Lorain Journal Co. v. United States, 342 U.S. 143 (1951)

Court

Supreme Court

Date Decided

December 11, 1951

Vote

7-0

Victory For and Result

Plaintiff

Judgment affirmed.

Conduct at Issue

Refusal to Deal, Exclusive Dealing, Attempted Monopolization, Monopolization

Industries

Newspapers, Radio

Themes and Important Topics

Statute(s) at Issue

Procedural Posture

Final Judgment

Lower Court Opinions

United States v. Lorain J. Co., 92 F. Supp. 794 (N.D. Ohio 1950), aff'd sub. nom., Lorain J. Co. v. United States, 342 U.S. 143 (1951).

Facts

Between 1933 and 1948, the Lorain Journal (hereinafter “The Journal”) was an Ohio newspaper that engaged in interstate commerce and had “‘a commanding and an overpowering’” market position, occupying a “substantial monopoly” in Lorain, Ohio over the “mass dissemination of news and advertising” – in total covering 99 percent of families in the city.[1] It was perceived by many advertisers that the Lorain Journal was an essential medium to promote their goods or services.[2]

In 1948, the Elyria-Lorain Broadcasting Company established a Federal Communications Commission (FCC) licensed radio station with the call letters WEOL.[3] The station engages in interstate commerce.[4] Almost all WEOL’s income comes from paid advertising.[5]

After learning that “a substantial number” advertisers desired to use WEOL as a new advertising channel, the Journal implemented a plan “to eliminate the threat of competition from the station.”[6] The Journal’s plan involved refusing to accept any advertisements from any advertiser who either advertised with or who the Journal believed was going to advertise with WEOL.[7] The district court found that the Journal’s plan was explicitly structured to destroy WEOL.[8]

To facilitate its plan, the Journal monitored WEOL programming.[9] Upon discovering an advertiser, the Journal would terminate existing advertising contracts and only renew them if the advertiser terminated its relationship with WEOL.[10] The Journal’s plan was effective and convinced many advertisers to cease their plans to advertise with WEOL.[11]

Legal Question(s)

Question 1: Is the conduct an attempt to monopolize interstate commerce?

Question 2: Is the conduct an unlawful attempt to monopolize in violation of Section 2 of the Sherman Act?

Question 3: Does the district court’s injunction violate the First Amendment protections of Freedom of the Press?

Question 4: Is the district court’s decree reasonable, and therefore valid?

Majority Opinion (Justice Burton)

Question 1: Is the conduct an attempt to monopolize interstate commerce?

Answer: Yes

Rationale:

The Journal’s conduct affected interstate commerce because its actions:

  1. Inhibited advertisers from using WEOL for local advertising, reducing WEOL’s customer base and revenue;

  2. Reinforced the Journal’s dominant position in the local advertising market by discouraging competition (i.e., the usage of WEOL as an advertising outlet);

  3. Threatened to destroy and eliminate WEOL as a competitor;

  4. Aimed to restore the Journal’s monopoly over the “mass dissemination of all news and advertising, interstate and national, as well as local”; and

  5. Deprived the public in Lorain, Ohio, and other areas served by WEOL (e.g., Elyria) of a critical source of news and advertising (in this case via radio).[12]

While the out-of-state distribution of copies of the Journal in combination with the purchasing of its operating supplies and its intrinsic operation of providing local news and advertising along with the use of coercion to maintain/re-gain its monopoly of interstate news and advertising could provide a basis for determining that the Journal’s operations are in interstate commerce, the facts presented are more than sufficient to provide a basis to conclude that the Journal was engaging in interstate commerce.[13]

Beyond the “substantial monopoly” the Journal had in Lorain over the distribution of local news and advertising, the Journal also possessed control the transmission of out-of-state events to the public in Lorain, Ohio and the advertising of out-of-state products for sale in Lorain.[14] Since WEOL was simultaneously competing in these markets, the attempt to destroy WEOL affected interstate (as well as local) commerce.[15]

Simply put, dissemination of news or actions done for that purpose, and national advertising, and the local dissemination of news and advertising (which requires “continuous interstate transmission of materials and payments”), and the sale of the actual sale and delivery of the product (i.e., the newspaper) are a part of interstate commerce.[16] Prior cases detailing similar or analogous circumstances contrary to this point “no longer stands in the way.”[17]

Question 2: Is the conduct an unlawful attempt to monopolize in violation of Section 2 of the Sherman Act?

