Viacom sues to block rival for Paramount Suit says backer of QVC offer seeks cable monopoly

One of the most powerful figures in the cable-television business thinks his biggest rival has more power than is healthy; yesterday, he appealed to the courts and Washington to stop him.

In a ploy aimed at salvaging his company's $7.65 billion bid for Paramount Communications Inc., Sumner M. Redstone, chairman of Viacom Inc., filed an antitrust lawsuit against QVC Network Inc. and two companies controlled by John C. Malone, a cable magnate.


The QVC group made a counteroffer for Paramount on Monday that is worth $9.5 billion at current prices. Joined by Martin S. Davis, Paramount's chairman, Mr. Redstone, who has said he will not raise his offer for Paramount, spent yesterday in Washington calling on members of Congress to discuss his and the rival deal.

"My reaction to that is Redstone is blowing smoke," one Wall Street trader said about Mr. Redstone's insistence that he would not revise his bid.


"This guy is going to need some more cash and stock. We expect him to bump and bump soon to keep momentum out of Diller's hands," the trader said, referring to QVC's chairman, Barry Diller, who does not get along with Paramount's Mr. Davis.

The Viacom suit, filed in Federal District Court in New York, seeks damages and an injunction against the two companies controlled by Mr. Malone: Tele-Communications Inc. and Liberty Media, which has extensive interests in cable programming channels.

The suit charges those companies with monopolistic practices, including QVC's bid for Paramount. It argues that such a buyout would "allow Malone to secure another ingredient in the defendants' scheme -- the product needed to bypass programmers like Viacom."

If Mr. Redstone can stop QVC -- or even slow it down -- in its drive to topple the friendly merger he has negotiated with Paramount, he may not have to raise his bid to match QVC's more generous offer.

Antitrust lawyers not involved in either bid said yesterday that it was not clear that such a suit could stop QVC's offer, but they said it was an aggressive move. They also pointed out that antitrust cases move very slowly through the courts.

But many in the industry say they think the suit raises troubling questions regardless of the outcome of the battle for control at Paramount. And even if Mr. Redstone loses the deal, they say, the lawsuit and its angry allegations may help him retaliate against a longtime rival who, he believes, is abusing his power.

QVC did not agree. "The suit is without merit and is simply an attempt to deprive Paramount shareholders from considering the best proposal," the company said in a statement.

A spokesman for Mr. Malone, who technically is not a QVC executive but owns a company that is a controlling shareholder, said "Tele-Communications has not had time to study any legal papers in connection with the lawsuit."


Andrew Schwartzmann, executive director of Media Access Project, a lobbying group, said that the case brings to light issues of alleged antitrust practices by Mr. Malone and that many media legal experts had long discussed whether such a suit could be successfully argued.

Mr. Redstone charges that the defendants, through a series of interlocking relationships, control cable television in one of every five cable homes, and that Tele-Communications' systems reach many homes that Mr. Malone's support is crucial to the success of any new cable system.