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Bloomberg reports that a lawsuit filed in San Francisco charges that when Walmart decided to get out of the online video rental business and refer all its customers to Netflix, the two companies were conspiring to create a monopoly that would result in higher prices.

Walmart initially got into the online video rental business because it saw that Netflix had established a credible and growing enterprise, and Blockbuster had decided to expand into an online service to supplement its brick-and-mortar stores. However, it didn’t take long for Walmart to decide that an independent entry didn’t make sense, and it threw in with Netflix.

KC's View:
Not a lawyer, but I don't really understand how this was a monopoly. After all, Blockbuster also had an online business, albeit one that was not as successful as the one pioneered by Netflix.

More to the point, it really all depends on how you the define the business. Should “online video rentals” be defined as a stand-alone industry, or as a component of the broader video rental business that includes thousands of stores and kiosks all over the country?

There is no question in my mind that the latter is the most accurate and fair way to view the video rental business…and for that reason, an antitrust lawsuit against Walmart and Netflix arrangement simply makes no sense at all.

In fact, the suit sort of resembles the ongoing (and may I say, utterly lunatic) efforts of the Federal Trade Commission (FTC) to unravel a completed acquisition of Wild Oats by Whole Foods, which ignores the fact that these days, organic and natural products are available almost everywhere.