United States v. Lorain Journal Co.

• Citation: 92 F. Supp. 794
• Decision Date: 29 August 1950
• Docket Number: Civ. A. No. 26823.
• Parties: UNITED STATES v. LORAIN JOURNAL CO. et al.
• Court: U.S. District Court — Northern District of Ohio

92 F. Supp. 794

UNITED STATES v. LORAIN JOURNAL CO. et al.

Civ. A. No. 26823.

United States District Court N. D. Ohio, E. D.

August 29, 1950.

Don C. Miller, Cleveland, Ohio, Victor H. Kramer, Victor A. Altman, and Baddia J. Rashid, Washington, D. C., and Robert B. Hummel and Norman Seidler, Cleveland, Ohio, for plaintiff.

Parker Fulton and Charles A. Baker, Cleveland, Ohio, for defendants.

FREED, District Judge.

This is a civil action instituted by a complaint filed by the United States under Section 4 of the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15 note, against the defendants, The Lorain Journal Company, an Ohio corporation which publishes the Journal and Times-Herald (hereinafter the "Journal"), Samuel A. Horvitz, Vice President, Secretary, and a director of the corporation, Isadore Horvitz, President, Treasurer, and a director of the corporation, D. P. Self, Business Manager of the Journal, and Frank Maloy, Editor of the Journal. It seeks to enjoin them from continuing to engage in certain acts in furtherance of an alleged combination and conspiracy in restraint of the interstate commerce of competitive news and advertising media and of their advertisers in violation of Section 1 of the Act, and an alleged combination and conspiracy to monopolize and an attempt to monopolize news and advertising channels in violation of Section 2 of the Act.

There is no dispute as to those salient facts which are dispositive of the issues raised. Since 1933, the Lorain Journal has been the only daily (excluding Sunday) newspaper of general circulation published in Lorain, Ohio, a city with a population of approximately 52,000. Prior to that time a competing daily newspaper called the Times-Herald was published and circulated in Lorain, but in December, 1932 its assets were purchased by the Lorain Journal Company, the Mansfield Journal Company, and defendant Samuel A. Horvitz.

The Journal's position in the community is a commanding and an overpowering one. It has a daily circulation in Lorain of over 13,000 copies and it reaches ninety-nine per cent of the families in the city. The Lorain Sunday News is a small weekly published in Lorain on Sundays only. It has a circulation of slightly over 3,000 copies, distributed almost exclusively in Lorain. The Chronicle-Telegram, a daily (excluding Sunday) newspaper of general circulation, is published eight miles away in Elyria, Ohio, but that newspaper is not distributed in Lorain although the Journal is sold in Elyria. The one morning and two afternoon newspapers published in nearby Cleveland have some circulation in Lorain, but the Journal enjoys more than two-thirds of the combined Lorain circulation of the four newspapers.

The evidence makes it clear that the Journal has no competitor for the newspaper advertisements of Lorain merchants except for the extremely limited competition provided by the Lorain Sunday News.

The first serious competitive cloud appeared on the Journal's previously unlimited horizon in October, 1948, when, pursuant to Federal Communications Commission's license, radio stations WEOL and WEOLFM began broadcasting operations from studios in Lorain and Elyria. The Journal had previously attempted without success to obtain a radio broadcasting license.

The principal charge of the complaint and the proof was that the defendants formulated and put into execution a plan designed and intended to eliminate this threat by the device of refusing to publish advertisements for local merchants who used the radio stations.¹

This charge has been clearly established. The record reveals a story of bold, relentless, and predatory commercial behavior. The Journal, its officers and employees, informed merchants who proposed to advertise over the radio stations that if they did so, their terminable advertising contracts with the Journal would be brought to an end and would not be renewed. The Journal monitored the programs of WEOL to learn who was using the advertising facilities of the radio station and those who did advertise over the radio had their contracts terminated, and were permitted to renew them only after they ceased to use WEOL. Numerous Lorain County merchants testified that, as a result of the Journal's policy, they either ceased or abandoned their plans to advertise over WEOL.

The Journal refused to carry the program logs of WEOL as paid advertisements although it prints the logs of some Cleveland stations in its news columns, and it even refused to publish an advertisement seeking employees to staff the radio station.

