Lorain Journal Co. v. United States

Last updated

Lorain Journal Co. v. United States
Seal of the United States Supreme Court.svg
Supreme Court of the United States
Argued October 17, 1951
Decided December 11, 1951
Full case nameLorain Journal Company, et al v. United States
Citations342 U.S. 143 ( more )
72 S. Ct. 181; 96 L. Ed. 162
Case history
PriorInjunction granted, 92 F. Supp. 794 (N.D. Ohio 1950); probable jurisdiction noted, 71 S. Ct. 743 (1951).
Court membership
Chief Justice
Fred M. Vinson
Associate Justices
Hugo Black  · Stanley F. Reed
Felix Frankfurter  · William O. Douglas
Robert H. Jackson  · Harold H. Burton
Tom C. Clark  · Sherman Minton
Case opinion
MajorityBurton, joined by unanimous
Laws applied
Sherman Antitrust Act

Lorain Journal Co. v. United States, 342 U.S. 143 (1951), is a decision of the United States Supreme Court [1] that is often cited as an example of a monopolization violation being based on unilateral denial of access to an essential facility although it in fact involved concerted action. [2] When the Lorain Journal monopoly over advertising in the Lorain, Ohio, area was threatened by the establishment of a competing radio station, the newspaper's publisher refused to accept advertising from those who advertised over the radio station and required them to advertise only in the Journal. The purpose of the publisher was to eliminate the competition of the radio station. The Supreme Court held that the publisher had attempted to monopolize trade and commerce in violation of § 2 of the Sherman Antitrust Act and was properly enjoined from continuing its conduct.

Contents

Background

The Lorain Journal Company, the defendant, published a newspaper, the Journal. For some years, it maintained "a commanding and an overpowering" position in the area and reached 99% of the families in the city. It was the only daily newspaper and carried a substantial amount of local and national advertising. [3]

Until 1948, the Journal enjoyed a monopoly "of the mass dissemination of news and advertising, both of a local and national character." In 1948, however, the FCC licensed the Elyria-Lorain Broadcasting Co. to operate a radio station, WEOL, in the Elyria, Oberlin, and Lorain area, in Ohio. Many of the local advertisers in the Journal wanted to use WEOL as well. The newspaper developed a plan to eliminate the competition from WEOL by refusing to accept local advertisements from any Lorain County advertiser who advertised or appeared to be about to advertise over WEOL. [4]

The Journal monitored WEOL programs to determine the identity of the station's local Lorain advertisers. Those using the station had their contracts with the newspaper terminated, and they could renew them only after ceasing to advertise through WEOL. As a result, many Lorain County merchants either ceased advertising or abandoned their plans to advertise over WEOL. The district court found that "the very existence of WEOL is imperiled by this attack upon one of its principal sources of business and income." [5]

The district court therefore found a violation of Section 2 of the Sherman Act and enjoined the Journal from continuing its program of refusing to deal with advertisers who advertised in WEOL and requiring advertisers to advertise only in the newspaper. [6] The publisher appealed to the Supreme Court.

Decision

Justice Harold H. Burton delivered the opinion of the Court. Harold Burton.jpg
Justice Harold H. Burton delivered the opinion of the Court.

Justice Harold H. Burton delivered the unanimous opinion of the Court that the newspaper's publisher attempted to monopolize in violation of Section 2 of the Sherman Act and was properly enjoined from continuing to do so.

The Court found the most important among the facts supporting the district court's judgment to be that the Journal enjoyed a nearly complete monopoly in Lorain from 1933 to 1948 and had a 99% coverage of Lorain families. "Those factors made the Journal an indispensable medium of advertising for many Lorain concerns." Accordingly, its

refusals to print Lorain advertising for those using WEOL for like advertising often amounted to an effective prohibition of the use of WEOL for that purpose. Numerous Lorain advertisers wished to supplement their local newspaper advertising with local radio advertising, but could not afford to discontinue their newspaper advertising in order to use the radio. [7]

