Dunn v. Phoenix Newspapers, Inc.

• Citation: 735 F.2d 1184
• Decision Date: 26 June 1984
• Docket Number: No. 83-2024,83-2024
• Parties: 1984-2 Trade Cases 66,079, 10 Media L. Rep. 2263 Gary J. DUNN, individually and as guardian of Steven Dunn, a minor child; and G. Michael Dunn, Plaintiffs-Appellants, v. PHOENIX NEWSPAPERS, INC., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1184

735 F.2d 1184

1984-2 Trade Cases 66,079, 10 Media L. Rep. 2263

Gary J. DUNN, individually and as guardian of Steven Dunn, a minor child; and G. Michael Dunn, Plaintiffs-Appellants, v. PHOENIX NEWSPAPERS, INC., Defendant-Appellee.

No. 83-2024.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 18, 1983.

Decided June 26, 1984.

Kenneth R. Reed, Michael Wischkaemper, Kenneth D. Nyman, Phoenix, Ariz., for plaintiffs-appellants.

Richard A. Segal, Gust, Rosenfeld, Divelbess & Henderson, Phoenix, Ariz., for defendant-appellee.

Appeal from the United States District Court for the District of Arizona.

Before DUNIWAY, TIMBERS, ^* and SKOPIL, Circuit Judges.

DUNIWAY, Circuit Judge:

This is an antitrust suit brought by newspaper home-delivery carriers against the publisher of two newspapers. The carriers complained that the newspapers violated the Sherman Act, 15 U.S.C. Sec. 1, and parallel state law, Ariz.Rev.Stat.Ann. Sec. 44-1402, by directly signing up home subscribers and engaging in other conduct setting the price that home subscribers paid to the carriers. The district court rejected the carriers' per se violation analysis and, after bench trial, filed detailed findings of fact, and decided for the newspapers under the "rule of reason." The carriers appeal, and we affirm.

I. FACTS.

Plaintiffs Gary J. Dunn, his minor son Steven Dunn, and G. Michael Dunn were carriers for the Arizona Republic and the Phoenix Gazette, daily newspapers published by defendant Phoenix Newspapers, Inc. The carriers were independent contractors, not employees of the newspapers. The newspapers did not grant the carriers monopolies or exclusive geographical sales rights. The newspapers set the prices at which they sold papers to the carriers.

The newspapers engaged in various practices that, the carriers say, tended to set the price that home-delivery subscribers would pay the carriers: (1) The newspapers published "suggested retail subscription prices" for home-delivery, as well as newsstand "face" prices, in each copy of the papers. (2) When the newspapers changed the published home-delivery subscription rates, they notified subscribers by prominent notices in the papers. (3) When the newspapers switched from carriers to motor route distributors, they directly notified subscribers of rate increases by form letter. (4) At various times, the newspapers used subscription-boosting practices such as door-to-door, telephone, and direct mail solicitation; newspaper advertisements quoting home delivery subscription rates; and promotional subscription discounts ("Eight-for-Four" and "Eight-for-Eight" plans). The carriers were contractually obligated to deliver the papers to such new subscribers. (Exh. 1, p 9.) (5) The newspapers offered direct plans ("Easy Pay Plan" and "Debit Transfer Plan") under which home-delivery subscribers paid directly to the newspapers at the suggested subscription rates, and the newspapers credited the carriers' accounts on a weekly basis. The carriers were not contractually obligated to participate in these plans. (See Exh. 1, p 8.) (6) The newspapers offered the carriers prepared billing invoices at the published home-delivery subscription rates.

The contractual agreements between the newspapers and carriers did not cover subscription prices, and the newspapers told both the carriers and subscribers that published subscription rates were "suggested retail prices" and that carriers were free to charge whatever prices they wanted. There was no evidence that the carriers ever tried to deviate from the suggested retail subscription price. Consequently, there was no evidence as to what the newspapers' actual response to a price increase by a carrier would have been.

II. STANDARDS OF REVIEW.

The parties disagree as to the appropriate standard of review. Findings of fact must be upheld unless they are clearly erroneous. Fed.R.Civ.P. 52(a). Whether the newspapers' practices as found violate the Sherman Act is a question of law, not fact, and is subject to de novo review. See United States v. General Motors Corp., 1966, 384 U.S. 127, 141 n. 16, 86 S.Ct. 1321, 1328, n. 16, 16 L.Ed.2d 415. The carriers are wrong in saying that all issues on appeal are issues of law subject to de novo review. The newspapers are wrong in saying that all issues on appeal are issues of fact subject to the "unless clearly erroneous" rule.

