United States v. Greater Buffalo Press, Inc

• Decision Date: 01 June 1971
• Docket Number: No. 821,821
• Citation: 29 L.Ed.2d 170,91 S.Ct. 1692,402 U.S. 549
• Parties: UNITED STATES, Appellant, v. GREATER BUFFALO PRESS, INC., et al
• Court: U.S. Supreme Court

402 U.S. 549

91 S.Ct. 1692

29 L.Ed.2d 170

UNITED STATES, Appellant,

v GREATER BUFFALO PRESS, INC., et al.

No. 821.

Argued April 19, 1971.

Decided June 1, 1971.

Syllabus

The United States brought this civil antitrust suit charging that the acquisition by Greater Buffalo Press (Buffalo) in 1955 of all the stock of International Color Printing Co. (International) violated § 7 of the Clayton Act; and that Buffalo, Hearst Corp., through its unincorporated division King Features Syndicate (King), Newspaper Enterprise Assn. (NEA), and others had conspired to restrain the sale of newspapers of the printing of color comic supplements in violation of § 1 of the Sherman Act. Before trial a consent decree was entered against Hearst. Buffalo, which does not control ownership of features or license them, prints the color supplements for newspapers and sells them. International prints color supplements only for King, which controls many popular comic features and is a licensor. International's owners wanted to sell rather than raise capital for modernization and expansion. International paid dividends every year, and in the year of sale its profits increased. Only King and Buffalso were considered as prospective purchasers; no others were even approached. After acquiring International, Buffalo controlled about 75% of the independent color comic supplement business and, through International, it entered into a 10-year contract with King to supply King's printing. The District Court dismissed the complaint after trial. As to the Clayton Act claim, it found two distinct lines of commerce: (1) printing of color comic supplements for newspapers not printing their own, and (2) printing of color comic supplements for syndicates selling copyrighted features to newspapers. That court also found the acquisition to be within the 'failing company' execption to § 7 of the Clayton Act. The United States appeals only from dismissal of the Clayton Act claim. The court did not reach the question of remedy. Held:

1. The line of commerce here is the color comic supplement printing business, which includes the printing of the supplements and their sale, and the 'area of effective competition' encompasses the business of Buffalo, International, and King. While there may be submarkets within this broad market, 'submarkets are not a basis for the disregard of a broader line of commerce that has economic significance.' Pp. 552—554.

2. The test of § 7 of the Clayton Act, whether the effect of an acquisition 'may be substantially to lessen competition,' is met here by Buffalo's control of about 75% of the independent color comic supplement printing business. P. 555.

3. The District Court erred in finding that the acquisition was within the 'failing company' exception, as the two requirements, (a) that International's resources were 'so depleted and the prospect of rehabilitation as remote that it faced the grave probability of a business failure,' and (b) that there was no other prospective purchaser, were not satisfied. Pp. 555—556.

4. The mere passage of time is no barrier to the divestiture of stock illegally acquired. P. 556.

5. The case is remanded to the District Court which has the initial responsibility of the drafting of a decree that will provide an appropriate and effective remedy. Pp. 556—557.

327 F.Supp. 305, reversed and remanded.

Daniel M. Friedman, Washington, D.C., for appellant.

Frank G. Raichle, Buffalo, N.Y., for appellees.

Mr. Justice DOUGLAS delivered the opinion of the Court.

This is a civil antitrust case brought by the United States charging a violation of § 7 of the Clayton Act,¹ as amended, 64 Stat. 1125, 15 U.S.C. § 18. The main thrust of the case involves the acquisition by Greater Buffalo Press, Inc. (Greater Buffalo), of all the stock of International Color Printing Co. (International). The complaint, at the secondary level, charged that Greater Buffalo, Hearst Corp., through its unincorporated division King Features Syndicate (King), Newspaper Enterprise Association, Inc. (NEA), and others had conspired to restrain the sale to newspapers of the printing of comic supplements in violation of § 1 of the Sherman Act, as amended, 26 Stat. 209, 15 U.S.C. § 1. It also charged that Hearst and NEA were violators of certain tying arrangements involving the licensing of comic features and the sale of comic supplements.²

Before trial a consent decree was entered against Hearst, enjoining King from entering into any agreement limiting competition in the printing of colorcomic comic supplements and barring any tying arrangement.

After full trial the District Court dismissed the complaint, 327 F.Supp. 305. ³ The case came here under § 2 of the Expediting Act, as amended, 32 Stat. 823, 15 U.S.C. § 29. We noted probable jurisdiction, 400 U.S. 990, 91 S.Ct. 460, 27 L.Ed.2d 437. We reverse the judgment below.

The case involves the comic supplement business used weekends by most newspapers. Some papers print their own comic supplements; others purchase them.

Greater Buffalo prints color supplements for newspapers and sells them.

International prints color comic supplements for King only.

Most color comic supplements are printed by companies like Greater Buffalo and sold to newspapers. But individual newspapers contract for the purchase of comic features and it is those comics that Greater Buffalo prints for the particular papers.

The most popular comic features used by major metropolitan papers are controlled by King.

Greater Buffalo has no control over the ownership of features and therefore does not license them. As noted, however, King is a licensor; and moreover, it prints 'ready-print' supplements which are preprinted and supplied to many newspapers only with masthead change.

The District Court declared that the acquisition of International by Greater Buffalo has not, and will not, result in a substantial lessening of competition in the color comic supplement industry, and therefore did not constitute a violation of § 7 of the Clayton Act.

The basic error of the District Court, in our view, was in its finding that the significant lines of commerce involved in this action should be divided into 'two distinct and separate categories: (1) the printing of color comic supplements for newspapers which do not print their own, and (2) the printing of color comic supplements for syndicates engaged in the sale of copyrighted comic features to newspapers. These are the lines of commerce—to treat them together as one line of commerce, i.e., the printing and sale of color comic supplements would be to ignore the tremendous leverage of the syndicates which control the copyrighted features.'

As we read the record, the printing of color comic supplements and their sale are component parts of the color comic supplement printing business. One firm or company may both print and sell; another may print yet sell through a third organization, as does International through King. The 'area of effective competition,' Standard Oil Co. v. United States, 337 U.S. 293, 299—300 n. 5, 69 S.Ct. 1051, 1055—1056, 93 L.Ed. 1371, comprises the business of Greater Buffalo, International, and King. There may be submarkets within this broad market for antitrust purposes (Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 1523—1524, 8 L.Ed.2d 510), but, as we said in United States v. Phillipsburg National Bank & Trust Co., 399 U.S. 350, 360, 90 S.Ct. 2035, 2041, 26 L.Ed.2d 658 'submarkets are not a basis for the disregard of a broader line of commerce that has economic significance.'

The District Court, proceeding from its premise as to the relevant market, analyzed the effects on the competition between Greater Buffalo and International resulting from the purchase of the stock of the latter. The true import would include not only that but also the effect on competition of the alliance with King, through the acquisition of King's client, International. The three of them were engaged in the single line of commerce consisting of the printing and distribution of color comic supplements. The printing of color comics is the same no matter for whom it is done or through whom they are distributed. The combination of those who print and sell comic supplements with those who sell comic supplements printed by others fastens more tightly the hold of the group on the side of supplement printing business. As a result of the acquisition, King has become dependent on Greater Buffalo for most of the printing which it sells in competition with Greater Buffalo. Greater Buffalo, it is said,...