The Seven Network has been dealt a bitter blow by the Federal Court following a decision that rejected Seven’s claim that their pay TV arm C7 was driven out of business when deprived of pay TV rights to the AFL and NRL.
Justice Ronald Sackville said the anti-competition case bought by Seven could not succeed.
He also found that Seven had failed to establish the existence of a wholesale pay television market or the existence of an AFL and NRL television rights market.
But Seven did manage to establish the existence of a retail pay TV market, Justice Sackville said.
In the complex case, which Seven launched seven years ago, the network alleged its pay television arm C7 was driven out of business after being deprived of pay TV rights to the AFL and NRL in 2000.
The case rested on pay TV company Foxtel’s refusal to carry C7 content before it lost the rights to the AFL.
“I conclude that Foxtel did not take advantage of its power in the retail pay television market in any of the ways alleged by Seven,” Justice Sackville said.
“In particular, I find that Seven has not made out its pleaded case in relation to Foxtel’s refusal to accept so-called offers by Seven to supply its channels and Foxtel by refusing to negotiate with C7 pending the award of the AFL broadcasting rights did not take advantage of its market power,” Justice Sackville said.
“I conclude that Seven’s case, based on the anti-competitive purpose of the various provisions, including the master agreement provision, cannot succeed.
“The reason is that even if each of the consortium respondents had the objective attributed to it by Seven – that of killing C7 – achieving that objective could not have substantially lessened competition in the retail television market.
“By reason of Optus’s parlous state any lessening of competition in that market would have occurred quite independently of the fate of C7.”
Justice Sackville narrowed the scope of the case by rejecting Seven’s argument that a wholesale sports channel market, AFL pay rights market and NRL pay rights market existed.
“I find that Seven has failed to establish the existence of that market,” he said.
“However, I conclude that Seven has made out that there was at the relevant time a retail pay television market in the terms pleaded by it.
“It follows from these findings that Seven can only succeed in its anti-competitive conduct case … if the provisions on which it relies had the effect or likely effect of substantially lessening competition in the retail pay television market.”
Justice Sackville also criticised the hefty cost of the legal stoush – dubbed ‘Seven versus the world’ – and which is estimated to have cost the parties a total of $200 million.
“In my view, the expenditure of $200 million and counting on a single piece of litigation is not only extraordinarily wasteful, but borders on the scandalous,” he said.
At one stage Seven was reportedly paying top London silk Jonathon Sumption, QC, more than $20,000 a day.
The ruling comes after 120 days of hearings over more than 12 months that produced almost 10,000 pages of transcript.
“The case is an example of what is best described as mega-litigation,” Justice Sackville said.
Justice Sackville said he would take submissions on damages but warned the parties to limit their submissions to no more than 10 pages long.
Seven had initially sought up to $1.1 billion in damages from 22 parties including News Ltd, Publishing and Broadcasting Ltd, Telstra, the AFL and the NRL.
The best it can now hope for is a pre-tax figure of $480 million.
There were 22 parties originally named in the Seven suit – including the AFL, Foxtel and Optus – but that number was whittled down after Seven settled with Ten Network and the AFL.