Opinion ID: 693382
Heading Depth: 3
Heading Rank: 3

Heading: The Effect of Marketing Communications Services on Major Philadelphia Newspapers, and Their Response

Text: 15 Much of Advo's growth has come at the expense of PNI, publisher of the Philadelphia market's major daily newspapers, The Philadelphia Daily News and The Philadelphia Inquirer. PNI estimates that it has lost at least $4,000,000 per year in ROP and circular advertising to Advo and similar competitors. 16 To counter Advo's advantages in market penetration and the ability to target specific neighborhoods, PNI in 1991 began working on a total market coverage (TMC) program to supplement ROP advertising with alternate delivery to non-subscriber households. PNI started implementing the program in small stages by 1992. Although it faced substantial start-up costs, PNI claims that it hoped to turn a profit on its TMC program by 1995. 17 Facing the same cost structure as Advo, PNI needed a base player to help cover the high fixed costs of delivering preprinted advertising packets door-to-door. In September 1992, and again in January of 1993, PNI offered to distribute circulars for the Super Fresh supermarket chain, a major Advo customer, for about $30 per thousand circulars. As part of its proposal, PNI offered discounts on ROP advertising tied to the total volume of advertising that Super Fresh purchased. Advo retained the account by cutting its rate by about 37%, from $58 to $36 per thousand circulars. Thus, Super Fresh retained Advo despite its base rate exceeding that in PNI's proposal by about 20%. Although the expert opinion testimony is conflicting, there appears to be no factual basis to Advo's claim that PNI's proposed prices were below its costs. There is also no support for Advo's claim that PNI tendered Super Fresh prices below those offered to comparable advertisers. 18 PNI made similar efforts to wrest the accounts of Acme and Fleming Foods supermarkets, Bradlees department stores, and Circuit City consumer electronics stores from Advo; in each case Advo retained the accounts after cutting its rates substantially. In fact no major account has switched from Advo. Thus, it is clear that to date PNI's activities have been pro-competitive, as they have resulted in lower prices.