The opinion of the court was delivered by: MUNSON
MEMORANDUM-DECISION AND ORDER
On November 20, 1978, plaintiff WIXT Television, Inc., a New York corporation, filed a private antitrust action in the Northern District of New York against two formidable communications conglomerates, Meredith Corporation and Newhouse Broadcasting Corporation. Plaintiff WIXT operates the American Broadcasting Company (ABC) television affiliate in Syracuse, New York. Defendant Meredith operates television station WTVH in Syracuse, the Columbia Broadcasting Company affiliate, as well as television and radio stations in other communities in the United States.
Defendant Newhouse Broadcasting Corporation operates WSYR television and radio stations in Syracuse, which are the National Broadcasting Corporation affiliates, and operates other television and radio stations throughout the United States.
Moreover, through its subsidiary, the Herald Company, Newhouse owns and publishes the only local daily morning, afternoon, and Sunday newspapers in Syracuse.
In plaintiff's original complaint, which plaintiff concedes was "hurriedly prepared"
and "not as clear as (it) might have been,"
plaintiff contends that defendants conspired to foreclose plaintiff from competing for commercial television advertising in Syracuse, New York, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, and more specifically the Noerr-Pennington
doctrine. However, it appears that Meredith's subsequent motions
to dismiss plaintiff's complaint or in the alternative to strike portions of the complaint, and a motion by Newhouse for summary judgment, inspired plaintiff to expand its claims. On March 2, 1979, plaintiff moved to amend its complaint in order to "clearly allege"
that Newhouse has engaged in reciprocal advertising practices in concert with its newspaper affiliate, the Herald Company, which, in its proposed amended complaint, plaintiff seeks to add as a defendant co-conspirator.
In addition, plaintiff's proposed amended complaint alleges that Newhouse and Meredith conspired to deprive plaintiff of its affiliation with ABC. After hearing oral argument on all of the above motions on April 9, 1979, the Court reserved its decisions.
In the meantime, plaintiff proceeded with discovery of Newhouse by deposing the vice-president and general manager of WSYR's television and radio stations, David Shurtleff, on March 7, 1979. Plaintiff served Newhouse with a request for the production of documents and things which was complied with by Newhouse at the deposition of Mr. Shurtleff. For its part, Newhouse served plaintiff with interrogatories and a request for admissions. Plaintiff later responded to Newhouse's discovery demands, but in a manner that was objected to by Newhouse.
However, beyond this, very little discovery was attempted by WIXT or Newhouse.
The reasons for the protracted discovery is partly attributable to scheduling conflicts and "communication problems" between the parties.
The delay was also attributable, at least from plaintiff's point of view, because of its request pursuant to Rule 56(f) of the Fed.R.Civ.P., to stay the Court's decision on Newhouse's summary judgment motion until plaintiff had an opportunity to conduct further discovery, which plaintiff believed would be essential to enable it to adequately oppose Newhouse's motion. In an effort to resolve these problems, plaintiff requested a pre-trial conference. The conference was held on November 29, 1979, and to the Court's surprise, plaintiff withdrew its Rule 56(f) request.
Furthermore, plaintiff informed the Court that it would not object to a resolution of the Newhouse summary judgment motion on the basis of the record as it stood at that time. The Court construed plaintiff's statements as a waiver of its right to further discovery.
In any event, on March 4, 1980, the Court contacted attorneys for Newhouse and WIXT and inquired whether they desired the opportunity to conduct further discovery before the Court ruled on the pending motions. Both parties declined the Court's invitation. With this procedural background in mind, the Court will first consider plaintiff's motion to amend its complaint.
Plaintiff moves to amend its complaint for purposes of clarifying the claims that it made in its original complaint, and to add the Newhouse-owned Herald Company as a defendant co-conspirator. While Meredith does not oppose the amendment of plaintiff's complaint, Newhouse maintains that, even after considering the changes in plaintiff's proposed amended complaint, plaintiff has failed to state a claim upon which relief can be granted, and has failed to demonstrate that there is a sufficient factual basis to support its claims. Newhouse nevertheless concedes that plaintiff's proposed amended complaint differs from the original in its drafting style only, because it "alleges no additional facts which were not before the Court in connection with Newhouse's motion for summary judgment." Newhouse Memorandum in Opposition to Plaintiff's Motion To Amend its Complaint, at p. 2.
