The judge in the U.S. District Court for the Southern District of New York granted the defendants’ motions for summary judgment in this magazine distribution antitrust case.
Retained by Cravath, Swaine & Moore
For this antitrust case related to magazine distribution, counsel for a publisher defendant, Time Inc. and its subsidiary, retained Cornerstone Research and Kenneth Elzinga, professor at the University of Virginia and Cornerstone Research senior advisor. The primary plaintiff was a major U.S. magazine wholesaler, Anderson News LLC.
In 2009, Anderson News announced to magazine publishers that it was adding a surcharge per copy it distributed, and would also require the publishers to bear Anderson News’s cost of carrying inventory. When magazine publishers switched to wholesalers who were not charging those fees and had lower prices, Anderson News claimed that collusion among publishers and their national distributors forced it to exit the market.
Professor Elzinga provided an expert report and deposition testimony showing that it was in the unilateral self-interest of Time to switch wholesalers in the face of the price increase by Anderson News. He also demonstrated that the company went out of business because it charged above-market prices, and that consumers did not suffer anticompetitive harm from its exit. In support of this testimony, Cornerstone Research and Professor Elzinga analyzed terabytes of delivery and sales data for more than 120,000 individual retail outlets and thousands of magazine titles.
The court granted the defendants’ motion for summary judgment. Echoing Professor Elzinga’s findings, the court concluded, “It is clear [Anderson News’s] own ill-conceived and badly executed plan led to its downfall. The antitrust laws do not compel any entity to accept a price increase, or assume the burden of a significant cost. This is especially so where there were other wholesalers available who offered lower prices and less expensive terms for handling inventory.”
The plaintiff appealed. In July 2018, the U.S. Second Circuit Court of Appeals upheld the district court’s ruling.