Wal-Mart Uses Class Action Against Netflix

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Wal-Mart is using its failed class action lawsuit with Netflix to attract new users to its video streaming service, Vudu.

A federal court in California agreed late last week to allow Wal-Mart to pay $27.5 million to 40 million Netflix subscribers. The kicker? They can make the payment in the form of gift cards for Walmart.com. As a result, this also gives Wal-Mart access to Netflix's customer database.

The class action suit came in response to a dinner meeting in 2005, where the CEOs of Netflix and Wal-Mart allegedly agreed to share the DVD market. According to consumer advocates, under the pact, Wal-Mart agreed not to rent DVDs if Netflix promised not to sell them. Class action suits were filed against both companies in 2009, claiming that this agreement violated antitrust laws.

While Wal-Mart decided to settle the case, Netflix is still fighting the allegations, claiming the suit "has no merit."

Wal-Mart's settlement, which still has to be finalized in February 2012, comes as the discount giant is in the process of aggressively promoting its Vudu service, which it acquired in February 2010. At the same time, Netflix is in dire need of an image cleanup, following several unfriendly consumer moves, including a recent price hike and the falling out of its Liberty Starz deal.

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