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
Page 345 U. S. 595
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.
Page 345 U. S. 596
(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
Page 345 U. S. 597
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
Page 345 U. S. 598
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
Page 345 U. S. 599
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
Page 345 U. S. 600
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,
Page 345 U. S. 601
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
Page 345 U. S. 602
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
Page 345 U. S. 603
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.
Page 345 U. S. 604
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.
Page 345 U. S. 605
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.
Page 345 U. S. 606
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
Page 345 U. S. 607
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
Page 345 U. S. 608
indicated potential lessening of competition as a result.
Id. at
289 U. S. 136,
139. [
Footnote 25]
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
Page 345 U. S. 609
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� v. Columbia Steel Co.,
334 U.
S. 495, 334 U. S. 507,
note 7 (1948); Fashion Originators' Guild v. Federal Trade
Commission,
312 U. S. 457,
312 U. S. 463
(1941), the Government here must measure up to the criteria of the
more stringent law. See Standard Oil Co. of California v.
United States,
337 U. S. 293,
337 U. S. 297,
311-314 (1949); United Shoe Machinery Corp. v. United States,@
258 U. S. 451,
258 U. S.
459-460 (1922).
Once granted that the volume of commerce affected was not
"insignificant or insubstantial," [
Footnote 28] the Times-Picayune's market position becomes
critical to the case. The District Court found that the
Times-Picayune occupied a "dominant position" in New Orleans; the
sole morning daily in the area, it led its competitors in
circulation, number of pages, and advertising linage. But every
newspaper is a dual trader in separate though interdependent
markets; it sells the paper's news and advertising content to its
readers; in effect, that readership is, in turn, sold to the buyers
of advertising space. This case concerns solely one of these
markets. The Publishing Company stands accused not of tying sales
to its readers, but only to buyers of general and classified space
in its papers. For this reason, dominance in the advertising
market, not in readership, must be decisive in gauging the legality
of the Company's unit plan.
Cf. Lorain Journal Co. v. United
States, 342 U. S. 143,
342 U. S.
149-150,
342 U. S.
152-153 (1951);
United
Page 345 U. S. 611
States v. Paramount Pictures, supra, 334 U.S. at
334 U. S.
166-167;
Indiana Farmer's Guide Pub. Co. v. Prairie
Farmer Pub. Co., 293 U. S. 268,
293 U. S.
278-279 (1934).
The "market," as most concepts in law or economics, cannot be
measured by metes and bounds. Nor does the substance of Sherman Act
violations typically depend on so flexible a guide. Section 2
outlaws monopolization of any "appreciable part" of interstate
commerce, and, by § 1, unreasonable restraints are banned
irrespective of the amount of commerce involved.
Lorain Journal
Co. v. United States, supra, at
342 U. S. 151,
note 6;
United States v. Paramount Pictures, supra, at
334 U. S. 173;
United States v. Yellow Cab Co., 332 U.
S. 218,
332 U. S.
225-226 (1947). [
Footnote 29] But the essence of illegality in tying
agreements is the wielding of monopolistic leverage; a seller
exploits his dominant position in one market to expand his empire
into the next. Solely for testing the strength of that lever, the
whole, and not part, of a relevant market must be assigned
controlling weight.
Cf. United States v. Columbia Steel Co.,
supra, at
334 U. S.
524.
We do not think that the Times-Picayune occupied a "dominant"
position in the newspaper advertising market in New Orleans. Unlike
other "tying" cases where patents or copyrights supplied the
requisite market control, any equivalent market "dominance" in this
case must rest on comparative marketing data. [
Footnote 30] Excluding advertising
Page 345 U. S. 612
placed through other communications media and including general
and classified linage inserted in all New Orleans dailies, as we
must since the record contains no evidence which could circumscribe
a broader or narrower "market" defined by buyers' habits or
mobility of demand, [
Footnote
31] the Times-Picayune's sales of both general and classified
linage over the years hovered around 40%. [
Footnote 32] Obviously no magic inheres in
numbers; "The relative effect of percentage command of a market
varies with the setting in which that factor is placed."
United
States v. Columbia Steel Co., supra, at
334 U. S. 528;
cf. United States v. National Lead Co., 332 U.
S. 319,
332 U. S.
352-353 (1947). If each of the New Orleans publications
shared equally in the total volume of linage, the Times-Picayune
would have sold 33 1/2%; in the absence of patent or copyright
control, the small existing increment in the circumstances here
disclosed [
Footnote 33]
cannot confer that market
Page 345 U. S. 613
"dominance" which, in conjunction with a "not insubstantial"
volume of trade in the "tied" product, would result in a Sherman
Act offense under the rule of
International Salt.
Yet another consideration vitiates the applicability of
International Salt. The District Court determined that the
Times-Picayune and the States were separate and distinct
newspapers, though published under single ownership and control.
But that readers consciously distinguished between these two
publications does not necessarily imply that advertisers bought
separate and distinct products when insertions were placed in the
Times-Picayune and the States. So to conclude here would involve
speculation that advertisers bought space motivated by
considerations other than customer coverage; that their media
selections, in effect, rested on generic qualities differentiating
morning from evening readers in New Orleans. Although advertising
space in the Times-Picayune, as the sole morning daily, was
doubtless essential to blanket coverage of the local newspaper
readership, nothing in the record suggests that advertisers viewed
the city's newspaper readers, morning or evening, as other than
fungible customer potential. [
Footnote 34] We must assume, therefore, that the
readership "bought" by advertisers in the Times-Picayune was the
self-same "product" sold by the States and, for that matter, the
Item.
Page 345 U. S. 614
The factual departure from the "tying" cases then becomes
manifest. 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. Here,
however, two newspapers under single ownership at the same place,
time, and terms sell indistinguishable products to advertisers; no
dominant "tying" product exists (in fact, since space in neither
the Times-Picayune nor the States can be bought alone, one may be
viewed as "tying" as the other); no leverage in one market excludes
sellers in the second, because for present purposes the products
are identical and the market the same.