Answer: Yes

Rationale:

First, “{t}he most illuminating” fact for the determination that the conduct is an unlawful attempt to monopolize is the “substantial monopoly” the Journal had – amounting it to being “an indispensable medium of advertising for many Lorain concerns.”[18]

Second, the district court “found unequivocally” that the Journal’s conduct “amounted to an attempt by the publisher to destroy WEOL and, at the same time, to regain the publisher's pre-1948 substantial monopoly over the mass dissemination of all news and advertising.”[19]

Given its monopoly, its conduct of refusing to print advertising from those also advertising with WEOL “amounted to an effective prohibition of the use of WEOL for that purpose.”[20]

Just as if multiple newspapers in a city were to engage in coordinated action to destroy a competition radio station would violation Sections 1 and 2 of the Sherman Act, a single newspaper with a substantial monopoly violates the attempt to monopolize clause in section 2 “when it uses its monopoly to destroy threatened competition.”[21]

Additionally, there is “no principle of law” which authorized or required the Journal to engage in the conduct it chose to pursue.[22]

Question 3: Does the District Court’s Injunction Violate the First Amendment Protections of Freedom of the Press?

Answer: No

Rationale: The injunction does not violate the freedom of the press.[23] The injunction applies a restriction on the Journal similar to what would apply to other firms.[24] The Journal cannot engage in attempts to monopolize which would violate the Sherman Act.[25] Injunctive relief, under Section 4 of the Sherman Act, is appropriate as applied to newspapers as it would be against other firms.[26]

Question 4: Is the District Court’s decree reasonable, and therefore valid?

Answer: Yes

Rationale:

There is no “obvious error” with the “the form and substance” of the district court’s decree.[27] Additionally, the requirements imposed by the district court are not “unduly burdensome.”[28]

Despite the record before the Supreme Court not containing all of the testimony or exhibits that the District Court used, the Supreme Court is “content” to allowing the district court to retain jurisdiction over the lawsuit and consider any modifications to the decree that are necessary.[29]

As detailed in the Supreme Court’s opinion, the District Court’s decree imposed the following requirements:

Rule(s) of Law

A firm with monopoly power cannot condition the usage of its services based on the non-usage of a rival’s services in an attempt to destroy that rival.

Open Questions and Implications from the Holding

Beyond what is detailed in the opinion and prior case law, the Supreme Court does not provide detailed guidance on what conduct constitutes a violation of Section 2 and the full analysis lower courts are required to engage in. The opinion details that monopoly power is critical (if not dispositive) to determining liability, an adverse effect on interstate commerce (in this case the destroy of a company that provides an alternative information medium and advertising channel), an intent to engage in such adverse conduct. But few other details are given.

Additionally, it is abundantly clear from the Court’s statements that a firm has “monopoly power” that can result in a violation of the Sherman Act if it has 99 percent market share in the relevant market.

Other Themes and Important Quotes from the Decision

Majority Opinion (Burton)

“Unless protected by law, the consuming public is at the mercy of restraints and monopolizations of interstate commerce at whatever points they occur. Without the protection of competition at the outlets of the flow of interstate commerce, the protection of its earlier stages is of little worth.”[34]

Plain Meaning: Without the antitrust laws to protect competition, consumers are vulnerable to businesses that restrict or dominate trade. If competition isn’t safeguarded where goods are sold to the public, then any efforts to protect competition higher up in the supply chain (like during manufacturing) will have little effect.

Note: This statement acknowledges the importance of protecting consumers and emphasizes that antitrust enforcement is necessary at all levels of a supply chain. However, it suggests that ensuring competition at the points where goods and services directly interact with consumers is particularly critical. While the Court’s statement does not specify how much more important this focus is, it implies that without robust competition at the consumer level, protections earlier in the supply chain are undermined.

