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February 24, 1977

William Weber t/a Garden State Press Clipping Bureau, Plaintiff
Arthur V. Wynne, Sr., Arthur V. Wynne, Jr., Harold E. Wynne, and Frederick J. Wynne, t/a Burrelle's Press Clipping Service & New Jersey Press Clipping Service, Defendants

Lacey, D.J.

The opinion of the court was delivered by: LACEY


This is an antitrust action brought under the jurisdictional grant of 15 U.S.C. § 15, charging a violation of the anti-monopoly provisions of the Sherman Act. 15 U.S.C. § 2. *fn1" Weber conducts in Red Bank, New Jersey, a press clipping bureau under the name of Garden State Press Clipping Bureau (hereinafter Garden State), and sues his competitor, Burrelle's Press Clipping Bureau, a New Jersey partnership (hereinafter Burrelle's), and New Jersey Press Clipping Bureau (hereinafter New Jersey Clipping), a regional division of Burrelle's, and, as well, individual officers and partners of each (Arthur Wynne, Sr., Arthur Wynne, Jr., Harold Wynne, and Frederick Wynne). Plaintiff initially charged violations of 15 U.S.C. §§ 1, 2 and 13(a), and unfair competition under the law of New Jersey. At pre-trial plaintiff formally abandoned Counts I, III and IV of the complaint and now simply charges a violation of 15 U.S.C. § 2 (hereinafter sometimes Section 2). *fn2"

 The complaint contends that New Jersey Clipping's operations in New Jersey, while concededly local, are supported and subsidized by Burrelle's national operations and revenue, thus enabling New Jersey Clipping to adopt a predatory pricing policy and to undercut, in the New Jersey market, plaintiff's prices for similar services, in an attempt to monopolize the press clipping business in the relevant New Jersey press clipping market, at plaintiff's expense.

 Just prior to trial the defendants moved to dismiss the complaint for lack of subject matter jurisdiction and failure to state a claim under Fed. R. Civ. P. 12(b)(1) and (6); for judgment on the pleadings under Fed. R. Civ. P. 12(c); and for summary judgment under Fed. R. Civ. P. 56(b). After argument, the court, mindful of the nearness of trial, reserved decision on the motions and ordered trial on the merits. Cf., Mortensen v. First Federal Savings & Loan Ass'n, 549 F.2d 884 (3d Cir., 1977). Now, after trial, I hold that this court has federal subject matter jurisdiction over the controversy. *fn3" On the other hand, I hold that plaintiff has failed to prove his claim on the merits.



 The plaintiff and the defendants run press clipping bureaus. Businesses, institutions, governmental agencies, and individuals place orders with these bureaus to read newspapers and to cut out and supply to them clippings referring to these customers or to a topic or topics selected by them. There are two types of clipping bureaus, national and regional. The defendant Burrelle's operates both a national and a regional bureau. Under its own name it supplies to its customers clippings from newspapers published throughout the United States. Its New Jersey division, New Jersey Clipping, however, supplies customers only with regional service, and for these customers reads and obtains clippings only from New Jersey papers, and publications from New York City and Philadelphia. *fn4" For this service, be it national or regional, the customer is usually billed a monthly reading charge, or a charge per clip, or a combination of both.

 The process by which the plaintiff and defendants provide clips to customers is as follows: the publications are delivered to the premises and are then distributed to readers. They read the publications and mark the clips, according to customer. The clips are then passed to a stamping machine which stamps the slips on which the clippings are mounted. From there the clips go to the cutting room, are cut from newspapers, pasted on the slips, and then sent to the filing room and filed by customer name. Thereafter, they are shipped out by the shippers.

 Prior to the plaintiff's entry into the New Jersey market in 1965, if anyone wanted press clipping service with only New Jersey coverage, he had no alternative but to take Burrelle's national service, with nationwide coverage of newspapers, see n. 4, supra, and pay a national rate. *fn5" Thus he was paying for "reading" he did not want.

 Seizing this competitive opportunity, Garden State, purchased for $1.00 by Weber in 1965, began to offer a specialized New Jersey service, founded upon reading New Jersey newspapers almost exclusively, at a rate less than half of what Burrelle's was then charging its New Jersey customers for its national service.