Cf. Standard Oil Co.
(Indiana) v. United States, 283 U. S. 163,
283 U. S.
176-178 (1931);
United States v. Aluminum Co. of
America, 148 F.2d 416, 424 (1945);
compare Indiana
Farmer's Guide Pub. Co. v. Prairie Farmer Pub. Co.,
293 U. S. 268,
293 U. S.
278-280 (1934). In short, neither the rationale nor the
doctrines evolved by the "tying" cases can dispose of the
Publishing Company's arrangements challenged here.
The Publishing Company's advertising contracts must thus be
tested under the Sherman Act's general prohibition on unreasonable
restraints of trade. For purposes of § 1,
"[a] restraint may be unreasonable either because a restraint
otherwise reasonable is accompanied with a specific intent to
accomplish a forbidden restraint or because it falls within the
class of restraints that are illegal
per se."
United States v. Columbia Steel Co., 334 U.
S. 495,
334 U. S. 522
(1948). Since the requisite intent is inferred whenever unlawful
effects are found,
United States v. Griffith, 334 U.
S. 100,
334 U. S. 105,
334 U. S. 108
(1948);
United States v. Patten, 226 U.
S. 525,
226 U. S. 543
(1913), and the rule of
International Salt is out of the
way, the contracts may yet be banned by § 1 if unreasonable
restraint was either their object or effect. Although these unit
contracts do not in
Page 345 U. S. 615
express terms preclude buyers from purchasing additional space
in competing newspapers, the Act deals with competitive realities,
not words.
United States v. Masonite Corp., 316 U.
S. 265,
316 U. S. 280
(1942). Thus, while we "do not think this concession relieves the
contract of being a restraint of trade, albeit a less harsh one"
than otherwise,
International Salt Co. v. United States,
332 U. S. 392,
332 U. S. 397
(1947);
see United States v. Paramount Pictures,
334 U. S. 131,
334 U. S.
156-158 (1948), [
Footnote 35] the "open end" feature of the contracts here
minimizes the restraint. For our inquiry to determine
reasonableness under § 1 must focus on
"the percentage of business controlled, the strength of the
remaining competition, [and] whether the action springs from
business requirements or purpose to monopolize."
334 U.S. at
334 U. S. 527;
compare Standard Oil Co. of California v. United States,
337 U. S. 293,
337 U. S.
312-313 (1949).
The record is replete with relevant statistical data. The volume
discounts available to local display buyers were not held unlawful
by the District Court, and the Government does not assail the
practice here. That segment of advertising linage, by far the
largest revenue producer of the three linage classes sold by all
New Orleans newspapers, [
Footnote 36] is thus eliminated from consideration.
Page 345 U. S. 616
Consequently, only classified and display linage data can be
scrutinized for possible forbidden effects.
Classified. -- The Item Company, then publishing the
Morning Tribune and the evening Item, utilized unit rates for
classified advertising in its papers in the year the Times-Picayune
Company absorbed the evening States. In 1933, the Item Company's
classified linage totaled 2.72 million, compared with the
Times-Picayune Company's total of 2.12 million. [
Footnote 37] Equalizing the competitive
relationship, the Times-Picayune Company, in 1935, countered by
adopting the unit-rate system of its rival. In that year, the
Times-Picayune sold 2.84 million, to the Item Company's 2.35
million, lines. While thus
Page 345 U. S. 617
evenly matched, the Times-Picayune over the years steadily
increased its lead. That Company sold 3.52 million lines in 1938,
and 3.76 in 1939; the Item Company totaled 2.23 and 2.18,
respectively. In fact, the Times-Picayune Publishing Company in
every year but 1938 advanced its linage total; since 1936, the Item
Company's totals declined yearly, solely excepting 1940.
At the end of that year, the Item Company's Morning Tribune
suspended publication; [
Footnote
38] a new local competitive structure took form. In that first
year, the Item, as sole competitor of the Times-Picayune Company's
two dailies, sold 1.23 million lines of classified linage, compared
with 2.09 million for the Times-Picayune and 2.08 for the States;
the Item's share thus accounted for roughly 23% of the total. Ten
years later the Item's share had declined to approximately 20%; in
1950, it sold 2.17 million lines, compared with the Times-Picayune
Publishing Company's total linage of 8.91 million, comprising 4.36
million for the Times-Picayune and 4.55 for the States. Measured
against the evening States alone, the Item's percentage attrition
is comparable. In 1941, it sold 37% of the two evening papers'
total linage; by 1950, that share had declined to 32%. Thus, over a
period of ten years' competition while facing its morning-evening
rival's compulsory unit rate, the New Orleans Item's share of the
New Orleans classified linage market declined 3%; viewed solely in
relation to its evening competitor, its percentage loss amounted to
5%.
General Display. -- Because the unit rate applicable to
general display linage was instituted to become effective 1950,
only one year's comparative data are in the record. In 1949,
general display linage in all New Orleans dailies
Page 345 U. S. 618
totaled 6.84 million, comprising 3.04 million lines in the
Times-Picayune, 1.93 million in the States, and 1.87 million in the
Item; the Publishing Company ran 73% of the total. [
Footnote 39] One year's experience with the
unit rate for
Page 345 U. S. 619
general display advertising showed a New Orleans total volume of
7.37 million lines, roughly apportioned as 2.96 million in the
Times-Picayune, 2.55 million in the States, and 1.85 million in the
Item; the Publishing Company's share had risen to 75%. Compared
with the States alone, the Item in 1949 accounted for 49% of the
two evening papers' total; in 1950, that had declined to 42%.