The Court said it was clear that "if all the newspapers in a city, in order to monopolize the dissemination of news and advertising by eliminating a competing radio station, conspired to accept no advertisements from anyone who advertised over that station," their boycott conspiracy would violate Sections 1 and 2 of the Sherman Act, as had bien held in such cases as Fashion Originators' Guild v. FTC . The Court continued, "It is consistent with that result to hold here that a single newspaper, already enjoying a substantial monopoly in its area, violates the 'attempt to monopolize' clause of § 2 when it uses its monopoly to destroy threatened competition." [8]

The Journal sought to excuse its conduct on the ground that it has a "right as a private business concern to select its customers and to refuse to accept advertisement from whomever it pleases." The Court said that such a right is not unqualified:

The right claimed by the publisher is neither absolute nor exempt from regulation. Its exercise a purposeful means of monopolizing interstate commerce is prohibited by the Sherman Act. The operator of the radio station, equally with the publisher of the newspaper, is entitled to the protection of that Act. [9]

Commentary

A note in the Virginia Law Review focused on the fact that the Court found an attempted monopolization of interstate commerce even though the Journal attempted to monopolize the advertising of only local merchants and did not refuse or try to monopolize the business of national advertisers because of their dealings with the radio station:

In this sense the monopoly was confined to the limits of a single city. This was nevertheless a forbidden monopoly, as the successful destruction of competition in local business by forcing the station to close would also have destroyed competition in interstate business, i.e., the national advertising carried by both the newspaper and the radio station. Thus the case is useful to point out again that the suppression of local competition is not free from the threat of prosecution under the Sherman Act simply because an intrastate and not an interstate monopoly is contemplated. [10]

Xharles Barber points to a contradiction or disconnect in the case law regarding specific intent in cases of this type, especially as interpreted in Times-Picayune Publishing Co. v. United States , [11] the specific intent behind the refusal to deal, a purpose to eliminate a competitor or a purpose to create or maintain a monopoly, was a major theme in finding a § 2 Sherman Act violation. [12] In Lorain Journal, the district court had found that the purpose and intent of the Journal's refusals to sell "was to destroy the broadcasting company." In Times-Picayune, the Court held that monopolization did not occur because there was no showing of specific intent to destroy competition or build monopoly, and the newspaper's challenged practice was legal because it was predominantly motivated "by legitimate business aims." [13] The Court distinguished the Lorain Journal case on the ground that there the newspaper's refusal to sell space to advertisers who advertised on the local radio station manifested "bold, relentless, and predatory commercial behavior," [14] which was absent in the Times-Picayune case. Barber maintains that the Court's "emphasis on specific intent suggests that it regarded this as controlling" on the monopolization issue. [15] However, Barber insists, United States v. Griffith, [16] which is quoted in both Lorain Journal and Times-Picayune, "held that specific intent is no longer an element of the offense of monopolization under Section 2." [17]

Barber therefore concludes:

The cases reviewed above indicate that the courts are groping for an appropriate rationale of the monopoly provisions of the Sherman Act which, while limiting the freedom of a trader unduly to exploit trade advantages stemming from his market position, will assure the preservation of his essential freedom to develop his business, including his supplier and customer relationships, in accordance with his personal business judgment. [18]

Donald Turner observed in the Harvard Law Review that the Supreme Court was "unquestionably correct" in holding the conduct of the Journal as an unlawful attempt to monopolize under section 2 of the Sherman Act. Nonetheless, if the Court had been asked to do so, it could properly "also have held that each seller [merchant contracting for advertisements] who complied with Lorain Journal's demands became party to an agreement with Lorain Journal to boycott the radio station." The only problem with that would be "the seeming unfairness of subjecting the coerced sellers to criminal penalties." It would be a mistake, however, Turner argued, to hold, as in Interstate Circuit, Inc. v. United States [19] or United States v. Parke, Davis & Co. , [20] "that the sellers, each being aware that others would also cease patronizing the radio station, have agreed with each other to carry on a collective boycott [emphasis added]" because

the decision of each seller was apparently wholly independent of the decisions of the others; each decision simply reflected an economic choice, forced by the newspaper's policy, as to which advertising medium could be dispensed with at least cost, a choice wholly unaffected by what other sellers might choose to do. [21]