 Faced with the loss of business to Garden State, Burrelle's in October 1970, responded to this competition by forming a New Jersey operating division (New Jersey Clipping), and in its name began to offer its New Jersey customers a regional service, much like plaintiff's, covering primarily only New Jersey newspapers. Since that time, defendants, through New Jersey Clipping have engaged in competition with Garden State on this basis in the New Jersey market as hereinafter defined. *fn6"

 As is well settled, plaintiff must demonstrate that the activity complained of occurred in or substantially affects interstate commerce for jurisdiction over the subject matter of this action to vest in this court. See Goldfarb v. Virginia State Bar, 497 F.2d 1, 15-16 (4th Cir. 1974), rev'd on other grounds, 421 U.S. 773, 780, 44 L. Ed. 2d 572, 95 S. Ct. 2004 (1975). See also Doctors, Inc. v. Blue Cross of Greater Philadelphia, 490 F.2d 48, 50 (3d Cir. 1973); Mortensen v. First Federal Savings & Loan Ass'n, supra, slip opinion at 21-22; Evans v. S. S. Kresge Co., 544 F.2d 1184 (3d Cir., 1976). See also Taxi Weekly, Inc. v. Metropolitan Taxicab Bd. of Trade, Inc., 539 F.2d 907, 909 (2d Cir. 1976).

 The plaintiff argues that because Burrelle's is in interstate commerce and is allegedly using its profits therefrom to implement and sustain, through New Jersey Clipping, the alleged predatory pricing designed to injure or destroy plaintiff in the New Jersey market, the activity complained of is actually "in interstate commerce," notwithstanding its limited local impact. Also, in what is essentially a refinement of the same argument, plaintiff claims the activity complained of is "in interstate commerce" because New Jersey Clipping, the alleged predator, is merely an intrastate division of an entity engaged in interstate commerce. Finally, plaintiff contends that, even if the activity in question is held to be solely intrastate, it has a "substantial effect" on interstate commerce.

 Defendants contend that because the relevant market is an intrastate market, this court has jurisdiction under Section 2 only if the alleged wrongful conduct had a substantial effect on interstate commerce. They further assert that, to ascertain whether there is such a "substantial effect," you look to the plaintiff's position to see whether, if he is eliminated or weakened as a competitor, this will result in a substantial reduction of the flow of supplies in interstate commerce, as in Hospital Bldg. Co. v. Trustees of Rex Hospital, 425 U.S. 738, 48 L. Ed. 2d 338, 96 S. Ct. 1848 (1976); and Doctors, Inc. v. Blue Cross of Greater Philadelphia, supra. See also Evans v. S. S. Kresge Co., supra.7

 I will deal with the defendants' jurisdictional contentions first. Undeniably, under appropriate circumstances, courts have looked to the nature of the business of an injured plaintiff in Section 2 cases. Hospital Bldg. Co. v. Trustees of Rex Hospital, supra, 425 U.S. at 744. On the other hand, there is nothing in Rex Hospital to suggest that the activity of a defendant must be ignored. Thus, in Mortensen v. First Federal Savings & Loan Ass'n, supra, slip opinion, at 23, the Court of Appeals for the Third Circuit relied largely upon the effect of the alleged wrongful activity on the defendant Association's interstate business. See also, Evans v. S. S. Kresge Co., supra. Viewing this case in this light, it is clear that this court has subject matter jurisdiction under Section 2 in that the alleged wrongful activity of the defendants, if accompanied by the intent to monopolize, as plaintiff charges, would affect interstate commerce to a substantial degree. Given this resolution of the jurisdiction issue, there is no need to examine the other bases urged by the plaintiff for establishing federal subject matter jurisdiction in this court over this controversy.


 Plaintiff Has Failed to Prove a Violation of Section 2 of the Sherman Act

 Count II of the complaint charges the defendants with attempting to attain a monopoly of the press clipping bureau business "in the relevant market of New Jersey" in violation of Section 2. The essential elements to be proved by the plaintiff if he is to sustain his burden imposed by a charge of attempting to monopolize are that the defendants have (1) a specific intent to monopolize the relevant market; and (2) sufficient market power to come dangerously close to success. United States v. Grinnell Corp., 384 U.S. 563, 570-71, 16 L. Ed. 2d 778, 86 S. Ct. 1698 (1966); Swift & Co. v. United States, 196 U.S. 375, 396, 49 L. Ed. 518, 25 S. Ct. 276 (1905); Yoder Bros., Inc. v. California-Florida Plant Corp., 537 F.2d 1347, 1366-67 (5th Cir. 1976); Coleman Motor Co. v. Chrysler Corp., 525 F.2d 1338, 1348 (3d Cir. 1975).

 The first step in any Section 2 analysis is to define the relevant market. The parties here have stipulated the relevant market to be:


The rendition of the services of reading and clipping newspaper and magazine articles that appear in New Jersey, New York City and Philadelphia daily newspapers. The geographic boundaries of the relevant market are the boundaries of the State of New Jersey. The relevant market is, therefore, an intrastate market. Stipulation of Facts at 4.