Themes: {{Necessity of the Antitrust Laws}}, {{Remedies}}, {{Protection of Consumers}}.

“To establish this violation of § 2 as charged, it was not necessary to show that success rewarded appellants' attempt to monopolize. The injunctive relief under § 4 sought to forestall that success. While appellants' attempt to monopolize did succeed insofar as it deprived WEOL of income, WEOL has not yet been eliminated. The injunction may save it.”[35]

Plain Meaning: A successful attempt to monopolize claim does not need to show that the challenged conduct actually succeeded in its intended goal.

Themes: {{Elements of a Section 2 Violation}}, {{Attempted Monopolization}}, {{Incipiency of the Sherman Act}}.

“Assuming the interstate character of the commerce involved, it seems clear that if all the newspapers in a city, in order to monopolize the dissemination of news and advertising by eliminating a competing radio station, conspired to accept no advertisements from anyone who advertised over that station, they would violate §§ 1 and 2 of the Sherman Act. It is consistent with that result to hold here that a single newspaper, already enjoying a substantial monopoly in its area, violates the ‘attempt to monopolize’ clause of § 2 when it uses its monopoly to destroy threatened competition.”[36]

Plain Meaning: Just as a conspiracy between multiple newspapers to eliminate a competitor would violate the Sherman Act, a single newspaper with monopoly power does so when it uses its power to destroy competition.

Note: It is unclear why the Court needed to equate a single firm monopolizing to multiple firms engaging in similar conduct would also be volitive of the antitrust laws. This statement merely implies some level of importance of the difference between single and concerted conduct.

Themes: {{Horizontal-Vertical Distinction}}.

“The publisher claims a right as a private business concern to select its customers and to refuse to accept advertisements from whomever it pleases. We do not dispute that general right…The right claimed by the publisher is neither absolute nor exempt from regulation. Its exercise as a purposeful means of monopolizing interstate commerce is prohibited by the Sherman Act. The operator of the radio station, equally with the publisher of the newspaper, is entitled to the protection of that Act.”[37]

Plain Meaning: The right of a private business to operate as it wants to is not absolute. The public is protected from monopolizing conduct by the Sherman Act.

Note: The Court’s statement is an express rebuttal of the idea that firms can do whatever they want to succeed in the marketplace and that their actions are immune from judicial scrutiny or regulation, such as in this case when actions are taken to monopolize a market.

Themes: {{Corporate Rights}}, {{Property Rights}}.

“Appellants have sought to justify their conduct on the ground that it was part of the publisher's program for the protection of the Lorain market from outside competition. The publisher claimed to have refused advertising from Elyria or other out-of-town advertisers for the reason that such advertisers might compete with Lorain concerns. The publisher then classified WEOL as the publisher's own competitor from Elyria and asked its Lorain advertisers to refuse to employ WEOL as an advertising medium in competition with the Journal. We find no principle of law which required Lorain advertisers thus to boycott an Elyria advertising medium merely because the publisher of a Lorain advertising medium had chosen to boycott some Elyria advertisers who might compete for business in the Lorain market. Nor do we find any principle of law which permitted this publisher to dictate to prospective advertisers that they might advertise either by newspaper or by radio but that they might not use both facilities.”[38]

Plain Meaning: Not all methods of competition are lawful. The Sherman Act prohibits the conduct the Journal engaged in and no principle of law overrides this fact.

Note: This statement implies that the Sherman Act delineates between fair and unfair methods of competition. Firms are not allowed to succeed in business by any means. They are required to operate within the boundaries established by law.

Themes: {{Corporate Rights}}, {{Property Rights}}, {{Legal Reach of the Sherman Act}}, {{Violating the Sherman Act}}.

“While the decree should anticipate probabilities of the future, it is equally important that it do not impose unnecessary restrictions and that the procedure prescribed for supervision, giving notice, keeping records and making inspections be not unduly burdensome.”[39]

Plain Meaning: When crafting remedies, courts should consider their effect on the future operations of the business and also not be too burdensome to comply with.

Note: This comment imposes an important limitation on a district court’s remedial powers. There are limits to what courts can impose. In this case the Court says they should not be too burdensome.

Themes: {{Remedies}}.