In Interstate Circuit, for example, "there was ample evidence . . . to support a finding of horizontal agreement of the most obvious sort, including the significant evidence that the consequence of imposing limitations on the movie chains' subsequent-run competitors had been to increase not only the profits of the chains but also the profits of each distributor." [22] In the Lorain Journal case, each acquiescent merchant "ended up worse off than before." Such an agreement "would be an odd sort of agreement." In such a case, it would be more sensible to proceed against the instigating party who "coerced those with whom he dealt" under a theory of attempted monopolization, as the Court did in the Lorain Journal case. [23]

Finally, Turner emphasizes:

In Lorain Journal, for example, the principal culprit was clearly the newspaper which instigated the boycott of the radio station. The advertisers who dealt with the paper, and who acquiesced in its demands, were unwilling participants. Moreover, the situation can be remedied, as indeed it was in Lorain Journal, by [the government's] proceeding against the instigator alone; freed of the unlawful pressures, the other parties would presumably revert to the nonrestrictive decisions they made before. These considerations might well and properly be taken into account by an enforcement agency in deciding whom to charge and whom not to charge with a violation of the act. [24]

Related Research Articles

<span class="mw-page-title-main">Sherman Antitrust Act</span> 1890 U.S. anti-monopoly law

The Sherman Antitrust Act of 1890 is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce and consequently prohibits unfair monopolies. It was passed by Congress and is named for Senator John Sherman, its principal author.

<span class="mw-page-title-main">United States antitrust law</span> American legal system intended to promote competition among businesses

In the United States, antitrust law is a collection of mostly federal laws that regulate the conduct and organization of businesses in order to promote competition and prevent unjustified monopolies. The three main U.S. antitrust statutes are the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. These acts serve three major functions. First, Section 1 of the Sherman Act prohibits price fixing and the operation of cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that may substantially lessen competition or tend to create a monopoly. Third, Section 2 of the Sherman Act prohibits monopolization.

Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1910), was a case in which the Supreme Court of the United States found Standard Oil Co. of New Jersey guilty of monopolizing the petroleum industry through a series of abusive and anticompetitive actions. The Court's remedy was to divide Standard Oil into several geographically separate and eventually competing firms.

<span class="mw-page-title-main">WEOL</span> Talk radio station in Elyria, Ohio

WEOL is a commercial radio station licensed to serve Elyria, Ohio, and features a talk and sports radio format. Owned by the Elyria-Lorain Broadcasting Co., WEOL services Lorain and Medina counties and the western parts of Greater Cleveland. The station is the local affiliate for The Ramsey Show, Kim Komando, Fox Sports Radio and ABC News Radio, and the Cleveland Guardians, Cleveland Cavaliers, Columbus Blue Jackets, and Ohio State radio networks.

The essential facilities doctrine is a legal doctrine which describes a particular type of claim of monopolization made under competition laws. In general, it refers to a type of anti-competitive behavior in which a firm with market power uses a "bottleneck" in a market to deny competitors entry into the market. It is closely related to a claim for refusal to deal.

Loewe v. Lawlor, 208 U.S. 274 (1908), also referred to as the Danbury Hatters' Case, is a United States Supreme Court case in United States labor law concerning the application of antitrust laws to labor unions. The Court's decision effectively outlawed the secondary boycott as a violation of the Sherman Antitrust Act, despite union arguments that their actions affected only intrastate commerce. It was also decided that individual unionists could be held personally liable for damages incurred by the activities of their union.

Fashion Originators' Guild of America v. FTC, 312 U.S. 457 (1941), is a 1941 decision of the United States Supreme Court sustaining an order of the Federal Trade Commission against a boycott agreement among manufacturers of "high-fashion" dresses. The purpose of the boycott was to suppress "style piracy". The FTC found the Fashion Guild in violation of § 5 of the FTC Act, because the challenged conduct was a per se violation of § 1 of the Sherman Act.

Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993), was a case in which the Supreme Court of the United States rejected the assertion that attempted monopolization may be proven merely by demonstration of unfair or predatory conduct. Instead, conduct of a single firm could be held to be unlawful attempted monopolization only when it actually monopolized or dangerously threatened to do so. Thus, the Court rejected the conclusion that injury to competition could be presumed to follow from certain conduct. The causal link must be demonstrated.

