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AD/SAT, DIV. OF SKYLIGHT v. ASSOCIATED PRESS, 181 F.3d 216 | Casetext
AD/SAT, DIV. OF SKYLIGHT v. ASSOCIATED PRESS
181 F.3d 216 (2d Cir. 1999)
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AD/SAT, DIV. OF SKYLIGHTv.ASSOCIATED PRESS
United States Court of Appeals, Second Circuit. August Term 1996Jun 23, 1999
No. 96-7304
Appeal from the March 6, 1996, judgment of the United States District Court for the Southern District of New York (Peter K. Leisure, District Judge), granting summary judgment in favor of all defendants and dismissing an antitrust complaint alleging anticompetitive practices in the field of delivering advertising to newspapers.
Daniel R. Shulman, Minneapolis, Minn., Joseph M. Alioto, San Francisco, Cal. (Terry M. Walcott, Shulman, Walcott Shulman, Minneapolis, Minn.; David E. Nachman, Solomon, Zauderer, Ellenhorn, Frischer Sharp, New York, N.Y., on the brief), for plaintiff-appellant.
Dennis J. Drebsky, New York, N.Y. (Richard N. Winfield, Hilary Lane, John A. Nathanson, Gregory G. Marshall, Rogers Wells, New York, N.Y., on the brief), for defendant-appellee Associated Press.
Yvonne S. Quinn, New York, N.Y. (Timothy J. Helwick, Andrew Rotstein, Sullivan Cromwell, New York, N.Y., on the brief), for defendants-appellees Newark Morning Ledger Co., The Birmingham News Company, Advance Publications, Inc., and Donald E. Newhouse.
Conrad M. Shumadine, Norfolk, Va. (Frank A. Edgar, Jr., Willcox Savage, Norfolk, Va., on the brief), for defendant-appellee The News Observer Publishing Company.
Patricia Farren, Matthew S. Wild, Cahill Gordon Reindel, New York, N.Y., submitted a brief for defendants-appellees Newspaper Association of America and National Newspaper Network.
James A. Treanor, III, Timothy J. O'Rourke, Scott D. Dailard, Dow, Lohnes Albertson, Washington, D.C., submitted a brief for defendants-appellees Dayton Newspapers, Inc. and Cox Enterprises, Inc.
A. Douglas Melamed, James W. Lowe, Wilmer, Cutler Pickering, Washington, D.C., submitted a brief for defendant-appellee The Oakland Press Company.
Robert P. Reznick, James B. Kobak, Jr., Hughes Hubbard Reed, New York, N.Y., submitted a brief for defendant-appellee Lexington Herald-Leader.
Thomas J. Lilly, Lilly Bienstock, Garden City, N.Y., submitted a brief for defendant-appellee Oklahoma Publishing Company.
This case involves allegations of anticompetitive conduct in the market for delivery of advertisements to newspapers. The plaintiff-appellant, AD/SAT, was engaged in the business of electronically transmitting advertisements to newspapers from the mid-1980s until 1996. After the Associated Press ("AP") launched a similar service in 1994, AD/SAT accused the AP of violating section 2 of the Sherman Act, 15 U.S.C. § 2, by (i) attempting to monopolize the alleged market for the electronic transmission of advertisements to newspapers; (ii) engaging in monopoly leveraging; and (iii) monopolizing the wire services news and photo transmission markets. In addition, AD/SAT alleged that all the defendants in this case (i) conspired to boycott AD/SAT, in violation of section 1 of the Sherman Act, 15 U.S.C. § 1; and (ii) conspired to monopolize the alleged market of electronic transmission of advertisements to newspapers, in violation of section 2 of the Sherman Act. AD/SAT appeals from the March 6, 1996, judgment of the District Court for the Southern District of New York (Peter K. Leisure, District Judge), to the extent it (i) dismissed AD/SAT's attempted monopolization and monopoly leveraging claims against the AP and its conspiracy claims against the AP and the other defendants, and (ii) declined to reconsider the District Court's April 24, 1995, decision dismissing AD/SAT's claims against the Lexington Herald-Leader. See AD/SAT v. Associated Press, 920 F. Supp. 1287 (S.D.N.Y. 1996) (" AD/SAT II").
