Times-Picayune Pub. Co. v. United StatesAnnotate this Case
345 U.S. 594 (1953)
U.S. Supreme Court
Times-Picayune Pub. Co. v. United States, 345 U.S. 594 (1953)
Times-Picayune Publishing Co. v. United States
Argued March 11, 1953
Decided May 25, 1953
345 U.S. 594
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
A publishing company owns and publishes in New Orleans a morning and an evening newspaper. Its sole competitor in the daily newspaper field is an independent evening newspaper. Classified and general display advertisers in the company's publications may purchase only combined insertions appearing in both its morning and evening papers, not in either separately. The United States brought a civil suit against the company under the Sherman Act, challenging the use of these "unit" contracts as an unreasonable restraint of trade in violation of § 1, and as an attempt to monopolize trade in violation of § 2.
Held: the record in this case does not establish the charged violations of § 1 and § 2 of the Sherman Act. Pp. 345 U. S. 596-628.
(a) The challenged activities of the company constitute interstate commerce within the meaning of the Sherman Act. P. 602, n 11.
(b) A "tying" arrangement violates § 1 of the Sherman Act when a seller enjoys a monopolistic position in the market for the "tying" product and a substantial volume of commerce in the "tied" product is restrained. International Salt Co. v. United States,332 U. S. 392. Pp. 345 U. S. 608-609.
(c) Since the charge against the company was not of tying sales to its readers, but only to buyers of general and classified space in its papers, dominance in the New Orleans newspaper advertising market, not in the readership, is the decisive factor in determining the legality of the company's unit plan. P. 345 U. S. 610.
(d) Section 2 of the Sherman Act outlaws monopolization of any "appreciable part" of interstate commerce, and § 1 bans unreasonable restraints irrespective of the amount of commerce involved. P. 345 U. S. 611.
(e) The essence of illegality in tying agreements is the wielding of monopolistic leverage; a seller exploits his dominant position
in one market to expand into another. Solely for testing the strength of that lever, the whole, and not part, of a relevant market must be assigned controlling weight. P. 345 U. S. 611.
(f) The company's morning newspaper did not enjoy in the newspaper advertising market in New Orleans that position of "dominance" which, together with a "not insubstantial" volume of trade in the "tied" product, would result in a Sherman Act offense under the rule of International Salt Co. v. United States,332 U. S. 392. Pp. 345 U. S. 608-613.
(g) The common core of the adjudicated unlawful tying arrangements is the forced purchase of a second distinct commodity with the desired purchase of a dominant "tying" product, resulting in economic harm to competition in the "tied" market. Pp. 345 U. S. 613-614.
(h) In the absence of evidence demonstrating two distinct commodities sold by the publishing company, neither the rationale nor the doctrines of the "tying" cases can dispose of the company's advertising contracts challenged here. They must therefore be tested under the Sherman Act's general prohibition on unreasonable restraints of trade. Pp. 345 U. S. 613-615.
(i) The inquiry to determine reasonableness under § 1 in this case must focus on the percentage of business controlled, the strength of the competition, and whether the challenged activity springs from business requirements or from purpose to monopolize. P. 345 U. S. 615.
(j) The factual data in the record in this case do not demonstrate that the company's advertising contracts unduly handicapped the existing competing newspaper. Pp. 345 U. S. 615-622.
(k) The Government has proved in this case neither actual unlawful effects nor facts which radiate a potential for future harm. P. 345 U. S. 622.
(l) While even otherwise reasonable trade arrangements must fall if conceived to achieve forbidden ends, the company's adoption of the unit plan in this case was predominantly motivated by legitimate business aims. P. 345 U. S. 622.
(m) Although emulation of a competitor's illegal plan does not justify an unlawful trade practice, that factor is relevant in determining intent, particularly when planned injury to that competitor is the crux of the charge of Sherman Act violation. P. 345 U. S. 623.
(n) Although long tolerated trade arrangements acquire no vested immunity under the Sherman Act, that consideration is relevant when monopolistic purpose, rather than effect, is to be gauged. Pp. 345 U. S. 623-624.
