Opinion ID: 626562
Heading Depth: 4
Heading Rank: 5

Heading: Publishers' and Distributors' Assumed Self-Interest

Text: Finally, we note the district court's view that Anderson's conspiracy claim is not plausible because the elimination of Anderson and Source would be contrary to the publishers' and national distributors' self-interest. The court stated that more wholesalers yields greater competition, which is good for suppliers. Destroying Anderson and Source would reduce the publisher's wholesale outlets from four to two and would give Hudson and News Group, the two remaining major wholesalers, 90% of the market share.... This is too much market power to yield to wholesalers. 732 F.Supp.2d at 397. We reject this rationale for the dismissal. First, the defendant publishers and distributors own or control 80 percent of the nation's magazines ( see PAC ¶ 80), including, apparently, those that are the most popular ( see, e.g., id. ¶¶ 11-18). We doubt that it can be said as a matter of law that these publishers and distributors would have less market power than wholesalers who themselves produce no goods and who, without these publishers and distributors, would lack the most popular magazines to offer to retailers. Nor is it implausible that the publishers and distributors would feel comfortable dealing with just two wholesalers, especially given that those wholesalers were members of the alleged conspiracy. Second, the court's self-interest rationale disregards the allegations that, under the pre-2009 system, with four national wholesalers competing with each other and operating independently of the publishers, the retailers had more wholesalers from which to choose and could make decisions based on the suppliers' prices. With only two national wholesalers, each with its own allocated territory, many retailers would have no other supplier choice; wholesalers could increase their profits by raising prices to the retailers, and not seek, as Anderson and Source had, to increase charges to the publishers. In the near term at the very least, the conspiracy alleged by Anderson could be expected to benefit the publishers, the distributors, and the two wholesalers who participated. In this connection, we note that the alleged comment by Jacobsen on the elimination of Anderson and Source, stating that we now control this space, was interpreted by the district court as merely describing the state of the industry, 732 F.Supp.2d at 402. It is at least as plausible an interpretation (a) that this statement claiming control evinced satisfaction with the reduction of the number of national wholesalers to two, and (b) that the we in we ... control referred not only to Jacobsen's TWR and its client Time, but to other publishers and distributors as well. If indeed Jacobsen said we are in control, it hardly seems possible that the we could not have included at least the nation's two largest distributorsCurtis and Kableand the publishers they represent, i.e., all of the other publishers in this case.