As a general proposition, leave to amend a complaint "shall be freely given when justice so requires," Rule 15 Fed.R.Civ.P., "and if the plaintiff has at least a colorable grounds for relief, justice does so require unless the plaintiff is guilty of undue delay or bad faith or unless permission to amend would unduly prejudice the opposing party." Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230, 9 L. Ed. 2d 222 (1962); S. S. Silberblatt, Inc. v. East Harlem Pilot Block, 608 F.2d 28, 42 (2d Cir. 1979). At the same time, "(a) trial court does not abuse its discretion in denying leave to amend a complaint which even as amended would fail to state a cause of action." Id.
To the extent that plaintiff's proposed amended complaint merely elaborates on its original claims, the Court believes that the interest of justice will be served by granting plaintiff's motion to amend. Since defendant Newhouse admits that it is already familiar with the assertions made in the proposed complaint, it will not be surprised or prejudiced by the additional allegations that plaintiff has proposed. Furthermore, this result is in the interest of completeness and judicial economy. Although Newhouse argues that plaintiff's proposed amended complaint is unsupported by the facts and fails to state a claim upon which relief can be granted, these matters can best be considered in the context of the motions to dismiss and for summary judgment. Accordingly, plaintiff's motion to amend its complaint is granted, and the amended complaint will serve as the basis for the analysis of defendants' motions. The Court will next examine defendant Newhouse's motion for summary judgment.
Plaintiff's complaint alleges three claims under Section 1 of the Sherman Act: first, that Newhouse and Herald have operated a reciprocal advertising arrangement; second, that Newhouse and Meredith have conspired to interfere with WIXT's ABC affiliation by boycotting plaintiff; and third, that Newhouse and Meredith have conspired to deny WIXT access to various government agencies. Newhouse has moved for summary judgment with respect to each of plaintiff's claims on the grounds that WIXT has not marshaled sufficient facts to show that triable issues of fact exist.
Summary judgment attains procedural significance by permitting the court to pierce sham claims and resolve actions where the facts are undisputed, and the moving party is entitled to judgment as a matter of law. Applegate v. Top Associates, Inc., 425 F.2d 92, 96 (2d Cir. 1970); American Mfrs. M. I. Co. v. American Broadcasting-Pars. Th., 388 F.2d 272, 278 (2d Cir. 1967). On a motion for summary judgment, the court is not to try issues of fact, rather, it is only to determine whether triable issues exist. Id. at 279. In making this determination, the court must "resolve all ambiguities and draw all reasonable inferences in favor of the party against whom summary judgment is sought," United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 994, 8 L. Ed. 2d 176 (1962). This is not to say that the party opposing summary judgment is free of all procedural obstacles. On the contrary, the opposing party "must do more than whet the curiosity of the court" with its claims. "(H)e must support vague accusation and surmise with concrete particulars" and show that there is a genuine issue as to any material fact. Applegate v. Top Associates, Inc., supra, 425 F.2d at 96. To some extent, however, this procedural devise relies less upon scientific precision than upon the "informed and properly reasoned judgment" of the court. American Mfrs. M. I. Co. v. American Broadcasting-Para. Th., supra, 388 F.2d at 279.
The primary burden of proof in a summary judgment motion is on the moving party, Adickes v. S. H. Kress & Co., 398 U.S. 144, 157-61, 90 S. Ct. 1598, 1608-10, 26 L. Ed. 2d 142 (1970). Once this burden has been met, the nonmoving party can avoid an adverse judgment only by bringing forth evidentiary support for its claims. Fed.R.Civ.P. 56(e); First National Bank v. Cities Service Co., 391 U.S. 253, 299, 88 S. Ct. 1575, 1597, 20 L. Ed. 2d 569 (1968). The standard for summary judgment has been summarized in the following manner:
summary judgment ... can be sustained ... if but only if the reviewing court is satisfied that a properly instructed jury, giving full weight to plaintiff's evidence, drawing every reasonable inference in its favor, and subjecting defendants' evidence to a critical eye, could not rationally have found that plaintiff was entitled to any relief.
