Knutson v. Daily Review, Inc.
| Decision Date | 23 September 1974 |
| Docket Number | No. C-73-1354-CBR.,C-73-1354-CBR. |
| Citation | 383 F. Supp. 1346 |
| Parties | Douglas K. KNUTSON et al., Plaintiffs, v. The DAILY REVIEW, INC., a corporation, et al., Defendants. |
| Court | U.S. District Court — Northern District of California |
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G. Joseph Bertain, Jr., Timothy H. Fine, William T. Amen, San Francisco, Cal., for plaintiffs.
Broad, Khourie & Schulz, Michael N. Khourie, Thomas Paine, San Francisco, Cal., for defendants.
Plaintiffs in this antitrust action are independent dealers who purchase, distribute and resell daily newspapers, The Argus and The Daily Review, in various areas located in Alameda County.1
Defendants are two corporations and several individuals. The Daily Review, Inc. ("DRI") is a California corporation organized on November 10, 1953, with its principal place of business at Hayward, California. DRI publishes The Argus, The Daily Review, and The Daily Review Shopping News, a weekly free shopper. Bay Area Publishing Co. ("BAPCO") is a California corporation organized on June 8, 1960, with its principal place of business in San Francisco, California. BAPCO conducts most of its business at Livermore, California, where it publishes the Tri-Valley Herald ("Herald") and the Tri-Valley News ("News"). BAPCO is a wholly owned subsidiary of DRI. None of the plaintiffs herein has any relationship, contractual or otherwise, with BAPCO. Floyd L. Sparks is the controlling shareholder of DRI, the president of DRI and BAPCO, and publisher of The Argus, The Daily Review, the Herald, and the News. William Chilcote is the business manager of DRI. Dallas Cleland is the director of circulation of The Argus, The Daily Review, the Herald and the News. John Clark is the assistant circulation manager of The Daily Review and promotion manager of The Daily Review, The Argus, the Herald, and the News. Carl Felder, doing business as Felder Enterprises, is an independent contractor engaged in the solicitation of subscribers for newspapers, including those involved in this case.2
Plaintiffs have alleged four separate claims for relief, all of which arise under the Sherman Act. First, plaintiffs claim that the provision in their written dealership agreements with the publisher ("Dealer's Agreement"), in effect between December 1, 1969, and September 1, 1973, which requires the dealer to sell the newspaper to the individual subscriber at a price fixed by the publisher (in effect, the resale-resale price) constitutes a vertical price fixing agreement in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Second, they allege that the unilateral termination provisions of the Dealer's Agreement as well as the other restraints on plaintiffs' ability to sell their businesses and the actual termination of plaintiffs and all other home delivery dealers as of September 1, 1973 amount to unreasonable restraints of trade in violation of Sherman Act § 1. Third, plaintiffs claim that the territorial restraints imposed upon them in the Dealer's Agreement are unlawful under Sherman Act § 1. Fourth, plaintiffs allege that defendants have attempted and conspired to monopolize the publication of community daily newspapers in the southern Alameda County area in violation of § 2 of the Sherman Act, 15 U.S. C. § 2. The complaint prays for preliminary and permanent injunctive relief under § 16 of the Clayton Act, 15 U.S.C. § 26, and for treble damages, costs and attorney's fees under § 4 of the Clayton Act, 15 U.S.C. § 15.
The parties have stipulated and the Court finds that the business involved in this case is either in or substantially affects interstate commerce. The requisite interstate commerce being present, this Court has jurisdiction under 15 U.S. C. §§ 15 and 26.
The Daily Review is published daily, in the afternoon Monday through Saturday, and in the morning on Sunday. It circulates in Hayward, San Leandro, Fremont, Newark, Livermore and elsewhere in southern Alameda County. Approximately seventy-five percent of its average paid circulation is within the "City Zone", which as defined by the Audit Bureau of Circulations ("ABC") consists of the corporate limits of Hayward and Union City plus the balance of the Hayward Census Division, Castro Valley Division, and San Leandro Division including that part of San Leandro City comprising Census Tracts 33, 34, 35, 42, 43 and 44. Along with other newspapers, The Daily Review is legally adjudicated to carry advertising required by law for transactions within the cities of Hayward and San Leandro, and it is the only newspaper adjudicated to carry legal advertising originating with the political entities of the cities of Hayward and San Leandro. Printed in Hayward, The Daily Review has twenty-eight full-time and ten part-time reporters and sixteen advertising salesmen.
