AD/SAT v. Associated Press

• Decision Date: 29 February 1996
• Docket Number: No. 94 Civ. 6655(PKL),95 Civ. 2469(PKL).,94 Civ. 6655(PKL)
• Citation: 920 F. Supp. 1287
• Parties: AD/SAT, A DIVISION OF SKYLIGHT, INC., Plaintiff, v. ASSOCIATED PRESS, Newspaper Association of America, National Newspaper Network, The Newark Star-Ledger, The Birmingham News Company, The Oakland Press Co., The News & Observer Publishing Company, Oklahoma Publishing Company, the Lexington Herald-Ledger, Dayton Newspapers, Inc., Cox Enterprises, Inc., Baltimore Sun Co., Inc., and Advance Publications, Inc., Defendants. AD/SAT, A DIVISION OF SKYLIGHT, INC., Plaintiff, v. Donald E. NEWHOUSE, Defendant.
• Court: U.S. District Court — Southern District of New York

920 F. Supp. 1287

AD/SAT, A DIVISION OF SKYLIGHT, INC., Plaintiff, v. ASSOCIATED PRESS, Newspaper Association of America, National Newspaper Network, The Newark Star-Ledger, The Birmingham News Company, The Oakland Press Co., The News & Observer Publishing Company, Oklahoma Publishing Company, the Lexington Herald-Ledger, Dayton Newspapers, Inc., Cox Enterprises, Inc., Baltimore Sun Co., Inc., and Advance Publications, Inc., Defendants.

AD/SAT, A DIVISION OF SKYLIGHT, INC., Plaintiff, v. Donald E. NEWHOUSE, Defendant.

Nos. 94 Civ. 6655(PKL), 95 Civ. 2469(PKL).

United States District Court, S.D. New York.

February 29, 1996.

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Shulman, Gainsley & Walcott, P.A., Minneapolis, MN (Daniel R. Shulman, Phillip Gainsley, Terry M. Walcott, of counsel), Law Firm of Joseph M. Alioto, San Francisco, CA (Joseph M. Alioto, of counsel), Solomon, Zauderer, Ellenhorn, Frischer & Sharp, New York City (David E. Nachman, of counsel), for Plaintiff.

Rogers & Wells, New York City (Dennis J. Drebsky, Richard N. Winfield, Hilary C. Lane, John A. Nathanson, Edward C. O'Callaghan, of counsel), for Defendant Associated Press.

Cahill Gordon & Reindel, New York City (Patricia Farren, Nancy A. Kopans, of counsel), John F. Strum, General Counsel, Newspaper Association of America, Washington, DC, for Defendants Newspaper Association of America and National Newspaper Network.

Sullivan & Cromwell, New York City (Yvonne S. Quinn, Timothy J. Helwick, Tracey J. Bolotnick, Tamar Feder, Andrew Rotstein, of counsel), for Defendants Newark Morning Ledger Co., The Birmingham News Company, Advance Publications, Inc., and Donald E. Newhouse.

Dow, Lohnes & Albertson, Washington, DC (James A. Treanor, Timothy J. O'Rourke, Scott D. Dailard, of counsel), Treanor, Harvey, Sullivan, Trowbridge & Mullen, New York City (Michael R. Treanor, of counsel), for Defendants Cox Enterprises, Inc., and Dayton Newspapers, Inc.

Wilcox & Savage, P.C., Norfolk, VA (Frank A. Edgar, Jr., Conrad M. Shumadine, of counsel), for Defendant The News & Observer Publishing Company.

Wilmer, Cutler & Pickering, Washington, DC (A. Douglas Melamed, Esq., James W. Lowe, Esq., of counsel), Patterson, Belknap, Webb & Tyler, LLP, New York City (Philip R. Forlenza, of counsel), for Defendant The Oakland Press Company.

Lilly & Bienstock, Garden City, NY (Thomas J. Lilly, Jr., of counsel), for Defendant the Oklahoma Publishing Company.

Hughes, Hubbard & Reed, New York City (James B. Kobak, of counsel), Hughes, Hubbard & Reed, Washington, DC (Robert P. Resnick, of counsel), for Defendant the Lexington Herald-Leader.

OPINION AND ORDER

LEISURE, District Judge:

AD/SAT alleges that defendant Associated Press ("AP") has violated Section 2 of the Sherman Act, see 15 U.S.C. § 2, by (1) attempting to monopolize the alleged market of electronic transmission of advertisements to newspapers; (2) engaging in monopoly leveraging; and (3) monopolizing the news and wire services markets. In addition, AD/SAT alleges that all defendants in this action have: (1) conspired to boycott plaintiff, in violation of Section 1 of the Sherman Act, see 15 U.S.C. § 1; and (2) conspired to monopolize the alleged market of electronic transmission of advertising to newspapers, in violation of section 2 of the Sherman Act. See 15 U.S.C. § 2. Pursuant to Fed.R.Civ.P. 56, AP moves for summary judgment as to AD/SAT's Sherman Act § 2 claims against it. In addition, all defendants move for summary judgment as to AD/SAT's Sherman Act §§ 1 and 2 conspiracy claims against them. Finally, AD/SAT moves for reconsideration of this Court's April 24, 1995 decision granting defendant the Lexington Herald-Leader's motion for summary judgment. Based on the following reasons, the Court grants all defendants' motions in their entirety, and denies AD/SAT's motion for reconsideration.