Defendant Oklahoma Publishing Company publishes an independent daily newspaper called the Daily Oklahoman. Defendant News Observer Publishing Company publishes the News Observer. Defendant Oakland Press Company publishes The Oakland Press. Finally, defendant Lexington Herald-Leader, a wholly-owned subsidiary of Knight-Ridder, Inc., publishes The Herald-Leader.
The AD/SAT system. AD/SAT's electronic delivery system allowed the advertiser to deliver a single hard copy of its ad to one of AD/SAT's two transmittal stations, located in New York and Los Angeles. The ad would then be scanned into AD/SAT's system, and transmitted to designated newspapers via the AP-owned-and-operated satellite network. The ad would be received at each newspaper by an AP satellite dish, and then forwarded to a "recorder" installed and owned by AD/SAT. The recorder would then produce a hard copy of the ad. The recorders — essentially high speed facsimile machines — cost over $60,000 each, and required an additional $30,000 worth of equipment to be operational.
In addition to the fees paid by newspapers, advertisers were charged a transmission fee, with the price decreasing as the number of sites to which the ad was being sent increased. Because the cost of sending a distinct ad to a single location over the AD/SAT network was much higher than the cost of physical delivery, the system was cost-effective only for those advertisers who sent an identical ad to many different locations. For this reason, AD/SAT targeted national advertisers.
Under the rate card effective from August 1991 to 1994, the fee for an advertiser sending a single ad to a single paper on the same day was $90. The lowest price per transmission was $11.70, which applied if the advertiser sent the ad to 76 or more newspapers. In its last years of operation, however, AS/SAT often negotiated special rates for its larger customers.
In December 1994, one of the newspaper defendants, the Lexington Herald-Leader, moved for judgment on the pleadings or, in the alternative, summary judgment. The District Court granted the motion in April 1995, dismissing AD/SAT's conspiracy claims against the Lexington Herald-Leader. See AD/SAT v. Associated Press, 885 F. Supp. 511 (S.D.N.Y. 1995) (" AD/SAT I"). The District Court held that AD/SAT failed to state a claim against the Lexington Herald-Leader for conspiracy to monopolize because it had not alleged facts from which the necessary element of a specific intent to monopolize could be inferred. Accordingly, the Court dismissed the section 2 claim against the Herald-Leader on the pleadings. See id. at 516.
In May 1995, the AP and the other remaining defendants moved for summary judgment. The District Court granted the motion and dismissed the rest of AD/SAT's claims in their entirety. See AD/SAT II, 920 F. Supp. 1287. In considering AD/SAT's attempted monopolization claim against the AP, the Court concluded that the relevant product market was the delivery of advertising to newspapers by any means, including physical delivery. See id. at 1296-99. As is frequently the case in antitrust litigation, the Court's definition of the relevant market was dispositive. Defining the market so broadly meant that AD/SAT could not show that there was a dangerous probability that the AP would achieve monopoly power — one of the essential elements of an attempted monopolization claim. See id. at 1299-1300. The Court also found that AD/SAT's claims that AdSEND was prematurely announced and that it was predatorily priced were not supported by any evidence in the record. See id. at 1301-04. Accordingly, the Court dismissed AD/SAT's claim of attempted monopolization.
We turn first to AD/SAT's claim that the AP attempted to monopolize the market for delivery of advertisements to newspapers. To survive a motion for summary judgment dismissing this claim, AD/SAT was required to demonstrate triable issues of fact as to whether the AP (1) engaged in anticompetitive or predatory conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power. See Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993); Twin Laboratories, Inc. v. Weider Health Fitness, 900 F.2d 566, 570 (2d Cir. 1990). As we have previously noted, "A threshold showing for a successful attempted monopolization claim is sufficient market share by the defendant" because a defendant's market share is "the primary indicator of the existence of a dangerous probability of success." Twin Laboratories, 900 F.2d at 570 (citation omitted); see also United States v. Grinnell Corp., 384 U.S. 563, 571 (1966) ("The existence of [monopoly power] ordinarily may be inferred from the predominant share of the market.").
In order to ascertain the market share of AP's AdSEND, we first must define the relevant product and geographic markets. See Walker Process Equipment, Inc. v. Food Machinery Chemical Corp., 382 U.S. 172, 177 (1965). Once the relevant market is determined, we consider a variety of factors in addition to the defendant's market share, including the strength of competition, barriers to entry, and the probable development of the market, see International Distribution Centers, Inc. v. Walsh Trucking Co., 812 F.2d 786, 792 (2d Cir. 1987), in order to determine whether there is a dangerous probability that, left unchecked, the defendant will attain monopoly power, i.e., the ability "(1) to price substantially above the competitive level and (2) to persist in doing so for a significant period without erosion by new entry or expansion." 2A Phillip E. Areeda et al., Antitrust Law ¶ 501, at 86 (emphasis in original) [hereinafter "Areeda"].
