A group of magazine publishers, including Time Inc., Hearst Corp., American Media Inc., Rodale Inc., won a longstanding antitrust case filed by wholesaler Anderson News LLC.
The $371 million antitrust suit, which was initially filed in 2009 in New York Southern District Court claimed the publishers banded together to not accept Anderson’s price hikes pertaining to distribution and inventory costs. The complaint was dismissed in 2010, but appealed in the Second Circuit two years later when Anderson alleged that the defendants conspired to cut its magazine supply.
On Thursday, Judge Paul Crotty said Anderson’s claims did not constitute antitrust violations, and he granted the defendants’ motion for summary judgment. He also intimated instead that Anderson’s actions, which included persuading its retail partners — Wal-Mart Stores Inc. and The Kroger Co. — to refuse business from the publishers, might have had its own antitrust implications.
“If there were ever an antitrust case of the pot calling the kettle black, this is it,” Crotty said in his judgment.
In the years leading up to the suit, Anderson had tried to increase prices on publishers, attempting to employ a variety of tactics, including fuel surcharges based on the weight of the magazine delivered. The publishers pushed back after Anderson proposed a seven-cent per copy distribution fee in 2009. Anderson’s competitor Source Interlink Distribution LLC sought similar increases as a result. (If that name sounds familiar, it’s because Source Interlink filed for bankruptcy in 2014, a move that caused further disruption to the newsstand business across the magazine industry.)
At the time, many of the publishers were feeling the crush of the economy and said they couldn’t afford the price increases and thus could not reach an agreement with Anderson.
As a result, Anderson negotiated with two of its largest retail clients Wal-Mart and Kroger to refuse business from other wholesalers.
Anderson then tried to “take advantage” of its controlling position in ProLogix East, a company that delivered magazines to retailers, by refusing to open its warehouse to make deliveries for Anderson News’ competitors, according to court papers. The wholesaler’s threat to stop deliveries was enjoined by a federal court in the District of Delaware, and when Anderson received word of the decision, it chose to go out of business. It filed the lawsuit shortly after it filed for bankruptcy in early 2009.
Time, Hearst and American Media filed counterclaims in the case, arguing that Anderson conspired with Source Interlink to impose a surcharge. Crotty tossed those counterclaims out on Thursday, noting that the publishers didn’t show they had “suffered” the kind of injury antitrust law is designed to prevent from the alleged “price fixing,” or 7-cent hike, if it had occurred.
“The antitrust laws do not compel any entity to accept a price increase, or assume the burden of a significant cost,” Crotty offered.