“The reference in § 2 to an attempt to monopolize ‘any part of the trade or commerce among the several States’ relates not merely to interstate commerce within any geographical part of the United States but also to any appreciable part of such interstate commerce.”[40]

Plain Meaning: Section 2 of the Sherman Act reaches as far as the commerce clause of the constitution allows.

Note: The Court affirms/adopts a broad interpretation of the language in Section 2 concerning its legal reach, which is tied to the reach of the Commerce Clause of the Constitution.

Themes: {{Relevant Market}}, {{Interstate Commerce Clause}}.

Disclosure About Case Briefs

This document is not legal advice. Case briefs are merely summations of legal opinions and are not to be used as a substitute for obtaining legal counsel or reading the opinion and drawing your own conclusions as to its meaning and significance. Interpretations of legal rulings may vary significantly. If you are seeking legal advice, consult a licensed attorney.

Links

  1. The Court describes the interstate commerce Lorain Journal engages in the following paragraph:

    “While but 165 out of the Journal's daily circulation of over 20,000 copies are sent out of Ohio, it publishes not only Lorain news but substantial quantities of state, national and international news. It pays substantial sums for such news and for feature material shipped to it from various parts of the United States and the rest of the world. It carries a substantial quantity of national advertising sent to it from throughout the United States. Shipments and payments incidental to the above matters, as well as the publisher's purchases of paper and ink, involve many transactions in interstate or foreign commerce.” Lorain Journal Co. v. United States, 342 U.S. 143, 146-47 (1951).

    Lorain Journal Co. v. United States, 342 U.S. 143, 146-47 (1951) (quoting United States v. Lorain J. Co., 92 F. Supp. 794, 796 (N.D. Ohio 1950)); Lorain Journal Co. v. United States, 342 U.S. 143, 152 (1951) (The Journal had a “substantial monopoly which was enjoyed in Lorain by the publisher from 1933 to 1948, together with a 99% coverage of Lorain families.”). ↩︎

  2. Lorain Journal Co. v. United States, 342 U.S. 143, 148 (1951) (“For some of them it found that advertising in the Journal was essential for the promotion of their sales in Lorain County.”); Lorain Journal Co. v. United States, 342 U.S. 143, 149-50 (1951) (Lorain Journal provided “practically indispensable coverage of 99% of the Lorain families[.]”); Lorain Journal Co. v. United States, 342 U.S. 143, 153 (1951) (“Numerous Lorain advertisers wished to supplement their local newspaper advertising with local radio advertising but could not afford to discontinue their newspaper advertising in order to use the radio.”). ↩︎

  3. Lorain Journal Co. v. United States, 342 U.S. 143, 147 (1951). ↩︎

  4. The Court describes WEOL’s interstate commerce activities in the following paragraph:

    “While the station is not affiliated with a national network it disseminates both intrastate and interstate news and advertising. About 65% of its program consists of music broadcast from electrical transcriptions. These are shipped and leased to the station by out-of-state suppliers. Most of them are copyrighted and the station pays royalties to the out-of-state holders of the copyrights. From 10 to 12% of the station's program consists of news, world-wide in coverage, gathered by United Press Associations. The news is received from outside of Ohio and relayed to Elyria through Columbus or Cleveland. From April, 1949, to March, 1950, the station broadcast over 100 sponsored sports events originating in various states. Substantially all of the station's income is derived from its broadcasts of advertisements of goods or services. About 16% of its income comes from national advertising under contracts with advertisers outside of Ohio. This produces a continuous flow of copy, payments and materials moving across state lines.” Lorain Journal Co. v. United States, 342 U.S. 143, 147-48 (1951).
    See also Lorain Journal Co. v. United States, 342 U.S. 143, 147 n.4 (1951) (describing what geographic areas the FCC license covers). Reprinted in full here: “The license also covers WEOL-FM but the two stations are here treated as one. WEOL operates on a frequency of 930 kilocycles and WEOL-FM of 107.6 megacycles. The station outlines its primary listening or market area on the basis of a half millivolt daytime pattern and a two millivolt nighttime pattern. Its day pattern reaches an area containing all or part of 20 counties and an estimated population of over 2,250,000. Its night pattern reaches an area containing parts of nine of these counties and an estimated population of about 450,000. Lorain County, which includes the communities of Lorain, Elyria and Oberlin, contains about 120,000 people, 52,000 of whom live in the City of Lorain.”; see also Lorain Journal Co. v. United States, 342 U.S. 143, 148 n.5 (1951) (detailing the interstate commerce involved with WEOL’s operations and license).