(o) The record in this case shows neither unlawful effects nor aims. Pp. 345 U. S. 615-624.
(p) The company's refusal to sell advertising space except en bloc, viewed alone, in the circumstances of this case, does not constitute a violation of the Sherman Act. Pp. 345 U. S. 624-626.
(q) A specific intent to destroy competition or to build monopoly is essential to guilt of an attempt to monopolize in violation of § 2 of the Sherman Act, and such intent is not established by the record in this case. Pp. 345 U. S. 626-627.
105 F.Supp. 670, reversed.
MR. JUSTICE CLARK delivered the opinion of the Court.
At issue is the legality under the Sherman Act of the Times-Picayune Publishing Company's contracts for the sale of newspaper classified and general display advertising space. The Company in New Orleans owns and publishes the morning Times-Picayune and the evening States. Buyers of space for general display and classified
advertising in its publications may purchase only combined insertions appearing in both the morning and evening papers, and not in either separately. [Footnote 1] The United States filed a civil suit under the Sherman Act, challenging these "unit" or "forced combination" contracts as unreasonable restraints of interstate trade, banned by § 1, and as tools in an attempt to monopolize a segment of interstate commerce, in violation of § 2. [Footnote 2] After intensive trial of the facts, the District Court found violations of
both sections of the law and entered a decree enjoining the Publishing Company's use of these unit contracts and related arrangements for the marketing of advertising space. [Footnote 3] In No. 374, the Publishing Company appeals the merits of the District Court's holding under the Sherman Act; the Government, in No. 375, seeks relief broader than the District Court's decree. Both appeals come directly here under the Expediting Act. [Footnote 4]
Testimony in a voluminous record retraces a history of over twenty-five years. [Footnote 5] Prior to 1933, four daily newspapers served New Orleans. The Item Company, Ltd., published the Morning Tribune and the evening Item. The morning Times-Picayune was published by its present owners, and the Daily States Publishing Company, Ltd., an independent organization, distributed the evening States. In 1933, the Times-Picayune Publishing Company purchased the name, goodwill, circulation, and advertising contracts of the States, and continued to publish it evenings. The Morning Tribune of the Item Co., Ltd., suspended publication in 1941. Today, the Times-Picayune, Item, and States remain the sole significant newspaper media for the dissemination of news and advertising to the residents of New Orleans.
The Times-Picayune Publishing Company distributes the leading newspaper in the area, the Times-Picayune. The 1933 acquisition of the States did not include its plant and other physical assets; since the States' absorption, the Publishing Company has utilized facilities at a single plant for printing and distributing the Times-Picayune and the States. Unified financial, purchasing, and sales administration, in addition to a substantial
segment of personnel servicing both publications, results in further joint operation. Although both publications adhere to a single general editorial policy, distinct features and format differentiate the morning Times-Picayune from the evening States. 1950 data reveal a daily average circulation of 188,462 for the Times-Picayune, 114,660 for the Item, and 105,235 for the States. The Times-Picayune thus sold nearly as many copies as the circulation of the Item and States together.
Each of these New Orleans publications sells advertising in various forms. Three principal classes of advertising space are sold: classified, general, and local display. Classified advertising, known as "want ads," includes individual insertions under various headings; general, also called national, advertising typically comprises displays by national manufacturers or wholesale distributors of brand-name goods; local, or retail, display generally publicizes bargains by local merchants selling directly to the public. From 1924 until the Morning Tribune's demise in 1941, the Item Company sold classified advertising space solely on the unit plan by which advertisers paid a single rate for identical insertions appearing in both the morning and evening papers, and could not purchase space in either alone. After the Times-Picayune Publishing Company acquired the States in 1933, it offered general advertisers an optional plan by which space combined in both publications could be bought for less than the sum of the separate rates for each. Two years later, it adopted the unit plan of its competitor, the Item Co., Ltd., in selling space for classified ads. General advertisers in the Publishing Company's newspapers were also availed volume discounts since 1940, but had to combine insertions in both publications in order to qualify for the substantial discounts on purchases of more than 10,000 lines per year. Local display ads as early as 1935 were marketed under a still effective volume
discount system, which, for determining the discount bracket in the States, permitted cumulation of linage placed in the Times-Picayune as well. In 1950, however, the Publishing Company eliminated all optional plans for general advertisers and instituted the unit plan theretofore applied solely to classified ads. As a result, since 1950, general and classified advertisers cannot buy space in either the Times-Picayune or the States alone, but must insert identical copy in both or none. Against that practice the Government levels its attack grounded on §§ 1 and 2 of the Sherman Act.
