Buying group challenges Weinstein-B'buster deal

Massachusetts suit seeks to block ‘not-for-rental’ labeling

By Susanne Ault -- Video Business, 12/11/2006

DEC. 11 | The National Entertainment Buying Group and two indie retailers filed suit in Massachusetts Superior Court today to block The Weinstein Co. and Genius Products from identifying its DVDs as not appropriate for rental from any retailer but Blockbuster.

TWC officials last month touted a deal to make Blockbuster its “exclusive” retail partner in the rental channel, as part of a broad marketing and copy-depth deal between the studio and retailer.

In comments surrounding the deal, Genius CEO Trevor Drinkwater said the companies understood that under the First Sale Doctrine, they would not be able to prevent other rental stores from buying TWC discs at retail and using them as rental inventory. He said TWC and Genius would, however, include on sell-through copies some sort of message to consumers that the discs were intended for sale only and should not be rented.

“With the First Sale Doctrine, there’s nothing we can do to prohibit someone from walking into Costco and buying the DVD and renting it,” Drinkwater told VB. “What we can do as a distributor is brand all Blockbuster DVDs with the Blockbuster logo, and all the DVDs that are out for sale will be clear to consumers as being for sale only. We’ll encourage people to call us if they did rent [a DVD that is labeled for sale].”

NEBG, which claims 300 members, and indie retailers Nolan Anaya of Captain Video, Amherst, Mass., and Todd Zaganiacz of Video Zone, South Deerfield, Mass., claim in the suit that such labeling would flout the First Sale Doctrine. They are charging TWC and Genius with unfair competition, unfair or deceptive acts and practices, untrue and misleading advertisements, negligent misrepresentation and tortuous interference with advantageous business relations.

The plaintiffs are seeking an injunction to prevent both the distribution of products and any notice “that would imply or tend to imply that retailers other than Blockbuster who rent the defendants’ DVDs to the public are engaged in wrongdoing.”

“It becomes defamation of character,” said Zaganiacz, NEBG president and owner of Massachusetts’ Video Zone. “It’s telling our customers that we are doing something wrong, when in actuality, we are not. Under the First Sale Doctrine, we have the right to purchase and then rent out that product.”

Genius Products had no immediate comment. TWC declined to comment on pending litigation.