    ↩︎

  5. Lorain Journal Co. v. United States, 342 U.S. 143, 148 (1951) (“Substantially all of the station's income is derived from its broadcasts of advertisements of goods or services.”); Lorain Journal Co. v. United States, 342 U.S. 143, 153 (1951) (“WEOL's greatest potential source of income was local Lorain advertising. Loss of that was a major threat to its existence.”). ↩︎

  6. Lorain Journal Co. v. United States, 342 U.S. 143, 148 (1951). ↩︎

  7. Lorain Journal Co. v. United States, 342 U.S. 143, 148 (1951) (“Under this plan the publisher refused to accept local advertisements in the Journal from any Lorain County advertiser who advertised or who appellants believed to be about to advertise over WEOL.”). ↩︎

  8. Lorain Journal Co. v. United States, 342 U.S. 143, 148-49 (1951) (“The {district} court found expressly that the purpose and intent of this procedure was to destroy the broadcasting company.”); Lorain Journal Co. v. United States, 342 U.S. 143, 150 (1951) (“The findings go further. They expressly and unequivocally state that the publisher's conduct was aimed at a larger target—the complete destruction and elimination of WEOL.”). The district court described Lorain Journal’s conduct as "bold, relentless, and predatory commercial behavior." Lorain Journal Co. v. United States, 342 U.S. 143, 149 (1951) (quoting United States v. Lorain J. Co., 92 F. Supp. 794, 796 (N.D. Ohio 1950)). ↩︎

  9. Lorain Journal Co. v. United States, 342 U.S. 143, 149 (1951) (“To carry out appellants' plan, the publisher monitored WEOL programs to determine the identity of the station's local Lorain advertisers.”). ↩︎

  10. Lorain Journal Co. v. United States, 342 U.S. 143, 149 (1951) (“Those using the station's facilities had their contracts with the publisher terminated and were able to renew them only after ceasing to advertise through WEOL.”). ↩︎

  11. Lorain Journal Co. v. United States, 342 U.S. 143, 149 (1951) (“Numerous Lorain County merchants testified that, as a result of the publisher's policy, they either ceased or abandoned their plans to advertise over WEOL.”). ↩︎

  12. Lorain Journal Co. v. United States, 342 U.S. 143, 149-50 (1951). ↩︎

  13. Lorain Journal Co. v. United States, 342 U.S. 143, 150 (1951) (“There is a suggestion that the out-of-state distribution of some copies of the Journal, coupled with the considerable interstate commerce engaged in by its publisher in the purchase of its operating supplies, provided, in any event, a sufficient basis for classifying the publisher's entire operation as one in interstate commerce. It is pointed out also that the Journal's daily publication of local news and advertising was so inseparably integrated with its publication of interstate news and national advertising that any coercion used by it in securing local advertising inevitably operated to strengthen its entire operation, including its monopoly of interstate news and national advertising. It is not necessary, however, to rely on the above suggestions. The findings go further.”). ↩︎

  14. Lorain Journal Co. v. United States, 342 U.S. 143, 150-51 (1951) (“The {district} court found that the publisher, before 1948, enjoyed a substantial monopoly in Lorain of the mass dissemination not only of local news and advertising, but of news of out-of-state events transmitted to Lorain for immediate dissemination, and of advertising of out-of-state products for sale in Lorain.”). ↩︎

  15. Lorain Journal Co. v. United States, 342 U.S. 143, 151 (1951) (“WEOL offered competition by radio in all these fields so that the publisher's attempt to destroy WEOL was in fact an attempt to end the invasion by radio of the Lorain newspaper's monopoly of interstate as well as local commerce.”). ↩︎