After the District Court at the outset denied the Government's motion for partial summary judgment holding the unit contracts per se violations of § 1, the case went to trial and eventuated in comprehensive and detailed findings of fact: [Footnote 6] The Times-Picayune and the States, though published by a single publisher, were two distinct newspapers with individual format, news and feature content, reaching separate reader groups in New Orleans. The Times- Picayune, the sole local morning daily which for twenty years outdistanced the States and Item in circulation, published pages, and advertising linage, was the "dominant" newspaper in New Orleans; insertions in that paper were deemed essential by advertisers desiring to cover the local market. Although the local publishing field permits entry by additional competitors, the Item today is the sole effective daily competition which the Times-Picayune Publishing Company's two newspapers must meet. On the other hand their quest for advertising linage encounters the competition of other media, such as radio, television, and magazines. Nevertheless, the District Court determined, the adoption of unit selling caused a substantial rise in classified and general advertising linage placed in the States,
enabling it to enhance its comparative position toward the Item. The District Court found, moreover, that the defendants had instituted the unit system, economically enforceable against buyers solely because of the Times-Picayune's "dominant" or "monopoly position," in order to
"restrain general and classified advertisers from making an untrammeled choice between the States and the Item in purchasing advertising space, and also to substantially diminish the competitive vigor of the Item. [Footnote 7]"
On the basis of these findings, the District Judge held the unit contracts in violation of the Sherman Act. The contracts were viewed as tying arrangements which the Publishing Company, because of the Times-Picayune's "monopoly position," could force upon advertisers. [Footnote 8] Postulating that contracts foreclosing competitors from a substantial part of the market restrain trade within the meaning of § 1 of the Act, and that effect on competition tests the reasonableness of a restraint, the court deemed a substantial percentage of advertising accounts in the New Orleans papers unlawfully "restrained." [Footnote 9] Further, a violation of § 2 was found: defendants, by use of the unit plan,
"attempted to monopolize that segment of the afternoon newspaper general and classified advertising field which was represented by those advertisers who also required morning newspaper space and who could not, because of budgetary limitations or financial inability, purchase space in both afternoon newspapers. [Footnote 10]"
Injunctive relief was accordingly decreed. The District Court enjoined the Times-Picayune Publishing Company from (A) selling advertising space in any newspaper published by it
"upon the condition, expressed or implied, that the purchaser of such space will contract for
or purchase advertising space in any other newspaper published by it;"
(B) refusing to sell advertising space separately in each newspaper which it publishes; (C) using its "dominant position" in the morning field
"to sell any newspaper advertising at rates lower than those approximating either (1) the cost of producing and selling such advertising or (2) comparable newspaper advertising rates in New Orleans."