In that year, a reallocation of advertising accounts also took
place. [
Footnote 40] In
1949, 23.7% of general display advertisers utilized the
Times-Picayune Publishing Company's publications exclusively; one
year later, that percentage had risen to 41%. Concurrently,
however, accounts advertising solely in the Times-Picayune declined
from 22.7% to 5.8%, and sole advertisers in the States dropped from
2% to .4%. On the other hand, in 1950, 10.6%, compared with 9.6%
the year before, of general display accounts inserted solely in the
Item, and the segment of advertising accounts inserting in all
three publications rose from 30.4% in 1949 to 39% in the following
year. In fact, while in 1949 only 51.6% of general display accounts
utilized the Item either exclusively or in conjunction with other
New Orleans dailies, one year later 52.8% of the accounts so
patronized the Item.
The record's factual data, in sum, do not demonstrate that the
Publishing Company's advertising contracts unduly handicapped its
extant competitor, the Item. In the early years, when four-cornered
newspaper competition for classified linage prevailed in New
Orleans, the ascendancy of the Publishing Company's papers over
their morning-evening competitor soon became manifest. With unit
plan pitted on even terms against unit plan, over the years the
local market pattern steadily evolved
Page 345 U. S. 620
from the Times-Picayune Company's rise and the Item Company's
decline. With the Morning Tribune's demise in 1940, the market
shrank, but the pattern remained. The Item continued its gradually
declining share of the market, though, in fact, the
Times-Picayune's unit rate for "classified" between 1940 and 1950
coincided with a reversal of the trend marking the Item's absolute
volume decline. Even less competitive hurt is discernible from the
Publishing Company's unit rate for general display linage. True, in
the single recorded year of its existence, the combination plan did
diminish by 7% the Item's share of linage if measured solely
against the States. Versus the linage sold by the Publishing
Company in its two newspapers, however, the Item's share of the
total market declined but 2%. That apparent incongruity is simply
explained: compared with 1949 monthly volume data, the unit rate in
each of the 11 months of its operation in 1950 drew linage away
from the Times-Picayune and toward the States. [
Footnote 41] In effect, the Publishing
Company's unit plan merely reallocated the linage sold by its two
constituent papers. And not only did the unit plan take from the
Times-Picayune and give to the States. Apparently it also led more
advertisers to insert in the Item, which sold general display space
to a proportionately greater number of accounts in 1950 than in
1949.
Meanwhile, the Item flourishes. The ten years preceding this
trial marked its more than 75% growth in classified linage. Between
1946 and 1950, its general display volume increased almost 25%. The
Item's local display linage is twice the equivalent linage in the
States. [
Footnote 42] And
1950, the Item's peak year for total linage comprising all three
classes of advertising, marked its greatest
Page 345 U. S. 621
circulation in history as well. In fact, since in newspapers of
the Item's circulation bracket general display and classified
linage typically provide no more than 32% of total revenues, the
demonstrated diminution of its New Orleans market shares in these
advertising classes might well not have resulted in revenue losses
exceeding 1%. [
Footnote 43]
Moreover, between 1943 and 1949, the Item earned over.$1.4 million
net before taxes, enabling its then publisher in the latter year to
transfer his equity at a net profit of $600,000. The Item, the
alleged victim of the Times-Picayune Company's challenged trade
practices, appeared, in short, to be doing well.
The record in this case thus does not disclose evidence from
which demonstrably deleterious effects on competition may be
inferred. To be sure, economic statistics are easily susceptible to
legerdemain, and only the organized context of all relevant factors
can validly translate raw data into logical cause and effect. But
we must take the record as we find it, and hack through the jungle
as best we can. It may well be that any enhancement of the
Times-Picayune's market position during the period of the assailed
arrangements resulted from better
Page 345 U. S. 622
service or lower prices, or was due to superior planning
initiative or managerial skills; [
Footnote 44] conversely, it is equally possible that, but
for the adoption of the unit contracts, its market position might
have turned for the worse. Nor can we be certain that the
challenged practice, though not destructive of existing
competition, did not abort yet unborn competitors equally within
the concern of the Sherman Act.
See United States v.
Griffith, 334 U. S. 100,
334 U. S. 107
(1948);
American Tobacco Co. v. United States, 1946,
328 U. S. 781,
328 U. S. 814;
Associated Press v. United States, 326 U. S.
1,
326 U. S. 13
(1945). But this suit was not brought to adjudicate a trade
practice as banned by specific statutory prohibitions which by a
clearly defined public policy dispense with difficult standards of
economic proof.
Compare Standard Oil Co. of California v.
United States, 337 U. S. 293,
337 U. S.
311-313 (1949). And the case has not met the
per
se criteria of Sherman Act § 1 from which proscribed effect
automatically must be inferred.
Cf. International Salt Co. v.
United States, 332 U. S. 392
(1947). Under the broad general policy directed by § 1 against
unreasonable trade restraints, guilt cannot rest on speculation;
the Government here has proved neither actual unlawful effects nor
facts which radiate a potential for future harm.
While even otherwise reasonable trade arrangements must fall if
conceived to achieve forbidden ends, legitimate business aims
predominantly motivated the Publishing Company's adoption of the
unit plan. Because the antitrust laws strike equally at nascent and
accomplished
Page 345 U. S. 623
restraints of trade, monopolistic designs, as well as results,
are reached by the prohibitions of the Sherman Act.
United
States v. Socony-Vacuum Oil Co., 310 U.
S. 150,
310 U. S. 224,
note 59 (1940);
United States v. Trenton Potteries Co.,
273 U. S. 392,
273 U. S. 402
(1927). The unit rate for classified advertising, however, was
adopted in 1935 obviously to counteract the competition of the Item
and Morning Tribune which confronted the Times-Picayune Publishing
Company with an established unit rate. To be sure, an unlawful
trade practice may not be justified as an emulation of another's
illegal plan.
Cf. Federal Trade Commission v. A. E. Staley Mfg.
Co., 324 U. S. 746,
324 U. S.
753-754 (1945). But that factor is certainly relevant to
illuminate ambiguous intent, particularly when planned injury to
that other competitor is the crux of the charge. In any event,
uncontradicted testimony suggests that unit insertions of
classified ads substantially reduce the publisher's overhead costs.