The relevant market for purposes of antitrust litigation is the "area of effective competition" within which the defendant operates. Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 327-28 (1961). As the Court explained in United States v. E.I. du Pont de Nemours Co., 351 U.S. 377 (1956):
The "market" which one must study to determine when a producer has monopoly power will vary with the part of commerce under consideration. The tests are constant. That market is composed of products that have reasonable interchangeability for the purposes for which they are produced — price, use and qualities considered.
In its First Amended Complaint, AD/SAT stated that "the transmission of advertising to newspapers" was a "relevant product market for purposes of this action." First Amended Complaint ¶ 21. Although it predicted that electronic transmission of advertisements — via satellite, land links, or both — would become the predominant mode of transmission in the future, AD/SAT noted that "[a]t present, advertisers use several means to transmit their ads to newspapers[,]" citing, as the most common, "delivery through the mail, courier service, overnight delivery service, such as Federal Express, and similar physical delivery services." Id. AD/SAT's president, David Hilton, stated in deposition testimony that AD/SAT's competitors included companies that offer physical delivery services, as well as companies that offer electronic transmission services. Likewise, Bain Company, a management consulting firm retained by AD/SAT, concluded that because most deliveries of ads to newspapers are not urgent, AD/SAT needed to price its service at levels competitive with overnight delivery services, which accounted for approximately 80 percent of all deliveries to newspapers.
Despite the abundance of evidence demonstrating that physical carriers competed with electronic delivery services for advertisers' business, AD/SAT argues that electronic delivery services — especially rush, three-hour, services — constitute a distinct product market. AD/SAT points out that, despite the greater expense, advertisers continued to use its service for rush deliveries and that AP's AdSEND has a dual pricing structure ($8 for overnight transmission; $40 for one-hour transmission). Based on these facts, AD/SAT argues that persisting demand for the higher-priced electronic transmission service, despite the availability of lower-priced alternatives, demonstrates that the two services are not reasonably interchangeable and, thus, do not compete in the same market.
It is true that one hallmark of reasonable interchangeability between two particular goods is uniformity in price. See 2A Areeda ¶ 530a, at 150. The Supreme Court recognized the relevance of price differences to the definition of a relevant market in Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962). However, significant price differences do not always indicate distinct markets. See 2A Areeda ¶ 562c, at 262 ("Products can be near-perfect substitutes even when their prices or qualities differ."). In this case, we are not persuaded that the difference in prices for rush electronic and non-rush delivery services indicates that distinct markets for these services exist. As the Areeda treatise notes, antitrust law is concerned only with "substantial" market power. Thus, where a "market" itself is insubstantial, made up of only a few buyers with extremely strong preferences, antitrust law is not implicated. See id. ¶ 530e, at 155 ("Most courts implicitly insist that a market be `substantial' in scope by ignoring smaller ones.").
It is important to remember that "[a] `market' is any grouping of sales whose sellers, if unified by a hypothetical cartel or merger, could profitably raise prices significantly above the competitive level. If the sales of other producers substantially constrain the price-increasing ability of the hypothetical cartel, these others are part of the market." 2A Areeda ¶ 533, at 169 (emphasis added). Here, the evidence before the District Court indicated that if the providers of electronic delivery services formed a cartel and charged supracompetitive prices for their "rush" services, a sufficient number of their customers would shift to other carriers or to non-rush electronic delivery, that the hypothetical cartel's price increase would not prove profitable. Under such circumstances, there is significant cross-elasticity of demand for rush and non-rush delivery services, and the two services are part of the same market. Accordingly, the District Court properly found the relevant product market to be the market for delivery of advertisements to newspapers by any means.
