Satellite TV providers probed about pricing contracts

By Alex Sherman Bloomberg News

DirecTV and Dish Network have received requests from the Justice Department about pricing contracts with television networks, part of a broader probe into whether pay-TV companies are squeezing out Internet-video rivals, according to three people with knowledge of the matter.

The Justice Department sent civil investigative demands, which are similar to subpoenas, to DirecTV and Dish, the two largest U.S. satellite-TV providers, said the people, who spoke on the condition of anonymity because they lacked authority to talk publicly about the situation.

The government is seeking information about so-called most-favored-nation provisions, which give pay-TV companies favorable pricing and terms, two of the people said. Regulators are concerned that the conditions are preventing smaller start-ups and Internet-video distributors from obtaining programming rights.

Information about the satellite providers’ terms will help the Justice Department learn more about the contracting practices of the industry, another person familiar with the situation said. The department also is investigating whether Comcast and other cable companies are limiting competition from Internet-video providers – a probe that was first reported by the Wall Street Journal earlier this month.

Darris Gringeri, a spokesman at El Segundo, Calif.-based DirecTV, declined to comment, as did Aaron Johnson at Englewood, Colo.-based Dish and Comcast’s Jennifer Khoury. Gina Talamona, a Justice Department spokeswoman, also declined to comment.

By stipulating that cable companies get the best prices on content, most-favored-nation clauses may make it harder for TV networks to turn around and sell their programming to Internet services, such as Netflix.

If most-favored-nation clauses were struck down as anticompetitive, Netflix and other online-video providers might be able to expand their video offerings by buying programs at lower prices – possibly in smaller chunks than what gets sold to the cable companies.