Time, Hearst, Other Magazine Publishers Win Boycott Appeal

Time Inc., Hearst Communications Inc., Rodale Inc., and other big magazine publishers won an antitrust appeal by wholesaler Anderson News LLC, which tried to push through a price hike and wound up shuttered, according to a decision unsealed Aug. 6.

The U.S. Court of Appeals for the Second Circuit agreed with a district court that Anderson News doesn’t have an antitrust case against the magazine giants because it has no evidence that they decided together to reject its strong-arm tactics rather than each deciding individually to refuse Anderson’s price increase. The court also declined to revive cross-claims from the publishers of a conspiracy by Anderson.

The court’s decision came July 19, but it remained under seal until now to allow the parties time to ask for any sensitive business information to be redacted from the opinion. The opinion and accompanying Aug. 6 judgment likely brings almost a decade of litigation to a close.

In 2009, Anderson was a large wholesaler in the single-copy magazine business — delivering, tracking, and recycling single issues of magazines sold at newsstands, grocery stores, and other places where customers without a subscription purchase one-off reads. Anderson faced pressure because publishers were overshipping single copies, forcing Anderson to handle and dispose of a lot of inventory and carry heavy costs on unsold issues.

To deal with the problem, Anderson decided in January 2009 to charge publishers a seven-cent surcharge for every eight magazines they shipped. Anderson threatened to “go dark” if publishers didn’t pay up by February.

The publishers refused and turned to other wholesalers willing to handle extra inventory without charging more. Anderson went out of business a month later and sued the publishers, contending they broke the antitrust laws by agreeing to boycott Anderson. Some of the publishers counter-sued, alleging that Anderson’s proposed price hike was itself the result of a conspiracy at the wholesale level.

Appeals court Judges Debra Ann Livingston, Denny Chin, and Susan L. Carney agreed with the district court that neither side stated any antitrust claims.

The court affirmed that Anderson hadn’t cleared the bar of showing that it is more likely than not that agreement among publishers caused them to refuse the price hike. Anderson “sought to significantly change the state of the market” by suddenly trying to impose the surcharge on a tight deadline, “take it or leave it” basis, the court said.

“It is not surprising that defendants quickly rejected the proposal in favor of switching to existing wholesalers without surcharges,” the court said. “No reasonable jury could find on this record” that the defendants struck up a conspiracy rather than independently rejecting Anderson’s terms.

But the publishers’ counterclaims also fail. Even if Anderson and another wholesaler that tried the same surcharge tactic had conspired, it didn’t cause the publishers any harm, the court said. Therefore, there is no standing to complain there was a wholesaler conspiracy, the court said.

The case is Anderson News LLC v. American Media Inc., 2d Cir., No. 15-2714, 7/19/18.

To contact the reporter on this story: Eleanor Tyler in Washington at etyler@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com