Even if we were to recognize a relevant product sub-market limited to the electronic transmission of advertisements, that sub-market would be characterized by rapid technological development and low barriers to entry. See Walsh Trucking, 812 F.2d at 792 (noting that, among other things, barriers to entry and probable development of the market are relevant to determination of whether there is a dangerous probability that the defendant will achieve monopoly power). Indeed, AD/SAT itself noted that "[a]t present, the market for the transmission of newspaper advertising, as well as the electronic transmission submarket thereof, is characterized by low concentration, vigorous competition, rapid technological development, and ease of entry. . . ." Amended Complaint ¶ 23. AD/SAT's marketing consultants likewise were aware of the threat of new entrants. See Deposition of Sam Rovit at 133 ("[B]ecause of the technology, eventually you would probably find other people coming in."). Indeed, from its inception, AdSEND faced competition from several companies, in addition to AD/SAT, that provided electronic transmission services.
In summary, AP's AdSEND enjoys only a small share of the relevant product market. Competition within that market is substantial. Rapidly developing technology for the transmission of data and low barriers to market entry suggest that the AP will face significant competition from new entrants. In the face of these facts, AD/SAT cannot prove an essential element of its attempted monopolization claim — that there is a dangerous probability that AP's AdSEND will achieve monopoly power. We need not consider whether AD/SAT presented triable issues of fact with respect to the remaining elements of an attempted monopolization claim — predatory conduct and specific intent to monopolize. The District Court properly granted summary judgment in favor of the AP on this claim.
We have said that a "successful claim of monopoly leveraging requires proof of at least three factors: monopoly power in one market, the use of [that] power, however lawfully acquired, to foreclose competition, to gain a competitive advantage, or to destroy a competitor in another distinct market, and injury caused by the challenged conduct." Grand Light Supply Co. v. Honeywell, Inc., 771 F.2d 672, 681 (2d Cir. 1985) (internal citations and quotation marks omitted). This Court first recognized monopoly leveraging as a distinct cause of action under section 2 of the Sherman Act in Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir. 1979), where we stated, in dictum, that "the use of monopoly power attained in one market to gain a competitive advantage in another is a violation of § 2, even if there has not been an attempt to monopolize the second market." Id. at 276.
Although a plaintiff alleging monopoly leveraging is not required to demonstrate a substantial market share by the defendant, application of the doctrine is limited to those circumstances where the challenged conduct actually injures competition, not just competitors, in the second, non-monopolized market. See Twin Laboratories, 900 F.2d at 571 (noting that a monopoly leveraging claim requires "tangible harm to competition"); cf. Spectrum Sports, 506 U.S. at 459 ("The concern that § 2 might be applied so as to further anticompetitive ends is plainly not met by inquiring only whether the defendant has engaged in `unfair' or `predatory' tactics."). As Professors Areeda and Hovenkamp explain, a claim for monopoly leveraging is properly stated only where the plaintiff can demonstrate that the challenged conduct "threatens the [second] market with the higher prices or reduced output or quality associated with the kind of monopoly that is ordinarily accompanied by a large market share." 3 Areeda ¶ 652, at 90. Thus, a large firm does not violate § 2 simply by reaping the competitive rewards attributable to its efficient size, nor does an integrated business offend the Sherman Act whenever one of its departments benefits from association with a division possessing a monopoly in its own market. So long as we allow a firm to compete in several fields, we must expect it to seek the competitive advantages of its broad-based activity — more efficient production, greater ability to develop complementary products, reduced transaction costs, and so forth. These are gains that accrue to any integrated firm, regardless of its market share, and they cannot by themselves be considered uses of monopoly power.
Furthermore, AD/SAT has not presented any evidence to support its claim that the AP announced AdSEND prematurely. When publicly announcing AdSEND in April 1994, the AP stated that the program would be tested over the summer and launched in September. Testing was done over the summer and, while some glitches remained in the system throughout the fall of 1994, it was operational shortly after the time the AP had projected. Moreover, "pre-announcement" of a new product constitutes predatory conduct only when it is knowingly false. See MCI Communications Corp. v. American Telephone Telegraph Co., 708 F.2d 1081, 1128 (7th Cir. 1983). There is no suggestion that the AP's announcement of AdSEND was knowingly false.
