Opinion ID: 626562
Heading Depth: 2
Heading Rank: 2

Heading: The Single-Copy Magazine Sales Industry

Text: Magazine wholesalers are responsible not only for delivering the magazines to retailers but also for thereafter picking up from the retailers, tabulating, and destroying any copies that remain unsold. ( See, e.g., Complaint ¶¶ 29-30; PAC ¶ 33.) However, publishers have an incentive to see that each retailer is overstocked, in order to ensure maximum sales and thereby maximize advertising revenues ( see, e.g., Complaint ¶ 31; PAC ¶¶ 34, 41); [i]ndeed, nearly half of all newsstand magazine titles have a `sell-through' percentage as low as 80%meaning that, of five magazines distributed by the wholesaler, only one is actually sold to a consumer (PAC ¶ 41). The cost of such overstocking is borne not by the publishers that desire it, however, but rather by the wholesalers, for wholesalers historically have been compensated only for the copies that retailers actually sold. ( See, e.g., id. ) Thus, when only one of five copies distributed is sold to a consumer, the wholesaler must bear the expense of retrieving the four unsold copies and transporting them back to its facilities for disposal or destruction, while being paid for only the one sold copy. Accordingly, Anderson and Source had advocated adoption of a different system, under which the retailers would automatically report their sales to the publishers through use of electronic checkout scanners, dubbed scan-based trading, and the retailers themselves would destroy all magazines they had not sold. Wholesalers would thereby be spared the unreimbursed cost of picking up, counting, reporting, and destroying unsold copies. ( See, e.g., Complaint ¶¶ 32-33; PAC ¶ 42.) Publishers, however, opposed scan-based trading, citing fears of mistaken underreporting of sales due to machine error (estimated to be some five percent of all sales); underreporting would negatively affect the publishers' revenues from both sales and advertising. ( See, e.g., Complaint ¶ 34; PAC ¶ 43.) In early January 2009, Anderson decided that it would announce the imposition on publishers, as of February 1, 2009, of a $.07 distribution surcharge (the Surcharge) for each magazine copy Anderson received and distributed, regardless of whether the retailer sold the copy. ( See Complaint ¶ 39; PAC ¶ 49.) Some paragraphs of Anderson's Complaint and proposed amended complaint allege that the Surcharge was a temporary, stop-gap measure (Complaint ¶ 39; PAC ¶ 49) and characterize it as a  proposed ... surcharge ( e.g., Complaint ¶ 40 (emphasis added); PAC ¶ 50 (emphasis added)); and the proposed amended complaint asserts that the Surcharge was not ... non-negotiable (PAC ¶ 51; see also id. ¶ 4 (As defendants well know, the proposed surcharge itself was negotiable.)). However, other paragraphs of the Complaint (unlike the PAC) cast the Surcharge in a more intractable light. For example, the Complaint alleged that on January 12 and 13 Charles Anderson, Anderson's chief executive officer (CEO), met with some of its largest publisher clients, including Time, AMI, and Bauer, and informed the publishers of Anderson's decision to impose the $.07 per copy surcharge. (Complaint ¶ 41 (emphasis added); compare id. with PAC ¶ 51 (substituting proposed temporary stop-gap measure for decision to impose the $.07 per copy surcharge).) And the Complaint alleged that on January 14, 2009, Mr. Anderson had a call-in interview with the representative of an industry publication, The New Single Copy, during which he publicly announced the surcharge and explained the industry constraints compelling that measure. (Complaint ¶ 42 (emphasis added); compare id. with PAC ¶ 52 (substituting underlying for compelling).)