[
Footnote 45] Approximately
thirty separate operations are necessary to translate an
advertiser's order into a published line of print. A reasonable
price for a classified and is necessarily low. And the Publishing
Company processed about 2,300 classified ads for publication each
day. Certainly a publisher's steps to rationalize that operation do
not bespeak a purposive quest for monopoly or restraint of
trade.
Similarly, competitive business considerations apparently
actuated the adoption of the unit rate for general display linage
in 1950. At that time, about 180 other publishers, the vast
majority of morning-evening owners, had previously instituted
similar unit plans. Doubtless, long-tolerated trade arrangements
acquire no vested immunity under the Sherman Act; no prescriptive
rights
Page 345 U. S. 624
accrue by the prosecutor's delay.
Cf. United States v.
Socony-Vacuum Oil Co., supra, at
310 U. S.
225-228. That consideration, however, is not wholly
irrelevant when monopolistic purpose, rather than effect remains to
be gauged.
Ibid. By adopting the unit plan for general
display linage at the time it did, the Publishing Company devised
not a novel restrictive scheme, but aligned itself with the
industry's guide, legal or illegal in particular cases as that is
found to be. Moreover, the unit rate was viewed as a competitive
weapon in the rivalry for national advertising accounts. Lower
milline rates visualized as a consequence of unit insertions might
attract national linage from advertisers utilizing newspapers in
other cities, as well as counteract a national advertisers' trend
away from newspapers toward other mass communications media.
[
Footnote 46] In summary,
neither unlawful effects nor aims are shown by the record.
[
Footnote 47]
Consequently, no Sherman Act violation has occurred unless the
Publishing Company's refusal to sell advertising
Page 345 U. S. 625
space except
en bloc, viewed alone, constitutes a
violation of the Act. Refusals to sell, without more, do not
violate the law. [
Footnote
48] Though group boycotts, or concerted refusals to deal,
clearly run afoul of § 1,
Kiefer-Stewart Co. v. Joseph E.
Seagram & Sons, 340 U. S. 211,
340 U. S. 214
(1951);
Associated Press v. United States, 326 U. S.
1 (1945);
see United States v. Columbia Steel
Co., 334 U. S. 495,
334 U. S. 522
(1948), different criteria have long applied to qualify the rights
of an individual seller. Beginning with
United States v.
Colgate & Co., 250 U. S. 300
(1919), this Court's decisions have recognized individual refusals
to sell as a general right, though "neither absolute nor exempt
from regulation."
Lorain Journal Co. v. United States,
342 U. S. 143,
342 U. S. 155
(1951). If accompanied by unlawful conduct or agreement, or
conceived in monopolistic purpose or market control, even
individual sellers' refusals to deal have transgressed the Act.
Lorain Journal Co. v. United States, supra; United States v.
Bausch & Lomb Optical Co., 321 U.
S. 707,
321 U. S.
721-723 (1944);
Eastman Kodak Co. v. Southern Photo
Materials Co., 273 U. S. 359,
273 U. S. 375
(1927);
United States v. A. Schrader's Son, Inc.,
252 U. S. 85,
252 U. S. 99
(1920);
cf. American Tobacco Co. v. United States,
328 U. S. 781,
328 U. S. 808
(1946);
Federal Trade Commission v. Beech-Nut Packing Co.,
257 U. S. 441,
257 U. S.
453-455 (1922). [
Footnote 49]
Page 345 U. S. 626
Still, although much hedged about by later cases,
Colgate's principle protects the Times-Picayune Publishing
Company's simple refusal to sell advertising space in the
Times-Picayune or States separately unless other factors destroy
the limited dispensation which that case confers.
In our view, however, no additional circumstances bring this
case within § 1. Though operating two constituent newspapers, the
Times-Picayune is a single corporation, and the Government in the
District Court abandoned a charge of unlawful concert among the
corporate officers. [
Footnote
50] With the advertising contracts in this proceeding viewed as
in themselves lawful and no further elements of combination
apparent in the case, § 2 criteria must become dispositive
here.
An insufficient showing of specific intent vitiates this part of
the Government's case. While the completed offense of
monopolization under § 2 demands only a general intent to do the
act, "for no monopolist monopolizes unconscious of what he is
doing," a specific intent to destroy competition or build monopoly
is essential to guilt for the mere attempt now charged.
United
States v. Aluminum Co. of America, 148 F.2d 416, 431-432
(1945);
United States v. Griffith, 334 U.
S. 100,
334 U. S. 105
(1948);
American Tobacco Co. v. United States,
328 U. S. 781,
328 U. S. 814
(1946);
Swift & Co. v. United States, 196 U.
S. 375,
196 U. S. 396
(1905). This case does not demonstrate an attempt by a monopolist
established in one area to nose into a second market, so that past
monopolistic success both enhances the probability of future harm
and supplies a motivation for further forays.
Cf. United States
v. Griffith, supra; Swift & Co. v. United States,
supra.
Page 345 U. S. 627
And unlike
Lorain Journal Co. v. United States,
342 U. S. 143
(1951), where a single newspaper's refusal to sell space to
advertisers unless they forewent advertising over a competing local
radio station manifested "bold, relentless, and predatory
commercial behavior,"
id. 342 U.S. at
342 U. S. 149,
no remotely comparable charge is borne out here. This branch of the
Government's case comprised allegations that the Publishing
Company's acquisition of the States in 1933 was one element in a
cool and calculated quest for monopoly control; that the Company
deliberately operated the evening States at a financial loss to the
detriment of the competing Item, and that it interfered with the
Item's distribution on the streets of New Orleans. The District
Court, and much evidence supports its conclusions, determined that
the 1933 purchase of the States then seemed a legitimate means of
business expansion; assumed that the Company's cost and revenue
allocations between its two publications were mere bookkeeping
transactions without economic significance, and concluded that the
Company, rather than obstruct street sales of the Item, merely
sought to assure equal treatment by news vendors of the Item and
States. [
Footnote 51]
Because these pillars of the Government's § 2 case thus collapsed
in the District Court, only the adoption of the unit rates remains
to support the alleged violation of § 2 of the Sherman Act. Since
we have viewed that step as predominantly motivated by legitimate
business aims, this record cannot bear out the specific intent
essential to sustain an attempt to monopolize under § 2.
