The opinion of the court was delivered by: GURFEIN
This is an action by Michael Lepore and Vito Lepore, independent home delivery dealers of the Daily News and the Sunday News, against New York News Inc. ("the News"), the publisher of those two newspapers, for damages under § 4 of the Clayton Act (15 U.S.C. § 15) and for injunctive relief under § 16 of the Clayton Act (15 U.S.C. § 26). The request for relief is based upon alleged violations of § 1 of the Sherman Act (15 U.S.C. § 1) and §§ 3 & 7 of the Clayton Act (15 U.S.C. §§ 14, 18) committed by the defendant in connection with the conduct of its system for the home delivery of the Daily News and the Sunday News.
Plaintiffs move for a preliminary injunction restraining the News from terminating its carrier agreements with the plaintiffs and from committing acts of harassment against the plaintiffs, and mandating other incidental relief. An evidentiary hearing was held.
This action raises some fundamental questions in the field of newspaper delivery.
Before 1965, the Daily News and the Sunday News sold their papers to independent route dealers who bought the newspapers from the News and delivered them by use of automobile. The independents carried and sold other morning newspapers in competition with the News, namely, the New York Times ("the Times"), and the now defunct Daily Mirror, Herald Tribune and, in Suffolk County, the Suffolk Sun.
In 1965 the News began a new distribution system, which utilized carrier boys in conjunction with franchised dealers, in certain areas of the suburban metropolitan area. At the same time it continued to deal in the old way with the independents who still distributed other newspapers and who were not limited on the retail price they could charge. That is still the situation in Manhattan and other areas.
This new distribution system for certain suburban areas involves independent home delivery carriers under uniform carrier agreements. The relevant provisions of the carrier agreement are: (1) that the News agrees to assign an exclusive territory to the carrier which it will assign for home delivery to no other carrier; (2) that the carrier agrees to purchase all newspapers required by home delivery customers at the prices fixed by the News and deliver them "at no more than the regular established home delivery price "; (3) that the carrier agrees not to sell or distribute copies of any other newspaper, or any advertising matter not authorized by the News; (4) that the carrier agrees not to charge any carrier boy engaged in making deliveries and collections more than the price established therefor by the News; (5) that the carrier does not have the right to return at cost unsold copies of the News; (6) that the News may terminate the agreement without advance notice if the carrier breaches any of its provisions, but that the carrier must give sixty days' notice in writing; (7) finally, that "the Carrier is and shall remain an independent contractor and not an employee or agent of the News."
In 1966 Michael Lepore ("Michael") entered into a similar carrier agreement for a certain area of Suffolk County (area FS-208) and his brother Vito ("Vito") entered into the same agreement for another area of Suffolk County (FS-209). In 1967 each entered into a revised agreement, the relevant terms of which have already been described. In November 1968, Michael sold his carrier agreement for FS-208, with the consent of the News, to Vito. At the same time, Michael entered into a new carrier agreement for the assigned territory of Co-Op City in the Bronx.
He was furnished with 500 free sample newspapers a day for distribution to tenants to acquaint them with the advantages of subscribing to home delivery service. This practice continued, with only a slight suspension, until January 17, 1972, when it was abruptly terminated in circumstances to be related.
The relationship between Michael and the News was apparently good until shortly after May 1971 when Michael shifted from boy deliverers to adult deliverers at higher compensation, because Co-Op City management had imposed a regulation forbidding use of its elevators by deliverers after six o'clock a.m. -- too early, under the law, for the use of boy deliverers. As a result, the weekly collections formerly made by the boys themselves could not be made by the adult deliverers, whose income would not justify the extra time; and, therefore, the more costly system of monthly billing by mail had to be instituted. Also, of course, the compensation had to be made higher for adults by dropping the price of the newspapers to the adult deliverers.
To make up for the changed conditions at Co-Op City, Michael joined with his brother, Vito, who did the home delivery at Co-Op City for the Times, to develop a single group of adults to deliver the Daily News and the Sunday News as well as the Times in Co-Op City. In addition, to make up for the added costs of adult delivery and billing by mail, Michael, in or about May 1971, increased his prices by including in his monthly bills to customers an additional charge, denominated a "billing charge."
He took both these actions unilaterally without approval of the defendant, and was in apparent breach of the contractual conditions of the agreement.
It is not evident when the News got full knowledge of these breaches, but by January 1972 things began to happen. On about January 17, 1972 the practice of sending free newspapers to Michael for sample distribution was stopped without notice. On January 27, 1972, the News advised Michael that his carrier agreement was terminated because of his use of adult deliverers who also delivered the Times, and because his "billing charge" made his price to customers higher than the maximum price allowed. In response to Michael's plea for reinstatement, the News gave him until February 1 to cease and comply. That deadline was later extended to February 6.
By February 6, Michael had hired a separate group of adult deliverers and, based on a compromise with the News, had dropped the "billing charge" and substituted for it a request for a "voluntary gratuity" in suggested amounts of from eighty-seven to ninety-five cents a month, depending on the number of papers delivered. There was testimony that most boy deliverers had been getting tips of about 25 cents a week but that the adults were receiving practically nothing, since they did not collect the bills and, hence, did not come face-to-face with the customers.
On February 23, 1972 the News placed vending machines for the sale of its newspapers on the street near various entrances to Co-Op City buildings. Early in March, the News cancelled a separate oral contract which both plaintiffs had had with the News since 1968 for telephone solicitation of subscriptions for home delivery of the Daily News and the Sunday News in Suffolk County. There is no doubt that by this time there was bad blood between the News and the Lepores. The Lepores call the acts described "reprisals;" the circulation sales manager of the News swore that they were dictated by economic considerations. No special reprisal against Vito, unrelated to Michael (nor, indeed, any breach of the carrier agreements by Vito in Suffolk County), has been shown.
The plaintiffs contend that they have demonstrated prima facie violations of the antitrust laws by the News entitling them to preliminary relief and that, in any event, the balance of hardship is so strongly in their favor as to require immediate relief.
The defendant admits that it sells over 2,225,000 daily morning newspapers and over 3,000,000 Sunday newspapers in the metropolitan New York area.
Whether or not this constitutes about 70% of the total circulation of all daily and Sunday newspapers in the area, as plaintiffs allege, it is clear that the News has the dominant position in the morning field, and that ...