Tri-State Broadcasting Co. v. UNITED PRESS INTERNAT'L INC.

• Decision Date: 02 December 1966
• Docket Number: No. 23087.,23087.
• Citation: 369 F.2d 268
• Parties: TRI-STATE BROADCASTING COMPANY, Inc., Appellant, v. UNITED PRESS INTERNATIONAL, INC., Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

369 F.2d 268 (1966)

TRI-STATE BROADCASTING COMPANY, Inc., Appellant, v.UNITED PRESS INTERNATIONAL, INC., Appellee.

No. 23087.

United States Court of Appeals Fifth Circuit.

December 2, 1966.

Archibald A. Farrar, F. H. Boney, Summerville, Ga., for appellant.

Robert S. Sams, Milton A. Carlton, Jr., Atlanta, Ga., for appellee; Troutman, Sams, Schroder & Lockerman, Atlanta, Ga., Baker, Hostetler & Patterson, Cleveland, Ohio, of counsel.

Before RIVES, BELL and THORNBERRY, Circuit Judges.

THORNBERRY, Circuit Judge:

Appellant, Tri-State Broadcasting Company, a Georgia corporation, instituted this claim for treble damages against appellee, United Press International, asserting that UPI had violated Section 2(a) of the Clayton Act,15 U.S.C. § 13, as amended by the Robinson-Patman Price Discrimination Act, 49 Stat. 1528(1936),15 U.S.C. § 13(a).Appellant claims in substance that UPI discriminated against appellant by charging it a substantially higher weekly contract price for UPI's news report service than those prices charged to other radio broadcasting stations operating in the same area.The district court dismissed appellant's complaint on the ground that the news information service supplied by UPI did not constitute a "commodity" within contemplation of the Act.We agree and affirm.

Appellant concedes that "if the subject matter of the contract was not a commodity as intended under the Robinson-Patman Price Discrimination Act then appellant would have no cause of action and the trial court would be correct in its ruling."Although the term "commodity" is nowhere defined in the Act,¹ a review of legislative history together with the sparse body of applicable case law in this area convinces us that the news service involved in this controversy cannot be held to constitute a "commodity" as that term is used in the Act.The contract between the parties provides in pertinent part that

United Press hereby bargains and sells to the Broadcaster the right and privilege of broadcasting vocally, on either sustaining or commercial programs over radio stations WGTA located at Summerville, Ga. the United Press full radio News Report, and agrees as far as practicable, to deliver said News Report to the Broadcaster by automatic printer.

(Emphasis added.)While the mere form of a contract will not be given controlling effect if the substance of the comtemplated transaction brings it within the ambit of the antitrust laws, Butterick Co. v. Federal Trade Comm., 2d Cir.1925, 4 F.2d 910, in this instance we think it apparent that in essence the transaction contemplates the sale of a privilege to broadcast news information, notwithstanding that incidental to such privilege is the right of appellant to utilize UPI's written news reports.Virtually no transfer of an intangible in the nature of a service, right, or privilege can be accomplished without the incidental involvement of tangibles,² and we conclude that in such circumstances the dominant nature of the transaction must control in determining whether it falls within the provisions of the Act.SeeGeneral Shale Products Corp. v. Struck Const. Co., 6th Cir.1942, 132 F.2d 425, cert. denied, 1943, 318 U.S. 780, 63 S.Ct. 857, 87 L.Ed. 1148.Here, the dominant purpose of the transaction was not merely the purchase by appellant of tangible written news reports, but rather the valuable right and privilege of broadcasting to its listeners news supplied by a reputable news information service.In substance, the contract contemplates the sale of a service together with the privilege of vocally passing on the information supplied by that service to a radio audience.The news items in their printed form at best represent tangible incidents of appellant's contractual right to utilize UPI's services.

While apparently no court has had occasion to pass upon the specific issue before us, the rationale employed by several courts in somewhat analogous controversies buttresses our conclusion that a contract for the sale of news information services does not constitute the sale of a "commodity" within contemplation of the Act.Columbia Broadcasting System, Inc. v. Amana Refrigeration, Inc., 7th Cir.1961, 295 F.2d 375, involved a suit by Columbia Broadcasting System for monies due on a contract under which CBS had agreed to produce and broadcast a television show under Amana's sponsorship.In defense of the claim, Amana filed a counterclaim asserting that CBS had granted greater discounts in price to other sponsors in violation of Section 2(a) of the Clayton Act, as amended, 15 U.S.C. § 13(a), and had also required Amana to purchase time over a specified group of network stations in violation of Section 3 of the Act, 15 U.S.C. § 14.In affirming the district court's dismissal of Amana's counterclaim for failing to state a cause of action under the Act, the Court reasoned:

We are of the opinion that the reasonable inferences to be drawn from the allegations concerning the written agreements do not admit of the transaction being accurately characterized as a "sale" of television "time" as it is labeled by Amana nor as merely a "services" contract as argued by CBS.Although both services and time are involved we conclude that in its essence the contract alleged is a purchase by Amana of the privilege of having itself identified as sponsor of the program broadcast and making use of the permissible portion thereof for advertising its products.

We are mindful of the fact that dictionary definitions of the word "commodity" have included its use in the sense of "privilege."* * * But here we must evaluate the word in the context in which it appears — the purchase, lease or sale of goods, wares, merchandise, machinery or supplies.

295 F.2d at 377-378.Similarly, in United States v. Investors Diversified Services, Inc., D.Minn.1951, 102 F.Supp. 645, the court rejected a contention that a contract for the loan of money secured by real estate mortgages involved a "commodity" as that term is used in Section 3 of the Act, 15 U.S.C. § 14.In a well-reasoned opinion the court concluded:

Although the phrase "other commodities" appears at the end of the phrase "goods, wares, merchandise, machinery, supplies," the rule of ejusdem generis requires that it be confined to articles of the same kind, class, and character as those specifically enumerated.* * * "Commodities" therefore must be given its usual and natural meaning.* * *

And no good reason is suggested why the Court should distort the usual, accepted meaning of the language used in the Act in order to bring within the purview of this sectionan article which may be in trade or in commerce, but has never been considered as a commodity as that term is used normally.* * * If Congress had desired synonymy between "commodities" and "commerce", it could have so indicated.* * * That the broad terms and constructions of the Sherman Act cannot be transplanted automatically into Section 3 of the Clayton Act is evident.

102 F.Supp. at 648-649.SeeFleetway, Inc. v. Public Service Interstate Transp. Co., 3d Cir.1934, 72 F.2d 761;County Theatre Co. v....