We conclude, therefore, that this record does not establish the
charged violations of § 1 and § 2 of the Sherman Act. We do not
determine that unit advertising arrangements are lawful in other
circumstances or in other proceedings. Our decision adjudicates
solely
Page 345 U. S. 628
that this record cannot substantiate the Government's view of
this case. Accordingly, the District Court's judgment must be
reversed.
Reversed.
* Together with No. 375,
United States v. Times-Picayune
Publishing Co. et al., also on appeal from the same court.
[
Footnote 1]
On Sundays the Times-Picayune Publishing Company also
distributes the Times-Picayune-States. Under the existing unit
plan, general display advertisers alternatively may insert in a
combination of either daily paper with the Sunday paper.
Additionally, the Company's unit plan for classified advertising
excludes some advertising, known as "over-the-river" classified,
placed from a small local area. As neither the parties nor the
District Court attached any significance to these exceptions to the
challenged unit rates for general display and classified
advertising space in the Publishing Company's daily papers, we
mention them solely for completeness.
[
Footnote 2]
"Every contract, combination in the form of trust or otherwise,
or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal. . .
."
15 U.S.C. § 1.
"Every person who shall monopolize, or attempt to monopolize, or
combine or conspire with any other person or persons, to monopolize
any part of the trade or commerce among the several States, or with
foreign nations, shall be deemed guilty of a misdemeanor. . .
."
15 U.S.C. § 2.
"The several district courts of the United States are invested
with jurisdiction to prevent and restrain violations of [this Act],
and it shall be the duty of the several district attorneys of the
United States, in their respective districts, under the direction
of the Attorney General, to institute proceedings in equity to
prevent and restrain such violations. . . ."
15 U.S.C. § 4.
The complaint named as defendants the Times-Picayune Publishing
Company and four of its officers. Two of these individuals remain
as parties in these appeals, one died after the appeals were filed,
and the District Court dismissed the complaint as to another. For
convenience, we refer to the former parties defendant as the
"Times-Picayune Publishing Company" or "Publishing Company."
[
Footnote 3]
105 F.
Supp. 670 (1952).
[
Footnote 4]
15 U.S.C. (Supp. V) § 29. Probable jurisdiction was noted on
November 10, 1952.
[
Footnote 5]
The printed record here comprises 1,644 pages of testimony and
exhibits of various degrees of pertinence to the issues.
[
Footnote 6]
See R. 1252-1261.
[
Footnote 7]
Fdg. 31;
cf. 105 F. Supp. at 678.
[
Footnote 8]
Ibid.
[
Footnote 9]
Id. at 105 F. Supp. at 678-679.
[
Footnote 10]
Id. at 105 F. Supp. at 681.
[
Footnote 11]
In the light of this Court's broad interpretation of those
relevant concepts, it is now beyond dispute that the activities
challenged in this case are sufficiently "trade or commerce"
relating to the interstate economy to fall under the wide sweep of
the Sherman Act.
Cf., e.g., Lorain Journal Co. v. United
States,In the light of this Court's broad interpretation of
those relevant concepts, it is now beyond dispute that the
activities challenged in this case are sufficiently "trade or
commerce" relating to the interstate economy to fall under the wide
sweep of the Sherman Act.
Cf., e.g., Lorain Journal Co. v.
United States, 342 U. S. 143
(1951);
United States v. National Assn. of Real Estate
Boards, 339 U. S. 485
(1950);
Mandeville Island Farms v. American Crystal Sugar
Co., 334 U. S. 219
(1948);
United States v. Frankfort Distilleries,
324 U. S. 293
(1945);
United States v. South-Eastern Underwriters Assn.,
322 U. S. 533
(1944);
Wickard v. Filburn, 317 U.
S. 111 (1942);
Indiana Farmer's Guide Pub. Co. v.
Prairie Farmer Pub. Co., 293 U. S. 268
(1934).
[
Footnote 12]
Learned Hand, J., in
United States v. Associated
Press, 52 F. Supp.
362, 372 (1943),
aff'd, 326 U. S. 326 U.S. 1
(1945).
[
Footnote 13]
Editor & Publisher 1952 International Yearbook Number, p.
17; Comment, Local Monopoly in the Daily Newspaper Industry, 61
Yale L.J. 948, 949 (1952), a comprehensive industry study.
See
also Ray, Economic Forces as Factors in Newspaper
Concentration, 29 Journ.Q. 31 (1952); Ray, Competition in the
Newspaper Industry, 15 J.Marketing 444 (1951); Nixon, Concentration
and Absenteeism in Daily Newspaper Ownership, 22 Journ.Q. 97
(1945).
[
Footnote 14]
American Newspaper Publishers Association, Newspaper Mortality
Since 1929 (Bulletin No. 5203, July 27, 1950). Demise of individual
newspapers occurred mainly through merger with other publications
or outright suspension of publication.
[
Footnote 15]
61 Yale L.J. at 950.
[
Footnote 16]
Id. at 977. Some small dailies also derive income from
miscellaneous sources such as job printing. In this case, the
District Court found that advertising and circulation accounted for
approximately 98% of New Orleans newspapers' total revenues. Fdg.
27.
[
Footnote 17]
Mass Communications (Schramm ed.1949), 549; Printers' Ink,
August 8, 1952, p. 35.
And see Borden, Taylor and Hovde,
National Advertising in Newspapers, 33
et seq. (1946).
[
Footnote 18]
Fdg. 26.
[
Footnote 19]
Comparison between Bulletin,
note 14 supra, at tables 2 and 3, and Editor
& Publisher International Yearbook Numbers 1929 to 1953.