AD/SAT's remaining allegation of predatory conduct is that the AP charged AD/SAT monopoly prices for its use of the AP satellite network. AD/SAT paid an annual use fee of $730,000, while the AP charged AdSEND only $75,000. Despite this significant disparity in prices, AD/SAT's argument fails for several reasons. First, AD/SAT has not even alleged, much less submitted evidence demonstrating, that the AP has a monopoly in the market for satellite services. Second, the contracts governing AD/SAT's use of the AP satellite network were first entered into in 1986 — long before the advent of AdSEND — and favorably renegotiated in 1991. Third, there is no evidence that could support the finding that it was necessary for AD/SAT to use the AP satellite network to compete in the market for delivery of advertisements to newspapers. This is not surprising since the relevant product market is the delivery of advertisements to newspapers by any means. And, even if the market were limited to electronic transmission of advertisements, AD/SAT could not demonstrate that use of the AP network was essential to its ability to compete in the market. Other firms offer satellite services, and other modes of electronic transmission, such as land lines, are available.
AD/SAT's claim of overcharging is very similar to an "essential facilities" antitrust claim. Thus, it is relevant to note that an "essential facilities" plaintiff must raise a triable issue of fact with respect to whether it is economically infeasible for the facility to be duplicated, and whether the denial of use inflicts a severe handicap. See Twin Laboratories, 900 F.2d at 568-69. Assuming that overcharging for the use of a facility is tantamount to denied of use, AD/SAT's claim nevertheless would fail because it has not raised a genuine issue of material fact with respect to whether it was overcharged so as to be effectively denied use or at least severely handicapped.
AD/SAT claims that the AP and the remaining defendants — the newspaper defendants, Newhouse, the NAA, and the NNN — unlawfully conspired to boycott AD/SAT, in violation of section 1 of the Sherman Act, and to monopolize the market for delivery of newspaper advertisements, in violation of section 2 of the Sherman Act.
Section 2 of the Sherman Act prohibits individuals from "combin[ing] or conspir[ing] with any other person or persons, to monopolize any part of the trade or commerce among the several States. . . ." 15 U.S.C. § 2. A successful conspiracy claim under section 2 requires "(1) proof of a concerted action deliberately entered into with the specific intent to achieve an unlawful monopoly, and (2) the commission of an overt act in furtherance of the conspiracy." Walsh Trucking, 812 F.2d at 795 (internal quotation marks and citations omitted).
Critical to surviving a motion for summary judgment on these claims is the threshold showing that a reasonable jury could find that the defendants' actions were concerted rather than independent. In Monsanto, the Supreme Court held that the inference of concerted action can be drawn only where the plaintiff presents "direct or circumstantial evidence that reasonably tends to prove that [each defendant] had a conscious commitment to a common scheme designed to achieve an unlawful objective." 465 U.S. at 764 (internal quotation marks and citation omitted). Furthermore, "antitrust law limits the range of permissible inferences from ambiguous evidence." Matsushita, 475 U.S. at 588. Thus, "conduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy. To survive a motion for summary judgment . . ., a plaintiff seeking damages . . . must present evidence `that tends to exclude the possibility' that the alleged conspirators acted independently." Id. (citations omitted). Moreover, the absence of a rational motive to engage in the alleged conspiracy is "highly relevant to whether a `genuine issue for trial' exists within the meaning of Rule 56(e)," id. at 596; if the defendants have "no rational economic motive to conspire, and if their conduct is consistent with other, equally plausible explanations, the conduct does not give rise to an inference of conspiracy," id. at 596-97 (citation omitted).
Thus, although the nature of trade associations is such that they are frequently the object of antitrust scrutiny, see Allied Tube Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 500-01 (1988), every action by a trade association is not concerted action by the association's members. Indeed, the varying roles played by trade associations such as the AP call for careful consideration by courts faced with allegations of antitrust conspiracy. As has been properly noted,
[t]here seems no conceptual difficulty in treating organizations created to serve their member-competitors or to regulate their market behavior as continuing conspiracies of the members. Nor is there any practical problem when we focus on those improprieties reducing competition among the members or with their competitors. But what about the day-to-day operations of the organization? Must we also see the trade association's buying, selling, hiring, renting, or investing decisions as continuing conspiracies among the members?. . . . [A]ll of these decisions become subject to Sherman Act § 1 litigation if [trade associations] are conspiracies. . . . One might respond to this concern in three ways: ignore it, adjust the necessary allegations or proofs, or hold such organizations continuing conspiracies for some purposes but single entities for other purposes.
7 Areeda ¶ 1477, at 347. To avoid unwarranted regulation of legitimate conduct, Professor Areeda suggested that "[t]o the extent that [trade associations] are buying and selling [products or services] in their own right, they can fairly be regarded as single entities whose selling decisions are not `price-fixing conspiracies' and whose buying decisions are not `boycott conspiracies' of rejected suppliers." Id. at 348.
