Tuesday, January 06, 2009

MySpace’s Blocking of Links to Rival Site Not Unlawful Exclusion

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

The operator of the social networking website MySpace would not have engaged in unlawful exclusionary conduct or caused antitrust injury by redesigning its site to prevent users from linking to or viewing content hosted on a rival’s site, the U.S. Court of Appeals in San Francisco has ruled in an unpublished opinion.

The rival—LiveUniverse, which operates a site called “vidiLife”—alleged that MySpace’s conduct constituted an unlawful refusal to deal. Dismissal of Live Universe’s monopolization claims (2007-2 Trade Cases ¶75,782) was affirmed.

Exclusionary Conduct

According to LiveUniverse, prior to MySpace’s redesign, users were able to link to content on vidiLife, to load and display videos from vidiLife on MySpace’s system, and to embed links to the vididLife site in their personal profiles.

Though this could indicate a prior course of dealing between MySpace and its users, nothing in the complaint suggested an agreement—or even an implicit understanding—between MySpace and LiveUniverse regarding the functionality of embedded links, the appellate court held.

Even if a voluntary course of dealing could be assumed, no allegation was made that such an arrangement was profitable to MySpace, such that the conduct of disabling those links would be contrary to its short-term business interests.

Antitrust Injury

LiveUniverse’s failure to allege causal antitrust injury served as an independent basis for dismissal, the appellate court added. The allegation that MySpace’s disabling of links to other social networking sites reduced consumers’ choices in the relevant market did not describe a cognizable injury.

LiveUniverse did not explain how MySpace’s actions on its own website could reduce consumers’ choice or diminish the quality of their experience on other social networking websites, the court observed.

There was no assertion that MySpace programmatically prevented consumers outright from accessing vidiLife or any other website. All MySpace did was to prevent consumers from accessing vidiLife through MySpace.com. Consumers remained free to choose which online service to join and on which websites to upload text, graphics, and other content, the court concluded.

The December 22 not-for-publication decision, LiveUniverse, Inc. v. MySpace, Inc., will appear at 2008-2 Trade Cases ¶76,445.

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