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Gary Marchese, Individually and On v. Cablevision Systems Corporation

January 14, 2011


The opinion of the court was delivered by: Linares, District Judge.



This matter arises out of allegations that Cablevision employs an illegal tying arrangement in which it uses its market power to require its subscribers to rent cable boxes as a condition of subscribing to its iO TV Package, in violation of, inter alia, Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. Currently before the Court is a motion to dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The Court has considered the submissions made in support of and in opposition to the instant motion.*fn1 No oral argument was heard. Fed. R. Civ. P. 78. Based on the reasons that follow, Defendant's motion to dismiss is granted, as is Plaintiff's request for leave to file a Second Amended Complaint.


Cablevision Systems Corporation and CSC Holdings, Inc. (collectively referred to as Defendant or Cablevision) provides cable programming services to consumers in the New Jersey, New York and Connecticut tri-state area and leases cable set-top boxes to customers in conjunction with its services. (Am. Compl., ¶¶ 2, 4). Cablevision offers at least two types of cable programming subscriptions -- "Broadcast Basic" and iO TV. (Am. Compl., ¶ 28). The iO TV Package includes all channels available through a subscription to Broadcast Basic, as well as certain additional channels and the following digital enhancements: (1) international programming, (2) interactive services, (3) Pay TV, and (4) on Demand. (Am. Compl., ¶¶ 28, 29). These digital enhancements are also known as "Two Way Services." (Id.).

All of the television signals offered through a subscription to an iO TV Package are transmitted by Cablevision in an encrypted format. (Am. Compl., ¶ 34). The cable set-top boxes at issue unscramble the encrypted television signals. (Id.). Thus, in order to access the Two Way Services available through the iO TV Package, Cablevision subscribers must rent a cable set-top box. (Am. Compl., ¶ 35). The cable set-top box is distributed exclusively by Cablevision. (Id.). Subscribers of the iO TV Package must pay a monthly fee to rent a cable box, which is in addition to the fee that Cablevision charges for the iO TV Package itself. (Am. Compl., ¶ 14).

Plaintiff, Gary Marchese, brings this action as a representative of a proposed class of Cablevision customers who purchased Two Way Services and were required to lease a cable box from Cablevision in order to access those services. (Am. Compl., ¶ 1). Plaintiff alleges that "[b]ytying the sale of a subscription to an iO TV Package with Two Way Services to the rental and use of a cable set-top box distributed exclusively by Cablevision that permits two way communications, Defendants have abused their market power and substantially and unreasonably restrained competition in the market for the rental and sale of cable set-top boxes that permit two way communications," in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. (Am. Compl., ¶¶ 7, 10, 91). Plaintiff also alleges that Cablevision wrongfully acquired and maintained a monopoly in the market for set-top boxes permitting Two Way Services by programming its cable system "to not provide service to cable set-top boxes that are otherwise capable of two way communications but are not distributed by Cablevision" in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. (Am. Compl., ¶ 151).


For a complaint to survive dismissal, it "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In evaluating the sufficiency of a complaint, a court must accept all well-pleaded factual allegations in the complaint as true and draw all reasonable inferences in favor of the non-moving party. See Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008). Additionally, in evaluating a plaintiff's claims, generally "a court looks only to the facts alleged in the complaint and its attachments without reference to other parts of the record." Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).


I. Section 1 Claims

A. Per Se Tying

The Court has previously ruled on this claim. In its August 18, 2010 Opinion, the Court held, in pertinent part, as follows:

Plaintiff defines the tying product as a subscription to an iO TV Package. (Compl., ΒΆ 25). Plaintiff has failed to allege actual coercion with respect to those services comprising the iO TV Package that are available through use of a CableCARD because he has not alleged that Cablevision's sale of such services was conditioned on the lease of a cable box. "Only those services which were unavailable to consumers who opted to use the alternative CableCARD to access secured channels, despite paying an additional fee for the service, caused consumers to be actually coerced into renting a cable box." In re Time Warner, 2010 WL 882989, at *8. Because the Complaint acknowledges that consumers could access scrambled channels by using a CableCARD with a device purchased from a third-party, those consumers were not actually coerced into leasing the cable box as a condition of purchasing the iO TV Package. See generally N. Pac. Ry., 356 U.S. at 6-7 ("[I]f one of a dozen food stores in a community were to refuse to sell flour unless the ...

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