No excuse was offered to the prospective advertiser in many instances for the peremptory refusal to accept the advertising if he used the radio station. On some occasions, when merchants remonstrated or sought an explanation, they were informed that it was the policy of the Journal to require advertisers to give the radio a "fair" — that is an exclusive — trial or they were informed that the policy was designed to "protect" the Lorain merchants by preserving the integrity of the Lorain market.

Those same rationalizations were advanced to this Court as the justifications for the behavior of the defendants, and this Court, like the Lorain merchants to whom they were first presented, is not convinced. The assertion that the Journal's policy was designed to permit advertisers to give the radio a fair test is too specious for any comment other than that it is unworthy of belief and unworthy of the astuteness and sharp business intelligence noticeably displayed on the witness stand by the defendant Samuel Horvitz, the dominant figure in the operation of the Journal. That the Journal was attempting to create an economic oasis in Lorain seems incredible, and it is difficult for the Court to see how the defendants could reasonably ascribe this activity to a benevolent desire to protect the Lorain merchants from themselves where the obvious result was to deprive those merchants of a channel which might attract additional business to their market at the very time that merchants in neighboring communities served by WEOL were using it for that purpose.

From the evidence there can be no doubt that the policy was as uncomplicated in purpose and as lacking in subtlety as the profit motive itself; the Journal sought to eliminate this threat to its pre-eminent position by destroying WEOL.

WEOL was licensed for the purpose of serving an area located wholly within the boundaries of Ohio. However, its broadcasts can be and are heard in southeastern Michigan. Numerous persons testified that they heard the broadcasts from WEOL on home or automobile receiving sets in Michigan, and it was agreed that additional witnesses would give similar testimony if called. A radio engineer who conducted field tests gave his opinion that WEOL might be satisfactorily heard on receiving sets in various places in southeastern Michigan during daylight hours.

WEOL is not affiliated with any national network. The majority of its programs originate in its local studios. However, in the past year, it carried broadcasts of over one hundred athletic events originating at places outside of Ohio. About sixty-five per cent of WEOL's broadcast time is devoted to the playing of musical transcriptions which are leased to WEOL by companies located outside of Ohio. WEOL devotes about ten to twelve per cent of its total broadcast time to news broadcasts. These broadcasts consist in part of world and national news gathered outside of Ohio and provided to WEOL by United Press teletype.

The income of WEOL is predominantly derived from the advertising of local merchants. Sixteen per cent of its gross income in 1949 was obtained from "national advertisers" who seek to promote good will for a particular product on a national scale. In a relatively few instances WEOL has broadcast advertising for out-of-state suppliers who were soliciting orders to be filled by direct shipment. There was no evidence that either of these two classes of advertisers has yet been refused access to the columns of the Journal because of their use of WEOL.

These are the facts upon which the Government predicates its charges, foremost of which is the charge of an attempt to monopolize.

The position of the Journal as the only significant medium of newspaper advertising in the City of Lorain may not, in and of itself, have constituted monopolization within the meaning of the Sherman Act, although it is a monopoly in common parlance. But the abuse of the power inherent in its position to compel a customer boycott of WEOL is a different matter. For "the use of monopoly power, however lawfully acquired, to foreclose competition, to gain a competitive advantage, or to destroy a competitor, is unlawful." U. S. v. Griffith, 334 U.S. 100, 107, 68 S.Ct. 941, 945, 92 L.Ed. 1236.

The defendants have urged upon the Court, in another connection, the principle that a single trader has a right to deal or to refuse to deal with whomever it pleases for whatever reason it pleases, so long as it does not combine with others to achieve its end. The classic statement of that doctrine recognized the right only in "the absence of any purpose to create or maintain a monopoly". U. S. v. Colgate & Co., 250 U.S. 300, 307, 39 S.Ct. 465, 468, 63 L.Ed. 992, 70 A.L.R. 443. The Journal admittedly has a right to select its advertisers for good reason or without reason, but it has no right in pursuit of a monopoly to require them not to deal with a competitor.

Where that is the purpose and design with which the defendants act, it is legally immaterial whether the course of action is or might be successful. As a practical matter no enterprise would single-handedly embark upon or persist in such behavior unless attainment were a possibility. The success crowning the Journal's efforts does not result from competition in the healthy sense of superior business skill and efficiency, but from the fact that while the Journal and WEOL are...