The Academy of Motion Picture Arts & Science, the folks who bring you the Oscars, are voting on a rule change that would exclude movies by companies like Netflix from consideration. The Justice Department apparently does not take kindly to the idea. According to Variety, Makan Delrahim, Assistant Attorney General for Antitrust, wrote the Academy stating that “agreements among competitors to exclude new competitors can violate the antitrust laws when their purpose or effect is to impede competition by goods or services that consumers purchase and enjoy but which threaten the profits of incumbent firms.”
It’s a fairly aggressive position to take, particularly for a Republican administration. To win, Justice would have to show that being nominated for an Oscar has an important effect in the market. Generally, films that are nominated for Oscars do much better, so the statement is at least plausible on its face. More importantly, however, Netflix is a new and aggressive format. They could easily be described as a nascent, disruptive and maverick competitive force. If one of their films were to be nominated, it could very well have a disproportionate affect on their “legitimacy” as a substitute to in-theater films and therefore on the market for films. In addition, the film industry has plenty of reason to squash new disruptive technologies as they threaten to take consumers away. Lastly, there is a decent chance the agreement could be characterized as a per se concerted refusal to deal.
This is not a frivolous threat. If the Academy proceeds to exclude Netflix, I would anticipate not only action from Justice but from Netflix and the plaintiff’s bar. And Mr. Spielberg one of the first to be deposed.