[
Footnote 20]
See Miller, Unfair Competition, 199
et seq.
(1941); Lockhart and Sacks, The Relevance of Economic Factors in
Determining Whether Exclusive Arrangements Violate Section 3 of the
Clayton Act, 65 Harv.L.Rev. 913, 942
et seq. (1952); Note,
49 Col.L.Rev. 241, 246 (1949);
cf. Edwards, Maintaining
Competition, 175-178 (1949); Watkins, Public Regulation of
Competitive Practices in Business Enterprise, 220
et seq.
(1940).
[
Footnote 21]
"Unfair methods of competition in commerce . . . are hereby
declared unlawful." 15 U.S.C. § 45. In the
Gratz case,
decided on a point of pleading, the Court observed that the
"complaint contains no intimation that Warren, Jones & Gratz
did not properly obtain their ties and bagging as merchants usually
do; the amount controlled by them is not stated; nor is it alleged
that they held a monopoly of either ties or bagging or had ability,
purpose or intent to acquire one."
253 U.S. at
253 U. S. 428.
"All question of monopoly or combination," therefore, was "out of
the way."
Ibid.
[
Footnote 22]
United States v. United Shoe Machinery Co.,
247 U. S. 32
(1918), is not relied on by the parties.
[
Footnote 23]
"It shall be unlawful for any person engaged in commerce, in the
course of such commerce, to lease or make a sale or contract for
sale of goods, wares, merchandise, machinery, supplies, or other
commodities, whether patented or unpatented, for use, consumption,
or resale within the United States . . . or fix a price charged
therefor, or discount from, or rebate upon, such price, on the
condition, agreement, or understanding that the lessee or purchaser
thereof shall not use or deal in the goods, wares, merchandise,
machinery, supplies, or other commodities of a competitor or
competitors of the lessor or seller, where the effect of such
lease, sale, or contract for sale or such condition, agreement, or
understanding may be to substantially lessen competition or tend to
create a monopoly in any line of commerce."
15 U.S.C. § 14.
That section relates to simple exclusive dealing arrangements,
cf., e.g., Standard Oil Co. of California v. United
States, 337 U. S. 293
(1949), not involved in this case, as well as to tying sales. For
purposes of the Clayton Act, the requisite condition not to deal in
the goods of another may be inferred from the practical effects of
the tying arrangement.
International Business Machines Corp. v.
United States, 298 U. S. 131,
298 U. S. 135
(1936);
Judson L. Thomson Mfg. Co. v. Federal Trade
Commission, 150 F.2d 952, 956 (1945);
Signode Steel
Strapping Co. v. Federal Trade Commission, 132 F.2d 48, 52
(1942);
Lord v. Radio Corp. of America, 24 F.2d
565, 568 (1928).
Cf. Federal Trade Commission v. Sinclair
Refining Co., 261 U. S. 463,
261 U. S.
473-474 (1923).
[
Footnote 24]
Aff'g, per curiam, 80 F.2d 641 (1935).
[
Footnote 25]
See also Signode Steel Strapping Co. v. Federal Trade
Commission, 132 F.2d 48, 54 (1942);
Judson L. Thomson Mfg.
Co. v. Federal Trade Commission, 150 F.2d 952, 958 (1945).
[
Footnote 26]
Dealing with a monopolization offense under Sherman Act § 2, a
charge not raised or considered here, the Court in
United
States v. Griffith, 334 U. S. 100,
334 U. S.
106-108 (1948), pointedly observed:
"Anyone who owns and operates the single theater in a town, or
who acquires the exclusive right to exhibit a film, has a monopoly
in the popular sense. But he usually does not violate § 2 of the
Sherman Act unless he has acquired or maintained his strategic
position, or sought to expand his monopoly, or expanded it by means
of those restraints of trade which are cognizable under § 1. . . .
[T]he use of monopoly power, however, lawfully acquired, to
foreclose competition, to gain a competitive advantage, or to
destroy a competitor, is unlawful. . . . If monopoly power can be
used to beget monopoly, the Act becomes a feeble instrument
indeed."
See also Levi, A Two-Level Anti-Monopoly Law, 47
Northwestern U.L.Rev. 567, 580-585 (1952).
[
Footnote 27]
On oral argument here, the Government explanatorily referred to
an early informal Federal Trade Commission opinion to the effect
that advertising space was not a "commodity" within the meaning of
§ 2 of the Clayton Act (
cf. note 23 supra). 81 Cong.Rec. App. 2336-2337.
Cf. Fleetway, Inc. v. Public Service Interstate Transp.
Co., 72 F.2d 761 (1934);
United States v. Investors
Diversified Services, 102 F.
Supp. 645 (1951). We express no views on that statutory
interpretation.
Compare note 11 supra.
[
Footnote 28]
The District Court in this case did not find the volume of
commerce affected by the restraint, but determined solely that a
substantial percentage of advertising accounts in New Orleans
papers was restrained by the Publishing Company's unit plan. Fdg.
30;
cf. Fdg. 22. In view of our disposition of this case,
we may assume, though not deciding, that the Sherman Act's
substantiality test was met.
[
Footnote 29]
See also United States v. Socony-Vacuum Oil Co.,
310 U. S. 150,
310 U. S. 224,
note 59 (1940);
Gamco, Inc. v. Providence Fruit & Produce
Bldg., 194 F.2d 484 (1952);
White Bear Theater Corp. v.
State Theater Corp., 129 F.2d 600 (1942).
[
Footnote 30]
"A patent, . . . although in fact, there may be many competing
substitutes for the patented article, is at least
prima
facie evidence of [market] control."
Standard Oil Co. of California v. United States,
337 U. S. 293,
337 U. S. 307
(1949);
cf. id. at
337 U. S. 303;
Oxford Varnish Corp. v. Ault & Wiborg Corp., 83 F.2d
764, 766 (1936); Miller, Unfair Competition, 199 (1941); Lockhart
and Sacks,
note 20
supra, at 943-944; Note, 49 Col.L.Rev. 241, 243
(1949).