  16. Lorain Journal Co. v. United States, 342 U.S. 143, 151 (1951) (“There can be little doubt today that the immediate dissemination of news gathered from throughout the nation or the world by agencies specially organized for that purpose is a part of interstate commerce. The same is true of national advertising originating throughout the nation and offering products for sale on a national scale. The local dissemination of such news and advertising requires continuous interstate transmission of materials and payments, to say nothing of the interstate commerce involved in the sale and delivery of products sold.”) (internal citations omitted); Lorain Journal Co. v. United States, 342 U.S. 143, 152 (1951) (“The distribution within Lorain of the news and advertisements transmitted to Lorain in interstate commerce for the sole purpose of immediate and profitable reproduction and distribution to the reading public is an inseparable part of the flow of the interstate commerce involved.”). ↩︎

  17. Lorain Journal Co. v. United States, 342 U.S. 143, 152 (1951). ↩︎

  18. Lorain Journal Co. v. United States, 342 U.S. 143, 152 (1951). ↩︎

  19. Lorain Journal Co. v. United States, 342 U.S. 143, 153 (1951). ↩︎

  20. Lorain Journal Co. v. United States, 342 U.S. 143, 152-53 (1951). ↩︎

  21. Lorain Journal Co. v. United States, 342 U.S. 143, 154 (1951). ↩︎

  22. Lorain Journal Co. v. United States, 342 U.S. 143, 154 n.8 (1951). ↩︎

  23. Lorain Journal Co. v. United States, 342 U.S. 143, 155 (1951) (“We find in {the district court’s injunction} no restriction upon any guaranteed freedom of the press.”). ↩︎

  24. Lorain Journal Co. v. United States, 342 U.S. 143, 155-56 (1951) (“The injunction applies to a publisher what the law applies to others.”). ↩︎

  25. Lorain Journal Co. v. United States, 342 U.S. 143, 156 (1951). ↩︎

  26. Lorain Journal Co. v. United States, 342 U.S. 143, 156 (1951) (“Injunctive relief under § 4 of the Sherman Act is as appropriate a means of enforcing the Act against newspapers as it is against others.”). ↩︎

  27. Lorain Journal Co. v. United States, 342 U.S. 143, 156 (1951). ↩︎

  28. Lorain Journal Co. v. United States, 342 U.S. 143, 156 (1951). ↩︎

  29. Lorain Journal Co. v. United States, 342 U.S. 143, 156-57 (1951) (“In the instant case the printed record contains neither the entire testimony nor all the exhibits which were before the court below. It omits also material mentioned during the trial as having been considered by the court when denying the Government's motion for a temporary injunction. Under the circumstances we are content to rely upon the trial court's retention of jurisdiction over the cause for whatever modification the decree may require in the light of the entire proceedings and of subsequent events.”). ↩︎

  30. Lorain Journal Co. v. United States, 342 U.S. 143, 156 (1951). ↩︎

  31. Lorain Journal Co. v. United States, 342 U.S. 143, 156 (1951); Lorain Journal Co. v. United States, 342 U.S. 143, 158 (1951) (Appendix). ↩︎

  32. Lorain Journal Co. v. United States, 342 U.S. 143, 156 (1951); Lorain Journal Co. v. United States, 342 U.S. 143, 158-59 (1951) (Appendix). ↩︎

  33. Lorain Journal Co. v. United States, 342 U.S. 143, 157-58 (1951) (Appendix). ↩︎

  34. Lorain Journal Co. v. United States, 342 U.S. 143, 152 (1951). ↩︎

  35. Lorain Journal Co. v. United States, 342 U.S. 143, 153 (1951). ↩︎

  36. Lorain Journal Co. v. United States, 342 U.S. 143, 154 (1951) (internal citations omitted). ↩︎

  37. Lorain Journal Co. v. United States, 342 U.S. 143, 155 (1951). ↩︎

  38. Lorain Journal Co. v. United States, 342 U.S. 143, 154 n.8 (1951). ↩︎

  39. Lorain Journal Co. v. United States, 342 U.S. 143, 156 (1951). ↩︎

  40. Lorain Journal Co. v. United States, 342 U.S. 143, 151 n.1 (1951). ↩︎