Bowen v. New York News, Inc.

• Decision Date: 23 August 1973
• Docket Number: No. 67 Civ. 1030.,67 Civ. 1030.
• Citation: Bowen v. New York News, Inc., 366 F.Supp. 651 (S.D. N.Y. 1973)
• Parties: Charles W. BOWEN, Jr. d/b/a Suburbia News Delivery Service, et al., Plaintiffs, v. NEW YORK NEWS, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

366 F. Supp. 651

Charles W. BOWEN, Jr. d/b/a Suburbia News Delivery Service, et al., Plaintiffs, v. NEW YORK NEWS, INC., et al., Defendants.

No. 67 Civ. 1030.

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

June 29, 1973.

Judgment August 23, 1973.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Herbert Monte Levy, New York City, for plaintiffs.

Nicholas L. Coch, New York City, for defendants Michael Lepore and Victore Lepore.

Townley, Updike, Carter & Rodgers, New York City, for other defendants (Andrew L. Hughes, Ronald S. Daniels, John M. Callagy, New York City, of counsel).

BAUMAN, District Judge.

This is an action by thirty independent home delivery dealers¹ of The Daily News and the Sunday News against New York News, Inc. ("The News"), the publisher of those newspapers, and various of its employees and franchise dealers for treble damages and injunctive relief under Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 26. The request for relief is based upon alleged violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2; Section 3 of the Clayton Act, 15 U.S.C. § 14; and Sections 2(a), 2(c), 2(d), 2(e) and 2(f) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. §§ 13(a), (c), (d), (e) and (f). At issue is the effort of The News to change its home delivery system from one employing independent route dealers to one utilizing carrier boys operating in conjunction with "franchised dealers".²

I.

In order to understand the exact nature of the alleged antitrust violations set forth in the complaint, it is necessary to describe in some detail the parties to this action and their relationships with each other.

The News is a New York corporation engaged in the business of publishing and distributing the "Daily News" and "Sunday News", newspapers published in New York City and generally distributed in the New York metropolitan area and, to a lesser extent, in the United States and foreign countries. At the time of this lawsuit, its circulation was approximately 2,000,000 papers daily and 3,000,000 on Sunday, the largest of any newspaper in the United States.

The News concedes, as well it might, that it is engaged in interstate commerce within the meaning of the Sherman and Clayton Acts. It is undisputed that it carries local, state, national and international news, including sports, nationally known columnists, comics and other syndicated features. Its enormous advertising content includes the messages of industrial giants from every corner of the United States.

The remaining defendants are either present or former News employees or present or former franchise dealers.³

The plaintiffs are, or were, independent route dealers dealing in a number of newspapers, periodicals and special interest publications. In general, they purchase these items from wholesalers and resell them to home delivery subscribers in defined territories.⁴ Because each confines his activities to his own territory, the routes have become more or less valuable and salable.

Prior to 1965, The News was home delivered exclusively by such route dealers. However, owing to circumstances to be related, The News became dissatisfied with its growth of home delivery circulation and decided to test a new distribution system in certain areas of the suburban metropolitan area, principally in Nassau and Suffolk Counties, using carrier boys who would buy their papers from franchised dealers. At the same time, it continued to deal with many of the route dealers in the time honored way. For this reason, the plaintiffs in this action fall into four separate categories.

(1) Route dealers to whom The News terminated sales on or after January 10, 1966;⁵

(2) Route dealers who continue to receive copies of The News and who operate in areas in which the franchise system has not been instituted;⁶

(3) Route dealers who continue to receive copies of The News and who operate in areas in which the franchise system has been instituted;⁷

(4) One route dealer who acquired his route from a terminated route dealer and who never sought to purchase from The News.⁸

The application of the legal theories advanced by the plaintiffs vary with respect to each of these categories and this difference will be noted as each of the theories is discussed.

II.

In the early 1960's, The News' circulation in New York City began to decline largely because of the fall off in sales of its evening edition which eventuated from the increasing popularity of television and the decreasing number of retail outlets remaining open in the evening. At the same time, the suburban explosion was creating a burgeoning market for newspaper sales which coincided with a similar shift of commercial enterprises from the city to the suburbs and their evolution as prime advertising markets. Since the bulk of The News' revenues comes from advertising, its appetite for its share was, quite naturally, whetted.

