Blockbuster Sued by Private Video Stores
L O S A N G E L E S, Feb. 1 -- A group of some 200 owners of private videostores has sued Blockbuster Inc., claiming the company ismonopolizing the video rental market and trying to driveindependent stores out of business.
The lawsuit filed in Los Angeles Superior Court on Wednesdayclaims that because Blockbuster is owned by media giant ViacomInc., the chain has "substantial market power and influence withthe Hollywood studios."
Agreements Blockbuster made with studios in 1997 and 1998 toshare rental revenues increased Blockbuster's market share anddrove competitors out of the market, the lawsuit alleges.
"Thousands of independent stores that have been affected bythese purchasing agreements have gone out of business as aresult," said John Merchant, a named plaintiff in the suit whoowns 49er Video in Davis, near Sacramento. "Blockbuster has done atremendous amount of damage to our livelihood and the value of ourbusiness."
Blockbuster, headquartered in Dallas, is the leading videorental chain, with some 7,500 stores worldwide. A statementreleased by the company today called the legal action adesperate maneuver.
"As for the plaintiffs' claims in their new California case,they are just as meritless as their previous efforts to challengerevenue-sharing agreements between the studios and retailers,arrangements that have greatly benefited consumers and theindustry," the statement said.
Accusations Similar to Those Filed Against Barnes & Noble
About 2,500 U.S. video stores went out of business in 1998,according to the Video Software Dealers Association, roughly 10percent of the total rental stores. Despite the drop, increasedcompetition forced independent video stores to launch an aggressivemarketing campaign, which led to better sales at some locations. "You will find that is the case in noncompetitive markets,"Merchant said.
The plaintiffs, who are seeking class-action status, include theowners of video stores around the country. Merchant and anothervideo store owner also filed a lawsuit in a Texas federal courtalleging price-fixing and antitrust violations by Blockbuster'sparent company, Viacom.