Hence these appeals. [Footnote 11]
The daily newspaper, though essential to the effective functioning of our political system, has in recent years suffered drastic economic decline. A vigorous and dauntless press is a chief source feeding the flow of democratic expression and controversy which maintains the institutions of a free society. Associated Press v. United States,326 U. S. 1, 326 U. S. 20 (1945); cf. Wieman v. Updegraff,344 U. S. 183, 344 U. S. 191 (1952); Joseph Burstyn, Inc. v. Wilson,343 U. S. 495, 343 U. S. 501 (1952). By interpreting to the citizen the policies of his government and vigilantly scrutinizing the official conduct of those who administer the state, an independent press stimulates free discussion and focuses public opinion on issues and officials as a potent check on arbitrary action or abuse. Cf. Grosjean v. American Press Co.,297 U. S. 233, 297 U. S. 250 (1936); Near v. Minnesota ex rel. Olson,283 U. S. 697, 283 U. S. 716-718 (1931). The press, in fact,
"serves one of the most vital of all general interests: the dissemination of news from as may different sources, and with
as many different facets and colors as is possible. That interest is closely akin to, if indeed it is not the same as, the interest protected by the First Amendment; it presupposes that right conclusions are more likely to be gathered out of a multitude of tongues than through any kind of authoritative selection. To many, this is, and always will be, folly, but we have staked upon it our all. [Footnote 12]"
Yet today, despite the vital task that in our society the press performs, the number of daily newspapers in the United States is at its lowest point since the century's turn: in 1951, 1,773 daily newspapers served 1,443 American cities, compared with 2,600 dailies published in 1,207 cities in the year 1909. [Footnote 13] Moreover, while 598 new dailies braved the field between 1929 and 1950, 373 of these suspended publication during that period -- less than half of the new entrants survived. [Footnote 14] Concurrently, daily newspaper competition within individual cities has grown nearly extinct: in 1951, 81% of all daily newspaper cities had only one daily paper; 11% more had two or more publications, but a single publisher controlled both or all. [Footnote 15] In that year, therefore, only 8% of daily newspaper cities enjoyed the clash of opinion which competition among publishers of their daily press could provide.
Advertising is the economic mainstay of the newspaper business. Generally, more than two-thirds of a newspaper's total revenues flow from the sale of advertising space. Local display advertising brings in about 44% of revenues; general -- 14%; classified -- 13%; circulation, almost the rest. [Footnote 16] Obviously, newspapers must sell advertising to survive. And while newspapers in 1929 garnered 79% of total national advertising expenditures, by 1951, other mass media had cut newspapers' share down to 34.7%. [Footnote 17] When the Times-Picayune Publishing Company, in 1949, announced its forthcoming institution of unit selling to general advertisers, about 180 other publishers of morning-evening newspapers had previously adopted the unit plan. [Footnote 18] Of the 598 daily newspapers which broke into publication between 1929 and 1950, 38% still published when that period closed. Forty-six of these entering dailies, however, encountered the competition of established dailies which utilized unit rates; significantly, by 1950, of these 46, 41 had collapsed. [Footnote 19] Thus, a newcomer in the daily newspaper business could calculated his chances of survival as 11% in cities where unit plans had taken hold. Viewed against the background of rapidly declining competition in the daily newspaper business, such a trade practice becomes suspect under the Sherman Act.
Tying arrangements, we may readily agree, flout the Sherman Act's policy that competition rule the marts of trade. Basic to the faith that a free economy best promotes the public weal is that goods must stand the cold test of competition; that the public, acting through the market's impersonal judgment, shall allocate the Nation's resources, and thus direct the course its economic development will take. Yet "[t]ying agreements serve hardly any purpose beyond the suppression of competition." Standard Oil Co. of California v. United States,337 U. S. 293, 337 U. S. 305 (1949). [Footnote 20] By conditioning his sale of one commodity on the purchase of another, a seller coerces the abdication of buyers' independent judgment as to the "tied" product's merits and insulates it from the competitive stresses of the open market. But any intrinsic superiority of the "tied" product would convince freely choosing buyers to select it over others, anyway. Thus,
"[i]n the usual case, only the prospect of reducing competition would persuade a seller to adopt such a contract and only his control of the supply of the tying device, whether conferred by patent monopoly or otherwise obtained, could induce a buyer to enter one."
Id. at 337 U. S. 306. Conversely, the effect on competing sellers attempting to rival the "tied" product is drastic: to the extent the enforcer of the tying arrangement enjoys market control, other existing or potential sellers are foreclosed from offering up their goods to a free competitive judgment; they are effectively excluded from the marketplace.
