RED FLAGS: Cable Companies Land on DOJ’s Radar

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The U.S. Department of Justice has launched an anti-trust probe into cable companies to determine whether they have been acting “improperly” to hurt nascent competition from online video, according to the Wall Street Journal.

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People familiar with the matter said DOJ officials have talked to several online video providers, including Netflix (NASDAQ:NFLX) and Hulu, which is jointly owned by News Corp. (NASDAQ:NWSA), Walt Disney Co. (NYSE:DIS), and Comcast Corp. (NASDAQ:CMCSA), which also happens to be the nation’s largest cable provider.

Time Warner Cable (NYSE:TWC), Comcast, and other cable companies are being questioned about issues such as setting data caps on their Internet services, thus limiting the amount of video a subscriber can watch or download, the WSJ reported. The companies argue the limits are needed to stop heavy users from overwhelming their networks.

Companies like Netflix have expressed concern that the limits are preventing customers from dropping cable television and switching exclusively to online video providers. They also worry the cable companies will give priority to their own online video offerings on their networks to stop subscribers from leaving.

Comcast did just that in March when it said videos viewed on its own Xfinity app on Microsoft’s (NASDAQ:MSFT) Xbox gaming console wouldn’t be counted against subscribers’ data caps in the the same way as videos viewed on the Xbox using Netflix, Hulu, or other apps. Netflix accused Comcast of violating federal rules preventing Internet providers from favoring their own content over others on the Internet.

According to people familiar with the matter, the DOJ is looking into Netflix’s claims to determine whether Comcast’s Xbox policy violated legal commitments made by the company in 2011 to secure anti-trust approval for its takeover of NBCUniversal, which had been majority owned by General Electric (NYSE:GE).

According to the people familiar with the matter, the Justice Department is examining whether Comcast’s Xbox policy violated legal commitments made by the company in 2011 to secure antitrust approval for its takeover of NBCUniversal. Under the terms of that legal settlement, Comcast agreed it would not “unreasonably discriminate” against other companies transmitting data over its pipes, or treat its own content differently.

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