Allegedly anticompetitive conduct must be considered in its factual context. Where that context reveals that the conspiracy claim is one "that simply makes no economic sense — [the plaintiff] must come forward with more persuasive evidence to support [its] claim than would otherwise be necessary." Matsushita, 475 U.S. at 587. In this case, the factual context of each defendant's decision to terminate, or attempt to terminate, its relationship with AD/SAT strongly suggests that the newspaper defendants had no rational economic motive to join the alleged conspiracies. Furthermore, the challenged conduct of each newspaper defendant is as consistent with the defendant's legitimate, independent business interests as with an illegal combination in restraint of trade. Under these circumstances, AD/SAT was required to submit evidence tending to exclude the possibility that the defendants acted independently. See Matsushita, 475 U.S. at 588; see also Burlington Coat Factory Warehouse Corp. v. Esprit De Corp., 769 F.2d 919, 923 (2d Cir. 1985) ("An antitrust plaintiff may not, therefore, in opposing a motion for summary judgment, rest on conclusory assertions of conspiracy when the defendants have proffered substantial evidence supporting a plausible and legitimate explanation of their conduct.") (citation omitted). As discussed in detail below, AD/SAT failed to submit such evidence.
(3) News Observer
The News Observer entered into its affiliation agreement with AD/SAT on August 15, 1986; in February 1993, the paper decided to temporarily unplug its AD/SAT recorder due to renovations at the paper that caused space constraints. After disconnecting the equipment, Richard Lee Henderson, the vice-president in charge of sales and marketing, noticed that the paper had received no complaints from advertisers regarding the unavailability of AD/SAT's delivery service. In the fall of 1993, Henderson learned that AD/SAT's corporate parent was filing for bankruptcy. Believing that this prospect was grounds for terminating the News Observer's affiliation agreement with AD/SAT, Henderson, advertising director James McClure, and W.L. "Mack" McCormick, the local sales manager, decided to terminate the agreement. This decision was communicated to AD/SAT by letter dated November 24, 1993.
AD/SAT's then-president, Atkins, told the paper that AD/SAT did not consider bankruptcy a valid grounds for termination under the contract; nevertheless, the paper reiterated its intention to exercise its right to terminate the agreement in a letter dated January 20, 1994. This letter was written five days after Lawrence Blasko of the AP visited the paper and introduced AdSEND. AD/SAT continued to contest the News Observer's right to terminate the affiliation agreement and, after consulting with its lawyers, the paper decided that paying the $7,500 annual affiliation fee would be less costly than a legal battle. Upon AD/SAT's insistence that the affiliation agreement so required, the paper re-installed the AD/SAT recorder at its offices.
AD/SAT points to the following facts in its attempt to implicate the News Observer in the alleged conspiracies: (i) the paper's president, Frank Daniels, Jr., was chairman of the board of the AP during the development, approval, and implementation of AdSEND; (ii) five days after Blasko's visit, the paper reconfirmed its intention to terminate its relationship with AD/SAT; and (iii) during a conversation between AD/SAT president Hilton and Daniels on June 15, 1994, Daniels purportedly stated, "I don't think that we will be doing business together, we're a beta [test] site for Ad/Send."
Contrary to AD/SAT's arguments, this evidence does not support the inference that the News Observer joined in a concerted refusal to deal with AD/SAT. Rather, the evidence shows that the paper — because it was dissatisfied with AD/SAT's service — expressed its desire to terminate its affiliation agreement well before anyone at the paper had heard of AdSEND and before the conspiracies alleged by AD/SAT supposedly came into existence. Furthermore, the outcome would be no different even if the paper had decided to terminate its AD/SAT affiliation after the paper's employees learned of AdSEND; the decision to terminate a service that was both costing the paper money and not bringing in additional revenue, and to install an alternative, cost-free service, does not give rise to an inference of an unlawful conspiracy in restraint of trade.