In the United States, advertising of services by members of the profession of law is typically permitted but regulated by state court and bar association rules.

Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), was a United States Supreme Court case that decided whether a dominant firm's unilateral refusal to deal with a competitor could establish a monopolization claim under Section 2 of the Sherman Act. The unanimous Supreme Court agreed with the 10th Circuit that terminating a pro-consumer joint venture without a legitimate business justification could constitute illegal monopolization. However, its decision created an exception to the general rule that firms can decide with whom to do business absent collusion, sparking significant controversy about the appropriate scope of this exception. In a subsequent case, Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, Justice Scalia, writing for the majority, stated that Aspen Skiing is "at or near the outer boundary of § 2 liability." Although its holding has been narrowed, this case's relevance remains contested, especially in the context of refusals to license intellectual property.

Pfizer Inc. v. Government of India, 434 U.S. 308 (1978), decision of the Supreme Court of the United States in which the Court held that foreign states are entitled to sue for treble damages in U.S. courts, and should be recognized as "persons" under the Clayton Act.

<span class="mw-page-title-main">History of United States antitrust law</span>

The history of United States antitrust law is generally taken to begin with the Sherman Antitrust Act 1890, although some form of policy to regulate competition in the market economy has existed throughout the common law's history. Although "trust" had a technical legal meaning, the word was commonly used to denote big business, especially a large, growing manufacturing conglomerate of the sort that suddenly emerged in great numbers in the 1880s and 1890s. The Interstate Commerce Act of 1887 began a shift towards federal rather than state regulation of big business. It was followed by the Sherman Antitrust Act of 1890, the Clayton Antitrust Act and the Federal Trade Commission Act of 1914, the Robinson-Patman Act of 1936, and the Celler-Kefauver Act of 1950.

FTC v. Motion Picture Advertising Service Co., 344 U.S. 392 (1953), was a 1953 decision of the United States Supreme Court in which the Court held that, where exclusive output contracts used by one company "and the three other major companies have foreclosed to competitors 75 percent of all available outlets for this business throughout the United States" the practice is "a device which has sewed up a market so tightly for the benefit of a few [that it] falls within the prohibitions of the Sherman Act, and is therefore an 'unfair method of competition' " under § 5 of the FTC Act. In so ruling, the Court extended the analysis under § 3 of the Clayton Act of requirements contracts that it made in the Standard Stations case to output contracts brought under the Sherman or FTC Acts.

United States v. Parke, Davis & Co., 362 U.S. 29 (1960), was a 1960 decision of the United States Supreme Court limiting the so-called Colgate doctrine, which substantially insulates unilateral refusals to deal with price-cutters from the antitrust laws. The Parke, Davis & Co. case held that, when a company goes beyond "the limited dispensation" of Colgate by taking affirmative steps to induce adherence to its suggested prices, it puts together a combination among competitors to fix prices in violation of § 1 of the Sherman Act. In addition, the Court held that when a company abandons an illegal practice because it knows the US Government is investigating it and contemplating suit, it is an abuse of discretion for the trial court to hold the case that follows moot and dismiss it without granting relief sought against the illegal practice.

United States v. Terminal Railroad Association, 224 U.S. 383 (1912), is the first case in which the United States Supreme Court held it a violation of the antitrust laws to refuse to a competitor access to a facility necessary for entering or remaining in the market. In this case a combination of firms was carrying out the restrictive practice, rather than a single firm, which made the conduct susceptible to challenge under section 1 of the Sherman Act rather than under the heightened standard of section 2 of that act. Even so, the case was brought under both sections.

United States v. New Wrinkle, Inc., 342 U.S. 371 (1952), is a 1952 Supreme Court decision in which the Court held that a claim of conspiracy to fix uniform minimum prices and to eliminate competition throughout substantially all of the wrinkle finish industry of the United States by means of patent license agreements was, if proved, a violation of § 1 of the Sherman Act. That one of the defendants, a patent-holding company, abstained from manufacturing activities, did not ship goods in commerce, and engaged solely in patent licensing did not insulate its activity from § 1. Making these license contracts for the purpose of regulating distribution and fixing prices of commodities in interstate commerce is subject to the Sherman Act, even though the isolated act of contracting for the licenses occurs within a single state. Patents give no protection from the prohibitions of the Sherman Act when the patent licensing agreements are used to restrain interstate commerce and fix prices of goods shipped in commerce.