Nifty Foods Corp. v. The Great Atlantic & Pacific Tea Co., Inc., 614 F.2d 832, 839 (2d Cir. 1980). Ambook Enterprises v. Time, Inc., 612 F.2d 604, 611 (2nd Cir. 1979).
Antitrust actions are not well suited to a summary disposition. The issues involved are usually complex, Poller v. Columbia Broadcasting, 368 U.S. 464, 473, 82 S. Ct. 486, 491, 7 L. Ed. 2d 458 (1962), and a plaintiff has often been unable to complete discovery in advance of the motion, and is therefore hampered in putting forth "facts" showing the necessity of trial. Cf. First National Bank v. Cities Service, 391 U.S. 253, 290-298, 88 S. Ct. 1575, 1593-1597, 20 L. Ed. 2d 569 (1968); Miracle Mile Associates v. City of Rochester, 617 F.2d 18, 21 (2d Cir. 1980); George C. Frey Ready-Mixed Con. v. Pine Hill C. M., 554 F.2d 551, 555 (2d Cir. 1977). See generally 2 Areeda and Turner, Antitrust Law § 317 (1978).
While courts must be mindful of the predicament faced by an antitrust plaintiff at the early stages of the litigation, and that, at times, summary judgment may be "too blunt a weapon with which to win the day," Miller v. General Outdoor Advertising Co., 337 F.2d 944, 948 (2d Cir. 1964), "summary judgments have a place in the antitrust field...." White Motor Co. v. United States, 372 U.S. 253, 259, 83 S. Ct. 696, 700, 9 L. Ed. 2d 738 (1963). For instance, when a case involves a per se violation of the antitrust laws, summary judgment may be an appropriate means of eliminating unsubstantiated claims. Id. On the other hand, where motive and intent are at issue, or the proof is in the hands of the moving party, then summary judgment will rarely be granted because a plaintiff has not as yet had a fair opportunity to conduct the necessary discovery. Poller v. Columbia Broadcasting, supra, (motive and intent); Norfolk Monument Co. v. Woodlawn Memorial Gardens, Inc., 394 U.S. 700, 89 S. Ct. 1391, 22 L. Ed. 2d 658 (1969) (control of the proof). At the same time, courts must appreciate that a plaintiff may commence an antitrust action to redress injuries "resulting from normal business hazards," Poller v. Columbia Broadcasting, 368 U.S. 464, 82 S. Ct. 486, 7 L. Ed. 2d 458 (1962) (Mr. Justice Harlan, dissenting), as opposed to unfair competition.
Also to be considered is the usually time consuming and expensive nature of antitrust litigation. Lupia v. Stella D'Oro Biscuit Co., Inc., 586 F.2d 1163, 1167 (7th Cir. 1978) cert. denied 440 U.S. 982, 60 L. Ed. 2d 242, 99 S. Ct. 1791 (1979); Coniglio v. Highway Services, Inc., 495 F.2d 1286, 1293 (2d Cir. 1974); Laurie Visual Etudes v. Cheesebrough-Pond's, Inc., 473 F. Supp. 951, 953 (S.D.N.Y.1979). With these principles in mind, the Court will now examine plaintiff's reciprocity claim.
The factual basis of plaintiff's reciprocity claim is not substantially in dispute, and can be summarized as follows. Sometime prior to 1974, Newhouse's television station, WSYR, entered into a "reciprocal" advertising arrangement with Newhouse's newspaper affiliate, the Herald Company. In accordance with that arrangement, the Herald newspapers agreed with WSYR to advertise WSYR's television programs in exchange for television advertising time used to promote one or more of the Herald newspapers. For a variety of reasons, the advertising arrangement increased the operating efficiency, and ultimately the profitability of WSYR. First of all, most if not all of the commercials for the Herald newspapers were aired during WSYR's "unsold" commercial broadcast time. Generally, all commercial television stations have unsold commercial broadcast time from which they are unable to realize any revenues.
