Inc., allows users to post videos on its site.  Some of those users embedded their videos in their MySpace web pages (a comon practice on social networking sites).  MySpace deleted the videos and references to Vidilife.com. LiveUniverse sued in federal district court in California, charging MySpace with attempted monopolization and monopolization under the federal antitrust laws.

The district court found that MySpace.com’s actions did not constitute an illegal “refusal to deal,” and the 9th Circuit upheld this ruling.  At the heart of the 9th Circuit’s ruling is the fact that LiveUniverse did not (and could not) allege a prior course of dealing between the two companies or that MySpace was forsaking short-term profits, as required by Trinko.  In addition, the court held that LiveUniverse had failed to adequately allege causal antitrust injury.

There is some back story to this case.  LiveUniverse’s CEO, Brad Greenspan, is the the former CEO of eUniverse/Intermix–the company that sold MySpace to News Corp in 2005 for a half-billion dollars.  Apparently, there is some bad blood between Greenspan and MySpace.com left over from that transaction, suggesting that MySpace.com may have been acting from personal motives.  If so, it was an expensive exercise in ego gratification for both companies.

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