Ralph C. Wilson Industries, Inc. v. Chronicle Broadcasting Co.

• Citation: 794 F.2d 1359
• Decision Date: 16 July 1986
• Docket Number: No. 84-2758,84-2758
• Parties: , 1986-1 Trade Cases 67,185 RALPH C. WILSON INDUSTRIES, INC., Plaintiff-Appellant, v. CHRONICLE BROADCASTING CO.; Miami Valley Broadcasting Corp.; Field Communications Corp.; Viacom International, Inc.; P.I.T.S. Films; Twentieth Century-Fox Film Corp.; Paramount Television Domestic Distribution, Inc.; Warner Bros. Television Domestic Distribution, Inc.; MCA Television Ltd.; Metro-Goldwyn-Mayer, Inc.; and United Artists Television, Inc., Defendants- Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1359

794 F.2d 1359

55 USLW 2137, 1986-1 Trade Cases 67,185

RALPH C. WILSON INDUSTRIES, INC., Plaintiff-Appellant, v. CHRONICLE BROADCASTING CO.; Miami Valley Broadcasting

Corp.; Field Communications Corp.; Viacom International,

Inc.; P.I.T.S. Films; Twentieth Century-Fox Film Corp.;

Paramount Television Domestic Distribution, Inc.; Warner

Bros. Television Domestic Distribution, Inc.; MCA

Television Ltd.; Metro-Goldwyn-Mayer, Inc.; and United

Artists Television, Inc., Defendants- Appellees.

No. 84-2758.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Oct. 9, 1985.

Decided July 16, 1986.

Frederick P. Furth, Craig C. Corbitt, Furth, Fahrner, Bluemle & Mason, San Francisco, Cal., for plaintiff-appellant.

Brent N. Rushforth, Dow, Lohnes & Albertson, Washington, D.C., M. Laurence Popofsky, Heller, Ehrman, White & McAuliffe, San Francisco, Cal., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before SNEED, SCHROEDER and BRUNETTI, Circuit Judges.

BRUNETTI, Circuit Judge:

Ralph C. Wilson Industries, Inc. ("Wilson") appeals the district court's grant of summary judgment in favor of appellees, various television stations and television program suppliers. We affirm.

I. BACKGROUND

Wilson is the licensee of television station KICU-TV ("KICU"), Channel 36, licensed by the Federal Communications Commission ("FCC") to the city of San Jose, Santa Clara County, California. KICU is an independent station; it is not affiliated with a major network. It licenses its programs, except for locally-originated news, public affairs and sports, from various program suppliers.

Appellees are network and independent television stations ("station appellees"), ¹ and suppliers of non-network television programs ("supplier appellees"). ² The station appellees negotiated from the supplier appellees exclusive rights to license programs, following a competitive bidding process among interested stations. "Thus, for example, a supplier would sell an exclusive license for M*A*S*H to [station appellee] KTVU, who [sic] would then be the only station in that area permitted to air M*A*S*H (or specified episodes of M*A*S*H) for the duration of the license." Ralph C. Wilson Indus. v. American Broadcasting, 598 F.Supp. 694, 700 (N.D.Cal.1984).

The exclusive licensing agreements vary in length and generally contain a right of first refusal for renewal. The station appellees enforce this exclusivity against all the television stations, in the San Francisco-Oakland-San Jose market, including KICU. Exclusivity is prevalent within the television broadcasting industry. The networks--ABC, CBS, and NBC--choose one local station affiliate within each recognized geographic television market. Each affiliate can present a unique program schedule. Similarly, suppliers of non-network programs license programs to a single station within each recognized geographic market.

The FCC establishes the geographic scope of exclusivity and permits exclusivity among television stations licensed to communities within 35 miles of each other or among stations licensed to communities within a designated hyphenated market. 47 C.F.R. Sec. 73.658(m) (1984). KICU and the station appellees are licensed to communities within the "San Francisco-Oakland-San Jose" hyphenated market. 47 C.F.R. Sec. 76.51(a)(7) (1984).

The geographic boundaries of an exclusive licensing area are in part determined by two national television rating services, A. C. Nielsen Co. ("Nielsen") and Arbitron Company ("Arbitron"). Nielsen and Arbitron Finally, the Independent Television News Association ("ITNA") was a cooperative association that provided non-exclusive news feeds to its members.

categorize geographic areas into market groups based on actual viewership patterns. Both rating services include San Jose in the San Francisco geographic market.

Wilson brought this action alleging violations of the Sherman Act, ("Act") 15 U.S.C. Secs. 1-7 (1985). On appeal, Wilson raises three claims under section 1 of the Act: 1) that the station appellees' exclusive program licensing practices unreasonably restrain trade; 2) that the station appellees engaged in a horizontal conspiracy to deny appellant access to quality television programming; ³ and 3) that station appellee KTVU and ITNA engaged in a conspiracy to deny appellant membership in ITNA. Appellant seeks declaratory and injunctive relief, and treble damages under section 4 of the Clayton Act, 15 U.S.C. Sec. 15 (1985).