The Oklahoma Publishing Company publishes the Daily Oklahoman, which entered into an affiliation agreement with AD/SAT in 1986. In 1993, the Daily Oklahoman received approximately 159 ads over the AD/SAT system; the affiliation and per-transmission fees resulted in a per-ad cost to the paper of approximately $68. That same year, the paper received approximately 400 ads over its own internal electronic "bulletin board." The Daily Oklahoman's advertising department conducts an annual budget review each October. After the October 1993 review, the paper's advertising director, David Thompson, decided to terminate the paper's relationship with AD/SAT as a way to reduce operational costs. Thompson consulted with other members of the department to ascertain whether terminating the paper's AD/SAT service would harm operations; they reported it would not. On November 1, 1993, the Daily Oklahoman notified AD/SAT in writing that it was terminating its affiliation agreement with AD/SAT. AD/SAT did not respond to this notice of termination until September 28, 1994, when it wrote to the Daily Oklahoman asking it to reconsider its decision. There is no evidence that Thompson had even heard of the AdSEND program until several weeks after the AP's formal announcement of the program in April 1994 — six months after the Daily Oklahoman terminated its relationship with AD/SAT.
Advance Publications, Inc. owns, through subsidiaries, Newark Morning Ledger Co., which publishes the Newark Star-Ledger, and Birmingham News Company, which publishes the Birmingham News. AD/SAT's attempt to implicate these three companies — which are part of the Newhouse group — is also unsuccessful.
In its appellate brief, AD/SAT asserts that Donald Newhouse's ownership of the paper and the paper's termination of its affiliation after the announcement of AdSEND give rise to the inference that the Birmingham News participated in the alleged conspiracies. As discussed above, the fact that Newhouse owned the newspaper, in the absence of any evidence tending to show that he was involved in its decision to terminate its AD/SAT affiliation, does not support an inference of conspiracy. Likewise, the fact that the paper terminated its relationship after the introduction of AdSEND does not give rise to an inference of concerted action. Rather, it shows, at best, parallel conduct following an invitation to conspire. Since the Birmingham News's conduct was at least as — if not more — consistent with legitimate business concerns as with unlawful conspiracy, AD/SAT was required to submit evidence tending to exclude the possibility that the Birmingham News acted independently. Because it failed to do so, summary judgment was appropriate.
AD/SAT alleges that Donald Newhouse — as a member of the AP board of directors and chairman of the NAA board of directors during the planning, approval, and implementation of AdSEND — was at the center of the alleged conspiracies to boycott AD/SAT and allow AdSEND to monopolize the ad delivery market. Though it is true that Newhouse, who is also the president and part owner of Advance, had the opportunity to join in a conspiracy with the AP to destroy competition in the ad delivery market, it is also true that, like the newspaper defendants, the NAA, and the NNN, Newhouse had no rational motive to do so. As both a newspaper owner and chairman of the NAA, a primary interest for Newhouse is making newspapers a more attractive medium for advertisers. As the District Court noted, "Encouraging and assisting AP in its effort to enter the delivery market is certainly consistent with this interest[,]" while "[j]oining a conspiracy to refuse to deal with AD/SAT in an effort to drive it out of business is not." AD/SAT II, 920 F. Supp. at 1316.
Furthermore, none of the evidence submitted by AD/SAT tends to exclude the possibility that Newhouse was acting in an independent effort to further the interests of his own newspapers and the organization he represented, the NAA. AD/SAT points to a letter, dated August 2, 1993, to AP president Louis Boccardi, in which Newhouse stated that the AP should move quickly if it planned to get into the ad delivery business because "there is a window of opportunity now which AdSat [ sic] might close if too much time goes by." Far from demonstrating the existence of a conscious commitment to an unlawful scheme, this statement encourages competition by urging the AP to act quickly before AD/SAT forecloses competition. AD/SAT also asserts that Newhouse was instrumental in securing the NAA's exclusive support for AP's AdSEND. As discussed below, the NAA never endorsed AdSEND to the exclusion of other firms involved in the electronic ad delivery market.
Unlike the other defendants, the NAA and NNN are not direct participants in the advertising delivery business. Rather, the NAA was established with the goal of encouraging technological development in the newspaper industry in order to increase the profitability of newspapers; the NNN has the more specific goal of increasing the newspaper industry's declining share of advertising dollars. Thus, neither organization — as long as they were acting in accordance with these goals — had a rational motivation to join the conspiracies alleged by AD/SAT. Indeed, it would be counter to the goals of both organizations to eliminate a competitor in the market for delivery of ads in order to facilitate an attempt to monopolize the market by a newcomer that was not yet operational, especially since competition among delivery mechanisms would promote both technological innovation and fair pricing.