Predatory Pricing Alleged in ‘Titanic’ Video Sales

The biggest blockbuster to hit the big screen is causing a legal brouhaha as it reaches the little screen.

Corona del Mar-based Shopping.com and two other retailers have been sued by the parent company of Tower Records for alleged predatory pricing in selling the video of the motion picture “Titanic” below cost.

Shopping.com, along with Fry’s Electronics in San Jose and Reel.com, an Emeryville-based online retailer, were named in the lawsuit filed by MTS Inc. in Sacramento County Superior Court this month.

The suit alleges that Shopping.com illegally sold the video for $7.99, less than half the price that Paramount Pictures sold it to retailers.

“There’s a point at which competition becomes unfair,” said Grace Bergen, counsel for MTS, which is based in West Sacramento. “This is unfair to a retailer that doesn’t sell anything other than videos.”

Fry’s used low-priced “Titanic” videos to draw customers for its higher-priced consumer electronics, and Reel.com and Shopping.com garnered lists of names to promote their online stores and sell other items, Bergen said. Tower, however, is not in a position to sell “Titanic” at a loss because videos, music and books are all the company sells.

Shopping.com declined to comment, but noted Monday in a filing with the Securities and Exchange Commission that it has not had a chance to investigate the charges. The company said it was served with the suit Monday.

Reel.com, which is in the process of being acquired by Hollywood Entertainment in a deal valued at $100 million, denied the charges.

“The suit is totally without merit,” said Julie Wainwright, chief executive of Reel.com. “They are saying that we were specifically intending to hurt Tower Records, and all we’re doing is introducing people to shopping online.

“We’re a small . . . company and they’re Tower Records, a giant brand. It’s hard to complain about unfair practices given the magnitude of their size relative to us.”

Reel.com expects about $12 million in revenues this year, while MTS had about $1 billion in sales last year. Fry’s did not return telephone calls.

Bergen said the line between vigorous competition and illegal pricing is a thin one.

“I do think that the law needs some clarification,” Bergen said. “It’s a fine point of whether or not someone is trying to harm or damage competitors.”