MySpace Defeats Sherman Antitrust Claim for Blocking Links to Competitor–LiveUniverse v. MySpace

By Eric Goldman

LiveUniverse, Inc. v. MySpace, Inc., 2008 WL 5341843 (9th Cir. Dec. 22, 2008). The June 2007 district court ruling in MySpace’s favor. LiveUniverse’s Nov. 2006 press release upon filing the lawsuit.

LiveUniverse runs, which it characterizes as a social networking site that competes with MySpace. There is also some personal drama here: LiveUniverse’s CEO is Brad Greenspan, the former CEO of eUniverse/Intermix–the company that sold MySpace to News Corp in 2005 for a half-billion dollars, although Greenspan opposed the deal at the time and remains disgruntled to this day.

In October 2006, MySpace allegedly redesigned its site to block, including allegedly preventing MySpace users from embedding LiveUniverse-hosted videos into their MySpace pages or even mentioning VidiLife on MySpace. LiveUniverse sued MySpace for a Sherman antitrust violation and 17200 unfair competition.

In an opinion unfortunately designed as non-precedential, the Ninth Circuit dismissed the Sherman Act and 17200 claims, saying that MySpace could break links to competitive sites if it wanted and that such behavior did not constitute an actionable “refusal to deal.” While the opinion itself is brief and unremarkable, the implications of this ruling are potentially significant:

First, I see this case as an interesting and useful counterpart to the KinderStart v. Google case (and, to a lesser extent, the Person v. Google and Langdon v. Google lawsuits). In KinderStart, the court said that Google wasn’t liable for its editorial decisions about indexing and ranking third party sites, including sites that compete with Google. This case extends those principles to kibosh a possible Sherman Act “refusal to deal” bypass to the KinderStart ruling.

Second, I remain intrigued that my limited review of materials never revealed a good explanation for exactly what changes MySpace made in October 2006 and why it did so. Perhaps the explanation is somewhere, but it certainly wasn’t front and center. Could MySpace be systematically interfering with user outlinks not for putatively legitimate reasons (such as to reduce the risks of drive-by downloads or the in-line linking of unwanted porn) but instead for questionable motivations, such as reducing its users’ awareness of competitors or a personal vendetta against a former CEO? Greenspan’s initial press release indicated that in 2005 and 2006 MySpace also tried to block outlinks to similarly competitive YouTube and Revver before MySpace users revolted against those blocks. I’m glad the marketplace mechanisms worked there, but I’d still like to know more about MySpace’s practices and motivations. Public scrutiny and monitoring can be a reasonably good substitute for legally compelled disclosures, but I wonder if MySpace’s choices are getting enough attention. I can’t vouch for its authenticity, but I thought this was a fascinating and disturbing chart. Not that I was in the target audience anyway, but if this chart is anywhere close to correct, MySpace sure doesn’t look like the right community for me.

Third, the case didn’t discuss 47 USC 230(c)(2), the statutory immunization for filtering decisions. It seems fairly obvious to me that the statute should protect MySpace’s filtering choices–even from an antitrust challenge so long as the challenge is civil, not criminal. We should learn a lot more about 230(c)(2) from the Ninth Circuit’s ruling in the Zango v. Kaspersky case, which is still pending on appeal.

Fourth, I try to stay away from net neutrality topics, but this case may have some implications for that debate. My understanding is that some anti-net neutrality advocates argue that antitrust law, including the Sherman Act, will regulate discriminatory decisions made by the carriers sufficient to deter bad practices. That may be true, but here the court rejects a refusal-to-deal challenge when one online competitor freezes out another online competitor. This might portend poorly for a refusal-to-deal challenge to non-neutral practices by carriers, which in turn might eliminate a safety valve that the anti-net neutrality folks have pointed to as an alternative to regulation. Don’t get me wrong, I’m very suspicious of net neutrality regulation, but this case might indicate that existing regulations won’t prohibit discriminatory carrier practices as well as some people hope.