For that reason, tying agreements fare harshly under the laws forbidding restraints of trade. Federal Trade Commission v. Gratz,253 U. S. 421 (1920), decided that a complaint which charged a seller with conditioning his sale of steel ties on purchases of jute bagging did not, because it failed to allege his monopolistic purpose or market control, state an actionable "unfair method of competition" within the meaning of § 5 of the Federal Trade Commission Act. [Footnote 21] United Shoe Machinery Corp. v. United States,258 U. S. 451 (1922), [Footnote 22] held, however, that a seller occupying a "dominant position" in the shoe machinery industry, without more, violated § 3 of the Clayton Act by contracts tying to the lease of his machines the purchase of other types of machinery and incidental supplies. [Footnote 23] Potential lessening of competition, requisite to illegality under § 3, was automatically inferred from the seller's "dominating position." Id. at
258 U. S. 457-458; Federal Trade Commission v. Sinclair Refining Co.,261 U. S. 463 (1923), extended the principles of Gratz to the Clayton Act; purchases of gasoline were tied to the lease of pumps at nominal rates, but neither monopolistic purpose or power nor potential harm to competition was shown. And, in any event, the "tie" was voluntary, since buyers could take the gasoline without taking the pumps. Id. at 261 U. S. 474-475. Indeed, the arrangement merely prevented lessees from dispensing other types of gasoline through the lessor's brand pumps, and was thus viewed as a means of protecting the goodwill of the lessor's branded gas. See also Pick Mfg. Co. v. General Motors Corp.,299 U. S. 3 (1936). [Footnote 24] The bounds of that doctrine were drawn by International Business Machines Corp. v. United States,298 U. S. 131 (1936). When competing sellers could meet the specifications of the "tied" product, in that case tabulating cards hitched by contract to the sale of computing machines, § 3 of the Clayton Act outlawed the tying arrangement because the "substantial" amount of commerce in the "tied" product
With its decision in International Salt Co. v. United States,332 U. S. 392 (1947), this Court wove the strands of past cases into the law's present pattern. There, leases of patented machines for dispensing industrial salt were conditioned on the lessees' purchase of the lessor's salt. A unanimous Court affirmed summary judgment adjudicating the arrangement unlawful under § 3 of the Clayton Act, and § 1 of the Sherman Act as well. The patents, on their face, conferred monopolistic, albeit lawful, market control, and the volume of salt affected by the tying practice was not "insignificant or insubstantial." Id. at 322 U. S. 396. Clayton Act violation followed as a matter of course from the doctrines evolved in prior "tying" cases. See also Standard Oil Co. of California v. United States,337 U. S. 293, 337 U. S. 304-306, 337 U. S. 305, notes 7-8. And since the Court deemed it "unreasonable per se to foreclose competitors from any substantial market," neither could the tying arrangement survive § 1 of the Sherman Act. 332 U.S. at 332 U. S. 396. That principle underpinned the decisions in the Movie cases, holding unlawful the "block-booking" of copyrighted films by lessors, United States v. Paramount Pictures,334 U. S. 131, 334 U. S. 156-159 (1948), as well as a buyer's wielding of lawful monopoly power in one market to coerce concessions that handicapped competition facing him in another. United States v. Griffith,334 U. S. 100, 334 U. S. 106-108 (1948). From the "tying" cases, a perceptible pattern of illegality emerges: when the seller enjoys a monopolistic position in the market for the "tying" product, or if a substantial volume of commerce in the "tied" product is restrained, a tying arrangement violates the narrower standards expressed in § 3 of
the Clayton Act because from either factor the requisite potential lessening of competition is inferred. And because, for even a lawful monopolist, it is "unreasonable per se to foreclose competitors from any substantial market," a tying arrangement is banned by § 1 of the Sherman Act whenever both conditions are met. [Footnote 26] In either case, the arrangement transgresses § 5 of the Federal Trade Commission Act, since minimally that section registers violations of the Clayton and Sherman Acts. Federal Trade Commission v. Motion Picture Advertising Service Co.,344 U. S. 392, 344 U. S. 395 (1953); Federal Trade Commission v. Cement Institute,333 U. S. 683, 333 U. S. 690-694 (1948); Fashion Originators' Guild v. Federal Trade Commission,312 U. S. 457, 312 U. S. 463 (1941).
In this case, the rule of International Salt can apply only if both its ingredients are met. The Government, at the outset, elected to proceed not under the Clayton, but the Sherman Act. [Footnote 27] While the Clayton Act's more specific standards illuminate the public policy which the Sherman Act was designed to subserve, e.g., 334 U. S. S. 610