BACKGROUND

This case is about the business of delivering advertisements from advertisers to newspapers. Traditionally, advertisements have been delivered from the advertiser, or advertising agency, to the newspaper by one of several means of physical delivery, including regular mail, messenger service, and overnight delivery service (such as Federal Express). By choosing to spend advertising dollars advertising in newspapers, as opposed to other alternatives such as television and radio, advertisers trigger the demand for delivery service, and they also typically select the means of delivery. In addition, advertisers normally bare the costs of delivery. At the current time, over 80% of all newspaper ads are delivered by overnight services such as Federal Express, with messenger service being the next most popular means of delivery.

An alternative means of delivering newspaper advertisements is electronic transmission. Electronic delivery of advertising involves the transmission of copy from advertisers to newspapers via satellite or terrestrial (i.e. land-based) means. Two of the parties in this litigation, AD/SAT and AP, deliver advertisements to newspapers over satellite networks. AD/SAT has been engaged exclusively in this activity since 1986, and it delivers its ads over a satellite network owned and operated by AP. AP, a cooperative association whose members consist of over 1,500 United States newspapers, is primarily engaged in the collection, assembly and distribution to newspapers of news and photographs. Recently, however, AP also began to deliver ads to newspapers electronically, also using its satellite network. Unlike the physical carriers such as Federal Express, which engage in a wide variety of delivery services, AD/SAT's and AP's services currently focus exclusively on the delivery of ads to newspapers. AD/SAT argues that AP's entrance into the business, which allegedly occurred with unlawful conspiratorial assistance from the remaining defendants in this litigation, violated the antitrust laws.

Defendant Newspaper Association of America ("NAA") is a non-profit trade association whose membership consists primarily of general circulation daily newspapers in the United States. NAA has 1,500 member newspapers in the United States and Canada. Its mission is to promote the interests of the newspaper industry, in part by encouraging the development of technological and marketing innovations that will enhance the efficiency and profitability of newspapers. Traditionally, one problem for advertisers advertising in newspapers has been the cumbersome billing process for placing a single ad in multiple newspapers. Formed in the spring of 1994, defendant Newspaper National Network ("NNN") is a limited partnership among a wholly-owned subsidiary of NAA and 48 of the 50 largest newspapers in the United States by circulation. To help overcome the perception of newspaper advertising as inefficient and cumbersome relative to other multi-market media competitors such as television and radio, NNN has attempted to facilitate the simultaneous placement of advertising, at competitive prices, in all newspaper markets an advertiser wishes to reach. NNN has contracted with Publicitas Advertising Services, Inc. ("Publicitas") to serve as its "one order/one bill" clearing house for processing multi-newspaper insertion orders. NNN's goal is to attract new advertisers to newspapers, and it is therefore targeting five categories of national advertisers which typically spend less than five percent of their advertising budgets on newspapers ads.

The remaining defendants are individual newspapers or groups of newspapers, and one individual. Defendant Advance Publications, Inc. is owned by the Newhouse family. Defendant Donald E. Newhouse, the president of Advance, was, during times relevant in this litigation, a member of the Board of Directors of AP, and the volunteer Chairman of NAA. Through wholly owned subsidiaries, Advance owns defendants Newark Morning Ledger Co., which publishes The Star-Ledger, and The Birmingham News Company, which publishes The Birmingham News.¹

Cox Newspapers, Inc., a wholly-owned subsidiary of defendant Cox Enterprises, Inc. ("CEI"), publishes fourteen newspapers of general circulation. One of these newspapers is the Dayton Daily News, a Dayton, Ohio newspaper of general circulation, which is owned by defendant Dayton Newspaper, Inc. ("DNI"), a wholly-owned subsidiary of Cox Newspapers. David Easterly, the president of CEI, is a member of the AP Board of Directors, and was a member of an AP Board ad hoc committee which assisted AP's management in investigating and planning AP's entry into the electronic advertisement business.

Defendant Oklahoma Publishing Company publishes an independent daily newspaper called the Daily Oklahoman in Oklahoma City, Oklahoma. Defendant the News & Observer Publishing Company publishes the News & Observer. Finally, defendant Oakland Press Company publishes The Oakland Press, a daily newspaper in Oakland County, Michigan.²

A. The AD/SAT System

The AD/SAT system requires advertisers or advertising agencies to deliver a hard copy (or Velox) of an advertisement to one of two AD/SAT transmittal stations, which are located in Los Angeles and New York. The ad is then scanned into AD/SAT's system, and transmitted to the designated newspapers via the AP owned and operated satellite network. Next, the ad is received at each newspaper by an AP satellite dish, and forwarded to an AD/SAT installed and owned recorder, which produces a hard copy of the ad. Each recorder, which is essentially a high speed facsimile machine, costs approximately $62,000, with additional equipment, necessary to make the recorder operational, costing another $30,000.

AD/SAT's revenue is generated from service fees charged to both newspapers and advertisers. Advertisers are charged per ad transmission, and the amount per transmission decreases as the number of sites to which the ad is sent increases.³ Because the costs of sending an ad to a single location...