[
Footnote 31]
For every product, substitutes exist. But a relevant market
cannot meaningfully encompass that infinite range. The circle must
be drawn narrowly to exclude any other product to which, within
reasonable variations in price, only a limited number of buyers
will turn; in technical terms, products whose "cross-elasticities
of demand" are small. Useful to that determination is, among other
things, the trade's own characterization of the products involved.
The advertising industry and its customers, for example, markedly
differentiate between advertising in newspapers and in other mass
media.
See, e.g., Frey, Advertising (2d ed.1953), cc. 12,
15; Duffy, Advertising Media and Markets (2d ed.1951), cc. 3, 4;
Hepner, Effective Advertising, c. 20 (1949); Borden, Taylor and
Hovde, National Advertising in Newspapers,
passim (1946);
Sandage, Advertising Theory and Practice (3d ed.1948), cc. XX,
XXI.
[
Footnote 32]
See tables, notes
37
and |
37 and S.
594fn39|>39,
infra.
[
Footnote 33]
Cf., e.g., situations where several competitors
together controlling a large share of the market acting
individually or in concert adopt an identical trade practice.
See Federal Trade Commission v. Motion Picture Advertising
Service Co., 344 U. S. 392
(1953);
Signode Steel Strapping Co. v. Federal Trade
Commission, 132 F.2d 48, 54 (1942). And obviously, if a
producer controlling an even lesser share than here is ringed by
numerous smaller satellites together accounting for the rest, his
mastery of the market is greater than were he facing fierce rivalry
of other large sellers.
Cf. United States v. National Lead
Co., 332 U. S. 319,
332 U. S.
346-348,
332 U. S.
352-353 (1947);
United States v. Columbia Steel
Co., 334 U. S. 495,
334 U. S.
527-528 (1948). Fewness of sellers, on the other hand,
may facilitate concerted action.
See Fellner, Competition
Among the Few,
passim (1949); Stigler, The Theory of
Price, 228
et seq. (Rev. ed.1952.)
[
Footnote 34]
In fact, a survey (R. 1484) in 1940 disclosed that 27.6% of
States home carrier subscribers subscribed to the Times-Picayune by
home carrier as well
[
Footnote 35]
In
International Salt, the lessor's tying arrangement
permitted the lessee's purchase of the "tied" product in the open
market whenever the lessor declined to match the going market
price. That, this Court thought,
"does not avoid the stifling effect of the agreement on
competition. The [lessor] had at all times a priority on the
business at equal prices."
332 U.S. at
332 U. S. 397.
And the "block-booking" found unlawful in the
Paramount
case did not, of course, impose any express restrictions on
licensees desiring to acquire additional films elsewhere. In fact,
by specifying that a particular amount of the "tied" product be
taken and that amount covers the buyer's total requirements, a
tying arrangement may achieve a result equivalent to total
exclusion of other sellers without the formality of expressly
saying so.
See also note 23 supra.
[
Footnote 36]
See 61 Yale L.J. at 977, n. 162;
note 43 infra.
[
Footnote 37]
These and the following classified advertising data are derived
from the table below (R. 1448):
Classified Advertising Linage Carried by New
Orleans
Daily Newspapers, 1933-1950
--------------------------------------------------------
Times-
Picayune States Item Tribune
Morning Evening Evening Morning
--------------------------------------------------------
1933 1,484,740 633,332 1,369,729 1,349,577
1934 1,344,479 642,347 1,185,832 1,142,753
1935 1,490,316 1,344,849 1,180,850 1,169,733
1936 1,789,838 1,786,773 1,308,983 1,298,880
1937 1,832,728 1,834,845 1,252,840 1,228,357
1938 1,761,830 1,759,477 1,113,160 1,113,115
1939 1,881,673 1,882,970 1,097,277 1,086,777
1940 1,954,535 1,955,117 1,277,140 *1,248,712
--------------------------------------------------------
1941 2,085,566 2,083,812 1,231,540
1942 1,954,870 1,957,057 910,275
1943 2,849,190 2,843,097 1,241,787
1944 3,021,616 3,027,236 1,857,741
1945 3,246,566 3,265,686 1,899,926
1946 3,930,313 4,083,664 2,181,640
1947 4,353,943 4,507,427 2,210,193
1948 4,501,599 4,664,403 2,437,268
1949 4,271,302 4,420,193 2,232,617
1950 4,357,713 4,549,238 2,166,518
--------------------------------------------------------
* Morning Tribune discontinued (January 1941).
[
Footnote 38]
This record contains no evidence explaining the Morning
Tribune's demise. We must therefore assume that the Times-Picayune
Publishing Company's challenged trade practices are in no way
linked to the suspension of that competing daily newspaper.
[
Footnote 39]
All general display advertising data are derived from the table
below (R. 1450):
General Display Advertising Linage Carried by
New Orleans Daily Newspapers, 1949-1950
----------------------------------------
Times-
Picayune States Item
Morning Evening Evening
----------------------------------------
1949 -- Monthly Totals
----------------------------------------
Jan. 190,708 130,761 110,940
Feb. 231,656 158,252 154,008
March 305,782 205,740 183,383
April 295,603 179,186 164,288
May 282,080 171,509 177,725
June 275,249 162,481 165,681
July 227,896 136,380 133,669
Aug. 180,019 118,031 124,768
Sept. 248,078 154,362 151,187
Oct. 291,072 200,552 181,548
Nov. 281,356 173,898 157,516
Dec. 228,701 143,780 165,741
--------- --------- ---------
Total 3,038,200 1,934,932 1,870,454
----------------------------------------
1950 -- Monthly Totals
----------------------------------------
Jan. 237,517 171,564 176,184
Feb.* 229,367 166,536 167,309
March 283,568 210,413 164,734
April 262,997 199,803 162,523
May 276,036 229,662 154,058
June 260,248 222,657 170,420
July 213,550 194,800 121,387
Aug. 181,522 176,400 115,256
Sept. 241,167 221,574 147,051
Oct. 300,757 293,723 158,052
Nov. 265,956 266,869 168,339
Dec. 211,735 196,794 148,630
--------- --------- ---------
Total 2,964,420 2,550,795 1,853,943
----------------------------------------
* Unit rate became effective on Feb. 1, 1950.
