Netflix, Wal-Mart face second class-action lawsuit

UPDATE: Plaintiff alleges unfair DVD pricing, working to create a monopoly

By Susanne Ault -- Video Business, 1/30/2009

JAN. 30 | Another class-action lawsuit has been filed against Netflix and Wal-Mart alleging unfair DVD pricing after the two companies partnered to limit competition between each other.

Led by plaintiff Marci Badgerow from Chicago, the suit attacks the 2005 agreement struck between the retailers, in which Wal-Mart agreed to exit the online rental business in exchange for Netflix stopping all DVD sales. In this way, the companies hoped to stop unnecessarily cannibalizing revenue between each other.

The suit believes this agreement is illegal and promotes unfair trade. As proof, the suit particularly cries foul over Netflix raising its monthly subscription price from $14.99 to $17.99, on the heels of calling its truce with Wal-Mart. Prior to aligning with Netflix, Wal-Mart was offering a significantly cheaper $12.97 a month subscription plan.

Additionally, Netflix is accused of working to create a monopoly within the online DVD rental market, as it successfully got rid of Wal-Mart as a competitor.

“The subscription fees charged by Netflix to Plaintiff, as well as the other members of the Class, were maintained at artificially high levels,” states the suit filed in the U.S. District Court, Western District of Arkansas, on Jan. 26. “Plaintiff and the other members of the Class paid higher subscription prices to Netflix than they otherwise would have paid.”

The class-action plaintiffs are seeking three times the amount of unspecified financial damages relating to Netflix subscriptions, including attorney fees.

Wal-Mart disputed the claims.

"We made our own independent decision to exit the DVD rental business and our subsequent agreement with Netflix is entirely proper,” Wal-Mart spokeswoman Michelle Bradford said. “We intend to defend vigorously our decisions regarding the products and services offered to our customers.”

Netflix declined to comment.

In early January, a Northern California woman sued Netflix and Wal-Mart in a similar class action complaint.