Seven's costly C7 case may continue

Seven's marathon campaign to prove three of its main rivals, News Corp, Telstra and PBL, conspired to kill off its C7 pay TV sports venture in December 2000 was rejected by Federal Court Justice Ronald Sackville.

At stake was a maximum pre-tax damages payment to Seven of $480 million,

Rather than a major windfall, the network now faces the likely prospect of having costs awarded against it.

That could mean a total legal bill for the network exceeding $200 million, when the legal bills of its competitors are factored in.

Put in context, the Seven Network's underlying first half net profit was $112.79 million and its market capitalisation is $2.58 billion.

The Judge found Seven failed to establish key planks of its argument - that markets existed for wholesale pay television, and for AFL and NRL pay television rights.

That meant Seven's arguments about anti-competitive behaviour were restricted to the domain of the retail pay television market, and here too, Justice Sackville found Seven's arguments wanting.

"Even if each of the consortium respondents had the objective attributed to it by Seven - that of killing off C7 - achieving that objective could not have substantially lessened competition in the retail television market," Justice Sackville said.

"By reason of Optus' parlous state, any lessening of competition in that market would have occurred quite independently of the fate of C7."

Seven's failure to make the best offer for the AFL pay television rights, made the broadcaster "the author of its own misfortune," Justice Sackville said.

Beyond the legal arguments Justice Sackville also displayed a distinct distaste for the case, referring to it as `mega-litigation'.

"In my view, the expenditure of $200 million and counting on a single piece of litigation is not only extraordinarily wasteful, but borders on the scandalous," he said.

Justice Sackville also counselled the various parties to settle the dispute, for the benefit of their own financial health and the court system.

But on the steps of the Federal Court Seven Network director Bruce McWilliam defended pursuing the broadcaster's rivals through the courts as a "legitimate corporate action," leaving the option of appeal open.

"It's a pretty fundamental principle of litigation, notwithstanding the judge, that there are several layers of process," Mr McWilliam said.

"So as much as he might like it, the judge does not get the final word.

"The court system gives you that formal right."

Mallesons law firm partner Roger Forbes, who ran the case for Telstra, said elements of Seven's case were always outlandish.

"There were aspects of the claim which my client always regarded as extravagant, some of which were abandoned during the course of the proceedings.

"Telstra always believed the whole of the claim was completely baseless."

The nation's dominant telco said it looked forward to having its legal bills paid.

Media giant News Ltd also welcomed the decision, with chief executive John Hartigan referring to the case as a "willingness to employ litigation as a commercial strategy."

"Its attempts to manipulate the courts as well as the media covering this case have been a disgrace," Mr Hartigan said.

Foxtel chief executive Kim Williams lamented the money, time and energy expended on the case.

"The litigation launched by Seven was a great waste of executive energy and creative and financial capital across the Australian media sector for the past five years," Mr Williams said.

The 20 respondents are estimated to have legal bills around the $100 million mark, the vast bulk of which was spent by News Ltd, Telstra and PBL.

They have until August 24 to file any submissions or evidence in relation to costs, while Seven is required to respond by September 7.

In a pointed remark, Justice Sackville ordered the parties to restrict their cost arguments to 10 page submissions.