United States v. United States Gypsum Co. was a patent–antitrust case in which the United States Supreme Court decided, first, in 1948, that a patent licensing program that fixed prices of many licensees and regimented an entire industry violated the antitrust laws, and then, decided in 1950, after a remand, that appropriate relief in such cases did not extend so far as to permit licensees enjoying a compulsory, reasonable–royalty license to challenge the validity of the licensed patents. The Court also ruled, in obiter dicta, that the United States had standing to challenge the validity of patents when a patentee relied on the patents to justify its fixing prices. It held in this case, however, that the defendants violated the antitrust laws irrespective of whether the patents were valid, which made the validity issue irrelevant.

<i>Gamco, Inc. v. Providence Fruit & Produce Building, Inc.</i>

Gamco, Inc. v. Providence Fruit & Produce Building, Inc., 194 F.2d 484, is a 1952 First Circuit decision in the United States.

Interstate Circuit, Inc. v. United States, 306 U.S. 208 (1939), is a 1939 decision of the United States Supreme Court finding an antitrust price-fixing conspiracy based on what subsequently came to be known a hub-and-spoke conspiracy theory.

California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972), was a landmark decision of the US Supreme Court involving the right to make petitions to the government. The right to petition is enshrined in the First Amendment to the United States Constitution as: "Congress shall make no law...abridging...the right of the people...to petition the Government for a redress of grievances." This case involved an accusation that one group of companies was using state and federal regulatory actions to eliminate competitors. The Supreme Court ruled that the right to petition is integral to the legal system but using lawful means to achieve unlawful restraint of trade is not protected.

References

The citations in this article are written in Bluebook style. Please see the talk page for more information.

  1. ↑ Lorain Journal Co. v. United States, 342 U.S. 143 (1951).
  2. ↑ See. e.g., Robert Pitofsky, Donna Patterson, and Jonathan Hooks, The Essential Facilities Doctrine Under United States Antitrust Law, 70 Antitrust L.J. 443, 446–47 (2002) (characterizing it as "a unilateral refusal to deal" case). Actually, Lorain Journal involved agreements with reluctantly-acquiescent customers that they would not deal with a competitive radio station, as explained in the Background section.
  3. ↑ 342 U.S. at 146.
  4. ↑ 342 U.S. at 147–48.
  5. ↑ 342 U.S. at 149.
  6. ↑ United States v. Lorain Journal Co., 92F. Supp.794 (N.D. Ohio1950).
  7. ↑ 342 U.S. at 152–53.
  8. ↑ 342 U.S. at 154.
  9. ↑ 342 U.S. at 155.
  10. ↑ Note. 38 Va. L. Rev. 404, 406 (1952).
  11. ↑ Times-Picayune Publishing Co. v. United States , 345 U.S. 594 (1953).
  12. ↑ See Charles F. Barber, Refusals To Deal Under the Federal Antitrust Laws, 103 U. Pa. L. Rev. 847, 862, 866 (1955).
  13. ↑ 345 U.S. at 622.
  14. ↑ See 342 U.S. at 149.
  15. ↑ Barber, at 866.
  16. ↑ United States v. Griffith, 334 U.S. 100 (1948).
  17. ↑ Barber, at 870.
  18. ↑ Barber, at 872.
  19. ↑ Interstate Circuit, Inc. v. United States , 306 U.S. 208 (1939).
  20. ↑ United States v. Parke, Davis & Co. , 362 U.S. 29 (1960).
  21. ↑ Donald F. Turner, The Definition of Agreement under the Sherman Act: Conscious Parallelism and Refusals to Deal, 75 Harv. L. Rev. 655, 700 (Feb. 1962).
  22. ↑ Id.
  23. ↑ Id. at 701.
  24. ↑ Id. at 702.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.