[
Footnote 40]
Data are derived from tables and graphs at R. 1453-1456.
[
Footnote 41]
See table at
note
39 supra.
[
Footnote 42]
Media Records, 11 (1950).
[
Footnote 43]
For the average daily newspaper of greater than 100,000
circulation, a 1951 industry survey revealed the following typical
percentage sources of total revenues (Editor & Publisher, April
12, 1952, p. 74):
Local display . . . . . . . . 37.24%
General display . . . . . . . 16.98%
Classified advertising. . . . 14.60%
Circulation . . . . . . . . . 29.47%
A 3% decline in classified advertising, accounting for 14.6% of
total revenues, and a 2% loss in general display, responsible for
16.98% of revenues, would amount to a total revenue loss of .78%.
Compare Federal Trade Commission v. Morton Salt Co.,
334 U. S. 37
(1948), where the composition of a buyer's inventory necessitated
protection against competitive harm in the purchasing of even a
fractional part of his stock in trade.
Id. at
334 U. S.
49.
[
Footnote 44]
The record does, in fact, contain evidence demonstrating that
the Times-Picayune Publishing Company's milline rates (cost to
advertisers of one agate line per million circulation) ranged
roughly from $2.14 to $1.96, compared to the Item's corresponding
rates from $2.96 to $2.58. R. 296, 1115. Moreover, though no
inference necessarily flows from that fact, the Item changed
ownership at least twice in the past twenty years.
[
Footnote 45]
R. 1127-1129.
Cf. Borden, Taylor and Hovde, National
Advertising in Newspapers, 461-462 (1946). Obviously, equivalent
economics flow from voluntary unit insertions.
[
Footnote 46]
But cf. id. at 461-464; Nixon, Concentration and
absenteeism in Daily Newspaper Ownership, 22 Journ.Q. 97, 110-113
(1945), for advertisers' reactions to unit rates.
[
Footnote 47]
The Government places much emphasis on a memorandum prepared by
the Publishing Company's advertising representatives, referring to
the Company's adoption of the unit plan as one way
"to eliminate to a great extent the deleterious selling on the
part of our evening contemporary, which, in the long run, is not to
the best interests of the manufacturer."
As pointed out by the District Court, however, the author of the
memorandum explained that,
"in a number of cases . . . , the advertising agencies favored
the compulsory or unit rate because, once an agency had made its
selection or its recommendation of media to the advertiser, the
agency could resist any pressure brought to make a change in media
by pointing to the unit rate as making such change impossible."
105 F. Supp. at 675-676. That explanation accords with
prevailing agency practices and attitudes.
See Borden,
Taylor and Hovde, National Advertising in Newspapers, 207-212
(1946).
[
Footnote 48]
See generally Comment, Refusals to Sell and Public
Control of Competition, 58 Yale L.J. 1121 (1949).
[
Footnote 49]
And see United States v. Klearflax Linen
Looms, 63 F. Supp.
32 (1945).
"[I]f all the newspapers in a city, in order to monopolize the
dissemination of news and advertising by eliminating a competing
radio station, conspired to accept no advertisements from anyone
who advertised over that station, they would violate §§ 1 and 2 of
the Sherman Act. [Citing cases.] It is consistent with that result
to hold here that a single newspaper, already enjoying a
substantial monopoly in its area, violates the 'attempt to
monopolize' clause of § 2 when it uses its monopoly to destroy
threatened competition."
Lorain Journal Co. v. United States, 342 U.
S. 143,
342 U. S. 154
(1951).
[
Footnote 50]
Compare Timken Roller Bearing Co. v. United States,
341 U. S. 593,
341 U. S. 598,
341 U. S. 606
(1951);
Nelson Radio & Supply Co. v. Motorola, Inc.,
200 F.2d 911, 914 (1952);
United States v. Lorain Journal
Co., 92 F. Supp.
794, 799-800 (1950).
[
Footnote 51]
105 F. Supp. at 676-677, 680.
MR. JUSTICE BURTON, with whom MR. JUSTICE BLACK, MR. JUSTICE
DOUGLAS, and MR. JUSTICE MINTON join, dissenting.
The majority opinion seeks to avoid the effect of
United
States v. Griffith, 334 U. S. 100, and
of
International Salt Co. v. United States, 332 U.
S. 392, by taking the position that the Times-Picayune
does not enjoy a "dominant position" in the general newspaper
advertising market of New Orleans, including all three papers, as a
single market. The complaint, however, is not, and need not be,
dependent upon the relation of the Times-Picayune to that entire
market.
The complaint is that the Times-Picayune enjoys a distinct,
conceded, and complete monopoly of access to the morning newspaper
readers in the New Orleans area, and that it uses that monopoly to
restrain unreasonably the competition between its evening
newspaper, the New Orleans States, and the independent New Orleans
Item, in the competitive field of evening newspaper advertising.
Insistence by the Times-Picayune upon acceptance of its compulsory
combination advertising contracts makes payment for, and
publication of, classified and general advertising in its own
evening paper an inescapable part of the price of access to the
all-important columns of the single morning paper. I agree with the
District Court that such conduct violates the Sherman Act under the
circumstances here presented.
See also Fed.Rules
Civ.Proc., 52(a). "Findings of fact shall not be set aside unless
clearly erroneous . . . ," and
Lorain Journal Co. v. United
States, 342 U. S. 143. In
view of the disposition made of this case by the majority, it is
not necessary to discuss the terms of the decree.