 This court, based upon its own assessment of the facts, concurs in the parties' agreement and I find the relevant market to be as stipulated.

 At the heart of the plaintiff's charge of attempted monopoly is the allegation that since 1970 the defendants have used New Jersey Clipping as a mechanism for predation, namely, pricing its clipping services in the relevant market below cost with the intent to destroy Garden State as a competitor in said market. It is plaintiff's position that Burrelle's has been using its revenue from its national operations to subsidize its New Jersey regional operation, enabling New Jersey Clipping to effectively underprice Garden State. I shall examine the evidence with respect to this aspect of the plaintiff's claim hereinafter.

 Turning to the second requisite for proving an attempt to monopolize, "sufficient market power to come dangerously close to success," the court has been advised that New Jersey Clipping has, since 1971, the first full year of its operation, and for each year thereafter, occupied 77% of the relevant market. Garden State, for the years 1971-1973, ranged between 17% in 1972 and approximately 18.5% in 1971, 1973 and 1974, the last year for which this information was furnished.

 While these figures demonstrate that New Jersey Clipping for the years mentioned had an overwhelming percentage of the relevant market, a further word of explanation is required to cast them in the proper perspective. As has already been noted herein, n. 5, supra, the court has not been furnished any data as to the percentage of relevant market held by Burrelle's for the years prior to 1971. *fn8" However, it is clear to this court from all of the evidence that Burrelle's played a very substantial role in the New Jersey press clipping market in that earlier period, notwithstanding that it quoted only national rates. Moreover, while the court has been furnished with data representing revenue derived from the relevant market by Garden State for the earlier period mentioned, again percentage of market has not been furnished.

 Since the plaintiff bears the burden of proof on all of the essential elements, he cannot be heard to say that the advent of New Jersey Clipping on the scene in October 1970, accompanied by the utilization of alleged predatory pricing, resulted in a substantial reduction in the percentage of the market held by plaintiff or in a substantial increase in the percentage of the market held by the defendants. Instead, for all that appears in this record, Burrelle's has maintained either in its own name, or in the name of New Jersey Clipping Service, approximately the same percentage of the New Jersey market during the years preceding and after October 1970. A valid inference can also be drawn that in the years preceding October 1970 Garden State's share of the relevant market, notwithstanding the increased revenue figures furnished, remained relatively stable, as, indeed, it did from 1971-1974. It is in this light that I turn to an examination of the question thus presented: whether the percentage of the relevant market occupied by New Jersey Clipping demonstrates either that monopoly has already been achieved, or represents "sufficient market power" so that New Jersey Clipping, given the requisite intent, can come dangerously close to monopolizing the relevant market.

 To determine whether a defendant actually possesses monopoly power, it must be determined whether it has the "power of controlling prices or unreasonably restricting competition." United States v. DuPont de Nemours & Co., 351 U.S. 377, 389, 76 S. Ct. 994, 100 L. Ed. 1264 (1956). Proof of such matters may be direct or indirect. An overwhelming share of the relevant market is an indication, albeit indirect, of a defendant's market power to control prices or unreasonably restrict competition. Indeed, such an "overwhelming percentage" may establish a rebuttable presumption of monopoly. United States v. Grinnell Corp., 236 F. Supp. 244, 257 (D.R.I. 1964), modified, 384 U.S. 563, 86 S. Ct. 1698, 16 L. Ed. 2d 778 (1966).

 To have "control" of the relevant market, it is not required that a party actually exclude competitors from it; there may be a violation of Section 2 if he has the power to exclude actual or potential competitors from the field, and the intent to do so. American Tobacco Co. v. United States, 328 U.S. 781, 809, 90 L. Ed. 1575, 66 S. Ct. 1125 (1946). Control of prices is one manner by which such actual or potential competitors may be driven out of the market. Keco Indus. Inc. v. Borg-Warner Corp., 334 F. Supp. 1240, 1245-46 (M.D. Pa. 1971).

 Notwithstanding the presumption of monopoly power derived from the percentage of the relevant market occupied by New Jersey Clipping, I find that the presumption has been rebutted and overcome by the evidence tendered by the defendants to show that their market share which, as I have already indicated, has remained relatively stable for many years, was attributable to their "skill, efficiency, foresight, or like affirmatively laudable business conduct." United States v. Grinnell Corp., supra, 236 F. Supp. at 257.

