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Wholesale vid distribs sue U

Suit stems from U's move in October to streamline its sales efforts

After months of threats, two regional video wholesale distributors filed an antitrust lawsuit Tuesday against Universal Studios and two other distributors alleging that the three are conspirators in price-fixing, fraud, bribery, restraint of trade and breach of contract.

In their $30 million-plus suit, Flash Electronics and East Texas Distributing (ETD) seek to treble certain claims of damage under antitrust law that could increase the plaintiffs’ claim to nearly $90 million.

Streamlining move

Suit, filed in U.S. District Court in New York against Universal, Ingram Entertainment and Video Products Distributors (VPD), stems from U’s move in October to streamline its sales efforts by making rental product available to retailers through only two traditional distribs, cutting out all others.

A Universal spokeswoman said the company does not comment on ongoing litigation. Suit names two studio divisions — Universal Studios Home Video and Universal Music and Video Distribution — as defendants.

Flash and ETD are seeking $30 million, plus statutory, treble and punitive damages. They say the defendants violated the Sherman Antitrust and Clayton acts and other laws.

The complaint alleges that Ingram and VPD “conspired with each other and defendant Universal” to “fix, control, raise and stabilize prices” and gain an “unfair competitive advantage.” The plaintiffs also claim that Ingram and VPD had been pressuring U to cut out other distributors for several years.

In the suit, the plaintiffs specifically maintain that Universal solicited confidential customer information from Flash and ETD under false pretenses and passed that information along to Ingram and VPD. U and its chosen distribs are accused of having bribed retailers not to do business with the plaintiffs by offering them free product, according to the suit.

In addition, Universal allegedly threatened to interfere with the plaintiffs’ sales of movies from DreamWorks — which are sold through Universal to all wholesalers — if they continued to sell U product obtained through other sources.

Until Universal’s distribution streamlining, “plaintiffs were able to compete in the video and DVD market on a more fairly level playing field, which, in turn, benefited retailers and customers of retailers because the open competition in the market historically kept prices of videos and DVDs at an affordable level,” according to the suit.

Revenue-sharing distributor Rentrak also handles Universal product but was not named in the suit. Neither was Valley Media, which handles U sell-through product but no rental.

Ingram Entertainment chairman David Ingram declined comment, saying he hadn’t seen the action. VPD officials were not immediately available for comment.

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