Boston Herald Put in the Fix, Says Newspaper Distributor

(CN) – The Boston Herald and Providence Journal conspired to raise prices and restrict and eliminate competition for nonsubscription sales of daily and Sunday newspapers in and around Southeastern Massachusetts, Fall River News Co. says in a state antitrust complaint. Fall River says it is the last major independent distributor of newspapers in the region.




     In its complaint in Bristol County Court, Taunton, Mass., Fall River says that before the alleged conspiracy, it distributed the Boston Herald and its predecessor, the Record-American, to newsstands and elsewhere in Boston, eastern Connecticut, and Cape Cod. The relationship dates back to 1923, says Fall River, which described itself as a third-generation, family-owned business.
     But Falls River says that in mid-2009, it was shut out of the region when the conspirators implemented a “sham” bidding process “designed to raise prices, to reduce availability of competing products, and to eliminate competition in the wholesale market for non-subscription sales of daily and Sunday newspapers.”
     It claims that other newspapers not named as defendants “did act jointly with the Herald and/or the Providence Journal,” including newspapers owned and operated, directly or indirectly, by Rupert Murdoch’s News Corp. (including the Wall Street Journal, The New York Post, the Cape Cod Times, and the New Bedford Stanford-Times), and The Boston Globe, now owned by The New York Times).
     Fall River says is highly unusual for a newspaper company to rely on the newsstand distribution system of a competitor, as was ultimately the case in Southeastern Massachusetts.
     Historically, newspapers handled distribution in their core area and relied on third-party independents to distribute to outlying areas and to commuters at train stations and newsstands.
     Under freely competitive conditions in a non-concentrated market, no one publisher can dictate terms or unilaterally raise prices to wholesale distributors because no one publisher normally has sufficient market power, the complaint states. But Fall River claims that because the market for newsstand sales in the Boston region is so concentrated, “two or more publishers acting together can readily exert economic power,” raising wholesale prices above a competitive level or restricting the distribution of newspapers.
     The net effect, according to Fall River, is to push disfavored wholesalers out of the area. That’s what began happening when the Boston Herald and News Corp. issued a joint request for proposals in the late spring of 2009, seeking bids for distribution rights in four defined areas, Fall River says. Explicit in that request was an agreement among the publishers to sell their papers to a single winning bidder and a joint refusal to sell to others, it says.
     Fall River described the move as a “concerted action by horizontal competitors” that was “anticompetitive in both purpose and effect.”
     Worse, the independent wholesaler said, the process was “fixed” to skew the outcome. The winning bidder, the Providence Journal, was allowed to submit a bid that did not include pick-up and processing costs of unsold newspapers, which accounts for as much as one-third of the cost of newspaper delivery, according to the complaint.
     Freed of that obligation, which the Fall River News was not, it was able to submit a more attractive bid to publishers, the complaint states.
     Fall River seeks an injunction, attachment of funds, and treble damages.
     It is represented by Richard Yurko and Kevin Murphy with Yurko, Salvesen & Remz in Boston.

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