Should the television station be able to broadcast a commercial during an "unsold" period, the incremental cost involved is minimal, since additional facilities or personnel are not required. Thus, the WSYR and Herald arrangement took advantage of this cost efficiency to increase WSYR's profit.
Moreover, the exchange of television commercial for newspaper advertising is in the true sense of the term an exchange WSYR and Herald do not pay for this advertising in cash.
Instead, WSYR and Herald would keep a general accounting of the amount of advertising they exchanged such that, during the course of the year, the dollar value of the exchange would be comparable.
In a typical year, the amount of advertising exchanged between the companies approximated $ 170,000.00.
The third source of increased profit to WSYR as a result of this advertising arrangement was its effect on WSYR's "ratings." To back up for a moment, the revenues of a commercial television station derive principally from the sale of commercial broadcast time to advertisers.
In the case of WIXT, for instance, approximately forty-five percent of its revenues come from national advertisers and approximately forty percent derive from local advertisers. The price charged by a commercial television station for its advertisements are based upon audience estimates and station audience penetration data as set forth in rating books compiled by the Arbitron and A.C. Nielson Companies. These rating books are published four times a year, and they contain information about the number and demographic characteristics of television viewers in particular geographic markets, which are distilled from surveys of a statistically-relevant sample taken during four different four-week periods during the year. The rating given to a television station for a designated portion of its broadcast day is used to determine the dollar amount that an advertiser will be required to pay for a commercial broadcast at or around that time. As a corollary to this rule, the television stations with the highest ratings, get the larger share of the advertising business, and consequently are more profitable.
During the rating months, commercial television stations, attempt to boost their ratings with the aid of their network affiliations.
One method used is called "stunting," whereby the networks broadcast what they believe will be an exceptionally popular program.
To draw attention to such programs, the local affiliated television station will increase its advertising for these special programs to influence potential viewers to watch the programs. If a television station is successful in influencing the public to view its programs, this tends to increase its audience share or market penetration, and the profitability of the station.
Utilizing its special advertising arrangement with Herald, WSYR increased the volume of newspaper advertisements of its programs during the rating months
in an effort to improve its profits.
To support its Section 1 reciprocity claim, WIXT complains that Herald "refused"
it the opportunity to use an advertising exchange arrangement similar to the one employed by WSYR. The alleged refusal to deal was not, however, absolute, as plaintiff avers that it had entered into such an advertising arrangement with Herald, which, comparatively, amounted to five percent of the volume of advertising placed by WSYR with Herald.
Because WIXT was not more often able to use such an advertising arrangement with Herald, it had to divert funds that would otherwise be usable in the development of its business to pay for its advertisements in the Herald newspapers. In addition, plaintiff says that the WSYR-Herald advertising arrangement enabled WSYR to publicize its station and programing at less cost and to a significantly greater extent than WIXT;
particularly during those months when increased publicity is likely to affect television station ratings. Plaintiff asserts that, as a result, more viewers watched WSYR programing thereby enabling it to attract greater advertising patronage, to charge more for its advertising, and to become more profitable than WIXT. Finally, plaintiff claims that since WSYR is a dominant seller of television advertising in Syracuse, New York, the WSYR-Herald "reciprocal" advertising arrangement has allegedly enhanced WSYR's market power.
Relying upon these allegations, plaintiff maintains that Newhouse, through its affiliates WSYR and Herald, has conspired to restrain trade or commerce by using a reciprocal advertising arrangement in violation of Section 1 of the Sherman Act. Newhouse disputes that allegation and argues that the WSYR-Herald advertising arrangement is "immune from attack" under Section 1, and cites the case of Syracuse Broadcasting Corporation v. Newhouse, 319 F.2d 683 (2d Cir. 1963). In particular Newhouse contends that the advertising arrangement in question is not a conspiracy to restrain trade or commerce, and that there is no issue to be tried on this matter. Thus, Newhouse believes that it is entitled to summary judgment dismissing this portion of plaintiff's complaint. The Court will first address defendant's arguments.