The Argus is a morning seven-day daily newspaper circulated in Fremont, Newark, Union City, and elsewhere in southern Alameda County. Approximately ninety percent of its average paid circulation, as reported by ABC, is located within the cities of Fremont and Newark. It is legally adjudicated along with other newspapers to carry legal advertising for transactions within Fremont and Newark, and it is the only paper adjudicated to carry legal advertising originating with the political entities of the cities of Fremont and Newark. The Argus is printed in Livermore and employs fifteen full-time reporters and eight advertising salesmen.
The Herald (formerly the Livermore Herald & News) and the News (formerly the Village Pioneer) both circulate in the Livermore Valley. The Herald is a seven-day morning daily while the News is a three-day per week, controlled circulation3 afternoon paper. Approximately ninety-five percent of the average paid circulation of these papers is within the Primary Market Area consisting essentially of Livermore, Pleasanton, and Dublin, all in Alameda County, and the community of San Ramon in Contra Costa County. The Herald and the News share with other papers the adjudication for legal advertising within the cities of Livermore and Pleasanton, but they are the only newspapers adjudicated to carry legal advertising originating with the political entities of those two cities. These two papers are printed in Livermore and employ fourteen full-time reporters, five part-time reporters, and eight advertising salesmen.
The following portions of The Daily Review, The Argus, the Herald, and the News are identical: sports page, financial page, editorial page except for one editorial on two days during the week, T.V. log, "Night and Day Around the Bay," and substantial amounts of news and advertising. All of the composition work for these publications is done in Hayward.
This case focuses on the independent dealer system used by the Sparks' publications and the publisher's attempt to change from that distribution system to one composed of employee dealers ("district managers") and independent carriers. In approximately 1950 Sparks adopted the independent dealer system for distribution of The Daily Review. Thereafter this system was used for distribution of each daily newspaper acquired by Sparks or DRI so that in May, 1973, all daily newspapers published by companies owned or controlled by Sparks were distributed to home-delivery subscribers through independent dealers and independent carriers.
Under this distribution system each dealer, including plaintiffs here, purchased his copies of The Argus or The Daily Review from DRI and resold them for his own account to independent carriers —boys and girls under the age of 18. These carriers, in turn, resold the newspapers to home-delivery subscribers. Each dealer was engaged as an independent contractor pursuant to the terms of a written dealership agreement, not as an employee of DRI. Upon purchase of the newspapers each dealer had complete ownership of, possession of, and dominion over the papers. DRI did not reimburse a dealer for unsold copies, and the dealers had to sustain all losses from carrier defalcations. Each dealer owned such equipment as was necessary for the distribution of the newspapers to the carriers. No dealer under contract to DRI ever paid anything of value to obtain his dealership or carrier organization. These independent dealers derived their profit and paid their expenses from the difference between the price at which they sold the newspapers to their carriers and the price at which they purchased the papers from DRI. Rather than being uniform, however, the base rate charged by DRI for the papers varied among the dealers so that each dealer's income would be commensurate with the size, density and difficulty of delivery of his territory. By this means it was intended that each dealer would be able to earn an income which would fairly compensate him for his time and effort expended. This dealer income figure was reached jointly by the dealer and the publisher and then used, along with the set subscription price, the carrier's income (e. g., 57 cents per subscriber per month after October 1, 1969, for The Daily Review) and the number of subscribers, to calculate the base rate for the newspaper for each dealer.4
Prior to December 1, 1969, DRI used a standard form of dealer's agreement which provided that the dealer would sell newspapers to the subscribers within his route or territory at a fixed subscription price and that the subscription price, the price paid to the publisher by the dealer, and the size and boundaries of the territory were subject to change by the publisher in his sole discretion. The dealer could not assign, transfer or hypothecate rights arising under the agreement without the prior written consent of the publisher. A dispute arose whether under the terms of this agreement certain Herald and News dealers were independent contractors or employees of the publisher. As a result of this...
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...(S.D.Texas 1975). The acts from which one can infer specific intent must be essentially predatory in nature.25 Knutson v. Daily Review, 383 F.Supp. 1346, 1372-1375 (N.D.Cal.1974). Hence, it is with this understanding that we turn to the question of whether, accepting plaintiff's version of ......
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