Why Walmart’s Netflix Settlement Is Worthless (Twice Over)

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Fred Prouser / Reuters

It gets worse. Last week, in what can genuinely be described as a surprise ruling, a judge in San Francisco granted Netflix summary judgment in the remaining class action lawsuit, dismissing charges of antitrust violations because–in further insult to Walmart–the retail giant wasn’t important enough to impact Netflix’s pricing strategy, especially at a time when Blockbuster and Amazon were larger and more important competitors.

In her ruling, U.S. District Judge Phyllis Hamilton wrote that, even if Walmart did present enough standing to impact Netflix’s thinking, “Not only does the agreement [between the two companies in 2005] expressly acknowledge the ‘independent’ nature of Walmart’s decision to exit the [DVD rental] market, but it furthermore expressly states that Walmart is free to re-enter the same market. Under these circumstances, the court cannot agree that the agreement on its face reflects a blatant agreement to eliminate Walmart from the online DVD rental market as a form of market allocation.”

The decision not only means that Netflix avoids a potentially embarrassing and costly trial next year–the court date had been set for February–but it’s validated in its earlier choice not to follow Walmart’s lead and opt for early settlement. Suddenly, all of the company’s statements that the suit had “no standing” seem confident and prescient, and not simply attempts to deny what could otherwise be a PR and financial disaster. But at the same time, it does raise the question: What was Walmart thinking?

PaidContent has a particularly conspiratorial theory–that Walmart took a fall in the form of a settlement because it is doing what Netflix accused it of doing: targeting Netflix’s subscriber base with marketing for Walmart’s competing Vudu service. I’m as much a conspiracy theorist as the next person, but this seems more than slightly ridiculous, resting as it does on the court approving the Walmart proposal as well as the dual costs of the $27.25 million and the red face it gets from not standing its legal ground the way Netflix did. Aren’t there easier and cheaper ways to get the word out about Vudu ? Ways that aren’t going to be as ultimately frustrating as telling newcomers “We’ve given you credit towards your first rental, but so little that you’ll have to sign up and pay in order for it to be of any use whatsoever”?

MORE: Wal-Mart May Pay $40 Million to Silence Lawsuit Over Netflix Pact

Graeme McMillan is a reporter at TIME. Find him on Twitter at @Graemem or on Facebook at Facebook/Graeme.McMillan. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.

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