To avoid summary judgment dismissing its Section 1 Sherman Act claim, plaintiff must demonstrate that triable issues of fact exist, and that the defendants are not entitled to judgment as a matter of law
on any of three essential elements: first, that defendants entered into a "contract, combination ... or conspiracy," second, that such contract, combination or conspiracy was "in restraint of trade or commerce among the several States," and third, that plaintiff suffered economic injury based on the foregoing. 15 U.S.C. § 1. Fuchs Sugars & Syrups, Inc. v. Amstar Corp., 602 F.2d 1025, 1029-30 (2d Cir.) cert. denied in 444 U.S. 917, 100 S. Ct. 232, 62 L. Ed. 2d 172 (1979); Modern Home Institute Inc. v. Hartford Acc. & Ind. Co., 513 F.2d 102, 108-09 (2d Cir. 1975); House of Materials, Inc. v. Simplicity Pattern Co., 298 F.2d 867, 870 (2d Cir. 1962); DuPont Glore Forgan Inc. v. Am. Tel. & Tel. Co., 437 F. Supp. 1104 (S.D.N.Y.1977) aff'd 578 F.2d 1367 (2d Cir.) cert. denied 439 U.S. 970, 99 S. Ct. 465, 58 L. Ed. 2d 431 (1978); Beckman v. Walter Kidde & Co., 316 F. Supp. 1321, 1324 (E.D.N.Y.1970) aff'd 451 F.2d 593 (2d Cir. 1971), cert. denied 408 U.S. 922, 92 S. Ct. 2488, 33 L. Ed. 2d 333 (1972).
On the issue of conspiracy, the Supreme Court consistently held that common ownership and control of corporations will not insulate them against antitrust liability. See e.g., United States v. Citizens & Southern National Bank, 422 U.S. 86, 116-17, 95 S. Ct. 2099, 2016-17, 45 L. Ed. 2d 41 (1975); Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 141-42, 88 S. Ct. 1981, 1985, 1986, 20 L. Ed. 2d 982 (1968); Timken Roller Bearing Co. v. United States, 341 U.S. 593, 598, 71 S. Ct. 971, 974, 95 L. Ed. 1199 (1951); Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211, 215, 71 S. Ct. 259, 261, 95 L. Ed. 219 (1951); United States v. Yellow Cab Co., 332 U.S. 218, 227, 67 S. Ct. 1560, 1565, 91 L. Ed. 2010 (1947). Still, the mere fact that two or more commonly owned and controlled companies act together for their own self-interest does not necessarily have antitrust consequences. It is only when these companies, through concerted actions, "attempt to exact some collateral anticompetitive advantage" will they run afoul of the antitrust laws. Fuchs Sugars & Syrups, Inc. v. Amstar Corp., supra, 602 F.2d at 1025; Knutson v. Daily Review Inc., 548 F.2d 795, 802 (9th Cir. 1976) cert. denied 433 U.S. 910, 97 S. Ct. 2977, 53 L. Ed. 2d 1094 (1977); Bowen v. New York News, Inc., 522 F.2d 1242, 1254 (2d Cir. 1975) cert. denied 425 U.S. 936, 96 S. Ct. 1667, 48 L. Ed. 2d 177 (1976).
This rule recognizes that, as a practical matter, commonly owned companies will naturally tend to reach understandings among themselves in order to secure commercial advantages. Yet, it would defeat the purpose of free competition, and subject the multicorporate form to unnecessary restrictions, if the courts construed Section 1 of the Sherman Act as defining a "conspiracy in restraint of trade" to include every joint action by commonly owned companies." Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71, 84 (9th Cir. 1969); Murphy Tugboat v. Shipowners & Merchants Towboat, 467 F. Supp. 841, 860 (N.D.Cal.1979); Wills & Pitofsky, Antitrust Consequences of Using Corporate Subsidiaries, 43 N.Y.U.L.Rev. 20, 20-30 (1968). Thus, for example, where one corporate affiliate, in granting another affiliate free advertising benefits, merely affects a redistribution of corporate profits, this practice is not a conspiracy in restraint of trade. Syracuse Broadcasting Corp. v. Newhouse, 319 F.2d 683, 687 (2d Cir. 1963). At the other end of the spectrum, however, where jointly owned companies, through the use of restrictive sale agreements, unreasonably foreclose their competitors from access to market, such actions violate Section 1 of the Sherman Act. United States v. Yellow Cab Co., 332 U.S. 218, 67 S. Ct. 1560, 91 L. Ed. 2010 (1947). In sum, concerted action by jointly owned entities which is motivated by legitimate business purposes is protected conduct under the Sherman Act. And yet, concerted action by those same entities, which creates an anticompetitive effect will likely be viewed as a conspiracy in restraint of trade. See Murphy Tugboat v. Shipowners & Merchants Towboat, supra at pp. 858-60; DuPont Glore Forgan Inc. v. Am. Tel. Co., supra at 1115-16; Sullivan, Antitrust Law 323-28 (1977); 1 Von Kalinowski, Antitrust Laws and Trade Regulation § 6.01(2) at pp. 6-32-6-41 (1979).