To this end, it attempted to compete with regional and local newspapers for circulation and advertising by publishing a number of suburban or zone sections, each of which was and is distributed as part of The News in a specific geographic area. These suburban sections, which carry area news, also carry local advertising at lower rates than are charged for the full run of the paper.

However, under the route dealer system, The News' campaign was something less than successful. While the population of Nassau and Suffolk Counties rose by approximately 350,000 between 1960 and 1966, The News' home delivered circulation in that area increased by only 2,383 copies. At the same time, Newsday's home delivered circulation increased dramatically as did that of the Long Island Press.

The News decided that its failure resulted from the disinterest of route dealers and hired Jack Underwood to develop a new distribution system.

In 1965 he instituted a pilot franchise dealer program in an area of Nassau County not then being serviced by a route dealer. This was so successful that it became the model for The News' new distribution system which was then expanded into certain parts of New York City and almost throughout Long Island. The franchise dealers who participated in the program were signed to contracts, the relevant provisions of which are:

(1) that The News agrees to assign an exclusive territory to the dealer;

(2) that the dealer agrees to purchase all newspapers required by home delivery customers at prices fixed by the The News and supervise the delivery of them "at no more than the regularly assigned home delivery price";

(3) that the dealer agrees not to sell or distribute copies of any other newspaper, or any advertising material not authorized by The News;

(4) that the dealer agrees not to charge any carrier boy engaged in making deliveries and collections more than the price established therefor by The News;

(5) that the dealer does not have the right to return unsold copies of The News;

(6) that The News may terminate the agreement without advance notice if the dealer breaches any of its provisions, but that the dealer must give sixty days' notice in writing; and

(7) that the dealer "is and shall remain an independent contractor and not an employee or agent of The News."

In late 1965 and early 1966, a number of the plaintiffs were contacted by letter or telephone and offered the opportunity to become franchise dealers.⁹ Those who responded were told that if they did not agree to adhere to all of the provisions of the franchise agreement their supplies of The News would be cut off. None of them was willing to bow to its restrictive terms and, within time, each was notified by letter or otherwise that The News would no longer deal with him.¹⁰ In all, sixteen plaintiffs were cut off.¹¹

In the meantime, The News continued to recruit franchise dealers who were subsidized to help them through the early organizational phase of their operation and were charged less for The News than the route dealers who had not been terminated.

The eliminated route dealers attempted to buy copies of the paper from local newsdealers, but, with rare exception, found no one in Nassau or Suffolk willing to cooperate with them. As a result, they were forced to travel great distances and pay close to cover price to obtain its early editions. However, when franchise dealers complained that they were still facing competition from the "cut off" route dealers, defendants O'Sullivan and Cantanzaro directed them to ascertain the sources of the route dealers' supplies and promised that they would be eliminated. This precipitated a relentless campaign by the franchise dealers to learn the route dealers' sources of supply in which News employees enlisted and, as a result of which, the route dealers were under constant surveillance by franchise dealers, employees of The News and off-duty policemen recruited for this purpose. In some instances, the policing activities of the defendants turned into sheer harrassment. For example, when plaintiff Markowitz was observed removing papers from a drug store, The News had him arrested despite the fact that he claimed he had a written contract with the owner, one Max Seltzer, which authorized him to do so. When Seltzer was asked by defendant Auerbach to prosecute Markowitz, he confirmed Markowitz' story. He was told that if he did not agree to press charges The News would no longer supply him with papers. Seltzer refused and was cut off the next day.

III.

Plaintiffs contend that (1) The News' franchise agreement is an illegal price fixing agreement and that sales to them were discontinued in furtherance thereof; (2) the defendants have combined, in violation of Section 1 of the Sherman Act, to exclude them from access to copies of The News; (3) the franchise agreement contains illegal territorial and customer restrictions; (4) The News has attempted to monopolize the newspaper home delivery market; (5) the defendants have conspired to...