 I find that Burrelle's up to 1970 and New Jersey Clipping thereafter offered a service that was superior to that rendered by Garden State. Thus, even on a limited regional basis upon which New Jersey Clipping operated, it read more publications than did Garden State. Additionally, to the extent a New Jersey customer wanted to move to expanded coverage, Burrelle's national service was instantly available. New Jersey Clipping's service was also rendered more quickly in that clippings from daily newspapers could be and often were mailed out the same day as the article appeared in the publication. There is evidence as well to strongly suggest that Weber lost business from time to time because of inefficiency in his operation.

 Quite aside from how New Jersey Clipping was able to maintain after October 1970 what I have found to be essentially the same percentage of the relevant market occupied by Burrelle's before that time, the factor of the ability to control prices is, to a substantial degree, a function of the nature of the relevant market in terms of the ease of entry. Thus, there is obviously a limit to which prices can be raised in a market into which competitors can, with a minimum of expense and capital outlay, enter. The relevant market in this case is a peculiar one in that little, if any, capital is required to commence business as a press clipping service, particularly on a local level such as is here involved. *fn9"

 Finally, with respect to the aspect of monopoly power, notwithstanding the charges hurled at the defendants by the plaintiff in this case, there has been no appreciable upward movement of percentage of market occupied as far as defendants are concerned and, conversely, the plaintiff's share of the market has, with the exception of a slight dip in 1972, remained at the same level.

 Not only do I find that defendants presently do not monopolize the relevant market; I also find that they do not have "sufficient market power to come dangerously close" to monopolizing said market. What has been said with respect to the matter of actual monopoly is equally applicable in connection with the "dangerously close" issue. For the same reasons that defendants could not presently possess monopoly power, they do not possess "sufficient market power" to achieve a monopoly of the relevant market. *fn10"

 I now turn to the first of the factors which must be examined in an "attempt" case under Section 2, that is, has the plaintiff proved that the defendants had "a specific intent to monopolize the relevant market." It was to this issue that the plaintiff addressed most of his proof. In specific terms, plaintiff urges that the predatory pricing practices of the defendants, exercised through New Jersey Clipping, are sufficient to establish such specific intent as the law requires.

 As has been noted, "a specific intent to destroy competition or build monopoly is essential to guilt for the mere attempt.". . . Times-Picayune Pub. Co. v. United States, 345 U.S. 594, 626, 97 L. Ed. 1277, 73 S. Ct. 872 (1953). This specific intent may be demonstrated by showing predatory acts of an alleged monopolizer in furtherance of that attempt. Id. at 627.

 Plaintiff rests his claim of predation upon two factors allegedly reflected in defendants' pricing policies, varied and discriminatory prices and prices below cost. An assessment of the pricing policies of both New Jersey Clipping and Garden State is thus indicated.

 While the parties speak of "standard" rates, even in their stipulations, the price "mess," as Weber described the industry's pricing to be in 1965 in New Jersey, Trial Tr. of September 1, 1976, at 31, even up to trial had not stabilized in the relevant market.

 In 1969, Garden State charged for its New Jersey coverage a "standard" rate for old customers of $20 a month and $.15 a clip and a "standard" rate for new customers of $23 a month and $.18 a clip. As of January 1970 it charged three accounts a flat rate of $.10 per clip plus postage, with no reading charge. Within six months it increased one of these three accounts to $.13 per clip while keeping the others the same; and there was no difference in the service provided the three accounts. Special per clip rates are still maintained for these accounts, one paying $.15 per clip, another $.17 per clip.

 Moreover, plaintiff stipulated that during the period January 1970 to May 1974, Garden State charged 17 different rates, with customers in roughly the same category apparently paying different rates at the same time. Stipulation of Facts at 84. An exhibit annexed to the stipulation shows the wide variety of prices charged various customers. While some effort was made to justify the differences upon the basis of class of customer, or quantity of clippings furnished, it cannot be denied that Weber's whim or "judgment" accounted for whatever he decided he would charge a customer. See Def. Ex. 76-120. See also, Stipulation of Facts at 85 and attachment thereto. Trial Trans. of Dec. 1, 1976, at 8. In 1969, Burrelle's national rate was $45 a month and $.20 a clip. As of November 1976 the price for the national coverage was $65 per month and $.32 a clip. Between 1970 and 1974 Burrelle's prices for national service steadily increased as follows: January 1970 $45 and $.20 January 1971 $48 and $.20 May 1971 $48 and $.25 January 1972 $50 and $.25 August 1973 $55 and $.25 March 1974 $60 and $.25


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