II. STANDARD OF REVIEW

We review the grant of summary judgment de novo. Lojek v. Thomas, 716 F.2d 675, 677 (9th Cir.1983). We must determine, viewing the evidence in the light most favorable to the non-moving party, whether there exists any genuine issue of material fact and whether the substantive law was correctly applied. See First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1978); Amaro v. Continental Can Co., 724 F.2d 747, 749 (9th Cir.1984); Fed.R.Civ.P. 56(c). Although summary disposition is not favored in antitrust cases where motive and intent are at issue, Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962), it is available in an appropriate case. Accord Landmark Development Corp. v. Chambers Corp., 752 F.2d 369, 372 (9th Cir.1985); Ron Tonkin Grand Turismo v. Fiat Distributors, 637 F.2d 1376, 1381 (9th Cir.), cert. denied, 454 U.S. 831, 102 S.Ct. 128, 70 L.Ed.2d 109 (1981).

III. VIOLATION OF SECTION 1 OF THE SHERMAN ACT

A. The Exclusive Program Licensing Practices.

1. Legal Standards.

Wilson claims that the station appellees' exclusive licensing practices unreasonably restrain trade because the licenses are overbroad geographically, unreasonably long in duration, and incorporate unreasonable rights of first refusal.

Wilson does not contend that the general practice of exclusivity in television program licensing is illegal per se under the Sherman Act; in fact, KICU itself engages in exclusivity. Wilson's principal contention is that it receives lower ratings because it has been denied access to quality programming by the station appellees. Arbitron and Nielsen compile ratings books. The rating given to a television station determines the amount the station can charge advertisers. The higher the rating, the greater the share of the advertising market a station may receive, and, hence, the more profitable it may become. WIXT Television, Inc. v. Meredith Corp., 506 F.Supp. 1003, 1013 (N.D.N.Y.1980). Wilson argues that a "San Jose market" or "South Bay market" exists apart from the San Francisco market and consequently appellees should not be able to practice exclusivity against KICU.

In order to recover treble damages under section 4 of the Clayton Act, 15 U.S.C. Sec. 15, Wilson must show that it was injured in its business or property "by reason of anything forbidden in the antitrust laws." The antitrust laws include the Sherman Act, 15 U.S.C. Secs. 1-7. 15 U.S.C. Sec. 12(a) (1985).

Section 1 of the Sherman Act, 15 U.S.C. Sec. 1, prohibits "every contract, combination Appellees' exclusivity practices are vertical, non-price restraints which are analyzed under the rule of reason standard. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 58-59, 97 S.Ct. 2549, 2561-62, 53 L.Ed.2d 568 (1976). Although restraint may be the "essence" of every contract, Chicago Board of Trade v. United States, 246 U.S. 231, 238, 38 S.Ct. 242, 244, 62 L.Ed. 683 (1918), under the rule of reason standard only those agreements that unreasonably restrain trade violate the Sherman Act. National Soc. of Professional Engineers v. U.S., 435 U.S. 679, 687-88, 98 S.Ct. 1355, 1363, 55 L.Ed.2d 637 (1977). "Under this rule, the factfinder weighs all the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition." Continental T.V., Inc., 433 U.S. at 49, 97 S.Ct. at 2557.

in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States."

Before we need determine whether the practices challenged by appellant are unreasonable restraints of trade, the appellant must show that station appellees' practices injured or decreased competition.

2. Injury to Competition.

The rule of reason standard "[f]ocuses directly on the challenged restraint's impact on competitive conditions." Professional Engineers, 435 U.S. at 688, 98 S.Ct. at 1363. It is not enough for Wilson merely to show that it was harmed in its capacity as a competitor. As the Supreme Court stated in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977), "[p]laintiffs must prove antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." The antitrust laws were enacted for "the protection of competition, not competitors." Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962) (emphasis in original).

We have held that "it is injury to the market, not to individual firms, that is significant." Klamath-Lake Pharm. v. Klamath Med. Serv. Bureau, 701 F.2d 1276, 1292 (9th Cir.), cert. denied, 464 U.S. 822, 104 S.Ct. 88, 78 L.Ed.2d 96 (1983); See also Cascade Cabinet Co. v. Western Cabinet & Millwork, Inc., 710 F.2d 1366, 1373 (9th Cir.1983) (economic injury to a competitor does not equal injury to competition).

To determine whether competition has been harmed, the relevant market must be defined. Continental T.V., Inc., 433 U.S. at 53 n. 21, 97 S.Ct. at 2559 n. 21; NCAA v. Board of Regents of the University of Oklahoma, 468 U.S. 85, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984). The relevant market is determined by reference to both the product market and the geographic market. Brown Shoe, 370 U.S. at 324, 82...