III. PER SE VIOLATION.

A. Agreements between Newspapers and Subscribers.

Section 1 of the Sherman Act forbids "[e]very contract, combination ..., or conspiracy, in restraint of trade or commerce among the several States." 15 U.S.C. Sec. 1. A manufacturer that suggests resale prices and unilaterally refuses to deal with distributors that do not comply does not violate the statute. Monsanto Co. v. Spray-Rite Service Corp., 1984, --- U.S. ----, ----, 104 S.Ct. 1464, 1469, 79 L.Ed.2d 775; United States v. Colgate &amp Co., 1919, 250 U.S. 300, 307, 39 S.Ct. 465, 468, 63 L.Ed. 992; Filco v. Amana Refrigeration, Inc., 9 Cir., 1983, 709 F.2d 1257, 1261; General Cinema Corp. v. Buena Vista Distribution Co., 9 Cir., 1982, 681 F.2d 594, 597. Resale price maintenance is illegal only if implemented by contract, combination, or conspiracy. Albrecht v. Herald Co., 1968, 390 U.S. 145, 149, 88 S.Ct. 869, 871, 19 L.Ed.2d 998; United States v. Parke, Davis & Co., 1960, 362 U.S. 29, 43-44, 80 S.Ct. 503, 511-12, 4 L.Ed.2d 505; United States v. Bausch & Lomb Optical Co., 1944, 321 U.S. 707, 721-23, 64 S.Ct. 805, 812-13, 88 L.Ed. 1024; F.T.C. v. Beech-Nut Packing Co., 1922, 257 U.S. 441, 451-53, 42 S.Ct. 150, 153-54, 66 L.Ed. 307; Dr. Miles Medical Co. v. Park & Sons Co., 1911, 220 U.S. 373, 408, 31 S.Ct. 376, 384, 55 L.Ed. 502.

The carriers do not contend that agreements between the newspapers and themselves, or between the newspapers and other carriers, fixed resale prices. They do argue that the direct payment plans and other agreements between the newspapers and certain subscribers fixed the carriers' resale prices, and that this was per se illegal. We reject this argument for two reasons. First, the district court found that the carriers failed to show that agreements between the newspapers and subscribers fixed the prices received by the carriers. Second, even if such agreements set subscription prices, they would not be illegal per se.

1. No price-fixing agreements.

The district court found that the direct payment plans did not fix the carriers' prices and that carriers could charge higher or lower rates under these plans. The carriers argue that they were contractually bound to honor "direct payment" and other subscription agreements. This is not what the carrier agreements say. (Exhs. 1-3, p 8.) This is not what the district court found. (Findings & Conclusions p 46; cf. p 43.) Carriers were obligated to service new subscribers (Exhs. 1-3, p 9.) Although the carriers might have blushed to explain to their customers why they charged more than the suggested subscription prices, the record does not contradict the district court's finding that the carriers could have charged prices other than the suggested retail subscription prices.

The carriers target the newspapers' subscription promotion plans, but the district court found that these plans, while they did fix prices, were of limited duration, were offered on a sporadic basis, and were not shown to involve the plaintiff carriers or any of their subscribers. The carriers did not show that they ever tried to charge, but were prevented from charging, higher prices under the direct payment or other subscription plans.

Therefore, the district court found that there were no express agreements to fix prices that would support application of the per se rules of illegality. The district court further found that there was no implied agreement or combination because the newspapers stayed within permitted bounds of unilateral suggestion and persuasion in setting subscription rates. See Colgate, 250 U.S. at 305-06, 39 S.Ct. at 467; Hanson v. Shell Oil Co., 9 Cir., 1976, 541 F.2d 1352, 1355-57; Gray v. Shell Oil Co., 9 Cir., 1972, 469 F.2d 742, 748. The findings are not clearly erroneous.

2. No per se violation.

Price-fixing brought about by contract, combination, or conspiracy is unquestionably per se illegal. Arizona v. Maricopa Medical Society, 1982, 457 U.S. 332, 347, 102 S.Ct. 2466, 2474, 73 L.Ed.2d 48. But a producer is free to fix and publish a retail price for his product and solicit business at that price. The carriers argue that when the newspapers sign up subscribers for home delivery at specified prices, this is a combination in restraint of trade under the Sherman Act. Clearly, without more, it is not; and it is not per se illegal.

The myriad cases that have held resale price maintenance schemes to be per se violations have typically involved significantly different fact patterns, such as (1) a combination between the newspaper and a rival carrier, e.g., Albrecht v. Herald Co., 390 U.S. at 150, 88 S.Ct. at 871; or (2) a combination between the newspaper and the plaintiff carrier, e.g., Noble v. McClatchy Newspapers, 9 Cir., 1975, 533 F.2d 1081, 1089; Blankenship v. Hearst Corp., 9 Cir., 1975, 519 F.2d 418, 427-28; see Albrecht, 390 U.S. at 150 n. 6, 88 S.Ct. at 872 n. 6; or (3) a combination between the newspaper and a rival newspaper, e.g., Citizen Publishing Co. v. United States, 1969, 394 U.S. 131, 135, 89 S.Ct. 927, 929, 22 L.Ed.2d 148.

The carriers rely on the second paragraph of the Supreme Court's footnote in Albrecht, 390 U.S. at 150 n. 6, 88 S.Ct. at 872 n. 6:

Petitioner's amended complaint did allege a combination between respondent and petitioner's customers. Because of our disposition of this case it is unnecessary to pass on this claim. It was not, however, a frivolous contention. See Federal Trade Commission v. Beech-Nut Packing Co., 257 U.S. 441 [42 S.Ct. 150, 66 L.Ed. 307] (1922); Girardi v. Gates Rubber Co....