Appeals court rejects magazine anti-trust lawsuit

A federal appeals court has rejected an antitrust lawsuit brought against publishers by what was once one of the country's largest wholesale magazine distributors.

In an opinion published Monday, the 2nd U.S. Circuit Court of Appeals in Manhattan agreed with a lower-court judge in rejecting Anderson News LLC's claims, first brought in 2009.

The Knoxville, Tennessee company argued that publishers controlling 80 percent of the nation's magazines conspired to drive it out of business by rejecting its demand that publishers pay 7-cent surcharges on each magazine distributed. The company said the surcharge was necessary to remain profitable.

After 1,484 of 1,570 publishers or 95 percent of all publishers nationwide rejected the surcharge, Anderson shut down in February 2009, laying off thousands of employees and selling assets at fire sale prices. It had operated since 1917 and had served 30,000 retail customers in 37 states.

As a wholesaler, Anderson collected magazines from publishers and distributed them to retailers before recycling unsold magazines.

The appeals court said in an opinion written by Judge Susan L. Carney that evidence presented by Anderson was "perhaps consistent with an unlawful conspiracy among defendants."

But it cited the company's decision to impose a "take-it-or-leave-it" surcharge on the industry as another plausible explanation for its demise.

"It was likely that defendants needed to deprive Anderson of magazines for only a short while to secure its demise," the 2nd Circuit said. "In addition, theoretically, the longer-term goal of the alleged conspiracy — reduced competition in the wholesaler market — could have benefited defendants."

However, the three-judge panel concluded, "evidence of key facts that would support this theory have not materialized."

It also said a jury "could not reasonably infer that the conspiratorial explanation is more likely than not."

The 2nd Circuit also rejected counterclaims brought by some publishers including American Media Inc., Hearst Communications Inc. and Time/Warner Retail Sales & Marketing Inc. Those publishers maintained that Anderson had engaged in a price-fixing conspiracy.

Attorney Michael Kellogg, representing Anderson, said attorneys and Anderson were studying the opinion and deciding on their next steps.

In 2012, the 2nd Circuit had revived the Anderson News lawsuit after a judge tossed it out. As a result, Anderson News was able to try to build its case by obtaining potential evidence for two years.

The appeals ruling, reached two weeks ago, was not made public until attorneys were given time to seek redactions.