Newhouse claims that for antitrust purposes, the advertising arrangement at issue in the present case falls on the side of a legitimate business practice, and is therefore not a conspiracy in restraint of trade. In support of this argument, defendant relies principally on the Second Circuit Court of Appeals opinion in Syracuse Broadcasting Corp. v. Newhouse, 319 F.2d 683 (2d Cir. 1963). The Syracuse Broadcasting case involved twelve years of litigation, including four separate appeals to the Second Circuit. The action was commenced by the Syracuse Broadcasting Corporation which operated radio station WNDR in Syracuse, New York. Named as defendants were Samuel I. Newhouse, who directly or indirectly owned the three corporate defendants, the Herald Company, the Post-Standard Company, and the Central New York Broadcasting Company, a company that operated WSYR television and radio stations. Plaintiff alleged primarily that defendants conspired to grant WSYR disproportionate publicity in their newspapers, in violation of Section 1 of the Sherman Act. It was also claimed by plaintiff that defendants violated the Act by giving free newspaper advertising to WSYR and its advertisers without making the same opportunity available to WNDR.
In the final appeal on the latter issue, the Court of Appeals assumed that plaintiff presented sufficient evidence to prove that the newspapers had given free advertising to WSYR. 319 F.2d at 687. Nevertheless, the Court rejected plaintiff's claim that defendants were involved in a conspiracy to restrain trade. To begin with, the Court of Appeals followed the Supreme Court's admonition that the Sherman Act "is aimed at substance rather than form." Citing United States v. Yellow Cab Co., 332 U.S. 218, 227, 67 S. Ct. 1560, 1565, 91 L. Ed. 2010 (1947). The Court then stated further:
Looking at the substance of the transactions here, it is apparent that any free advertising, if given, merely affected a redistribution of corporate profits. There is nothing to indicate that WSYR could not have paid for its advertising. If it had paid for the advertising, the newspapers would have received additional revenue; if it did not pay, its own revenues would have been correspondingly increased. Therefore, the granting of free advertising is as equally probative of a corporate policy of leaving certain funds in one corporation rather than transferring them to the books of another as it is of a conspiracy to restrain trade. There is nothing to indicate that requiring WSYR to pay for its advertising would in any way have aided plaintiff in competing with WSYR.
Id. at 689. The common ownership of the defendants was not, however, dispositive of this issue. Id.
The present case differs only slightly from the facts of Syracuse Broadcasting. Here, defendants' uncontroverted evidence reveals that WSYR pays for its advertising through a barter arrangement with the Herald newspapers, as opposed to the free advertising arrangement that the Herald Company had provided to WSYR in the Syracuse Broadcasting case. Nonetheless, in Syracuse Broadcasting the Court of Appeals was not persuaded that the availability of free advertising was sufficiently anticompetitive to be characterized as a conspiracy in restraint of trade. There is greater justification for this same conclusion in the instant case because the defendants' barter advertising arrangement is even less advantageous than the free advertising considered in Syracuse Broadcasting. Furthermore, just as in Syracuse Broadcasting, there is no evidence in this case tending to demonstrate that WSYR was required by Newhouse to accept the advertising exchange rather than engaging in a cash transaction. Indeed, in its amended complaint plaintiff concedes that the combined resources of Newhouse enable it to reap the benefit of "promotional ...