Petition — Delta Communications Corp. v. National Broadcasting Co.
Supreme Court brief1979
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JUL 80 1979 |
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3 “Hiei 5 IDA, JRun CLERR
—_———_—_—_—_——
IN THE
Supreme Court of the United States
OCTOBER TERM, 1979
NO._#QO-=}j}138
DELTA COMMUNICATIONS CORPORATION,
Petitioner
Vv.
NATIONAL BROADCASTING COMPANY, INC.,
AMERICAN BROADCASTING COMPANIES, INC.,
AND SOUTHERN TELEVISION CORPORATION,
Respondents
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
E. BARRETT PRETTYMAN, JR. JoHN CoLEMAN Dawson
815 Connecticut Avenue 36 W. Rivercrest Drive
Washington, D.C. 20006 Houston, Texas 77042
Of Counsel A. A. WHITE
2400 Two Shell Plaza
Houston, Texas 77002
RICHARD E. WILBOURN
P. O. Box 1389
Meridian, Mississippi 39301
Rossin R. Dawson
2500 Two Shell Plaza
Houston, Texas 77002
Counsel for Petitioner \
—— —- ~— ST
OPINIONS BELOW .............-.--. RT
JURISDICTION AND STATUTORY PROVISIONS IN-
Tene ee eN ibaa eke xe nae hoe 054040 80909400.
EU UMNO SUED conve cece scccercssccsence
RTERNTS TT BEEN GANS bow cede cccceceseeewees
REASONS FOR GRANTING THE WRIT:
1. By misconstruing dictum in a decision by this Court,
the courts below have established an important and
erroneous rule that summary judgment may be granted
on the basis of the trial judge’s choice of the most
probable of conflicting inferences. ................
2. The court below improperly held that self interest
justifies antitrust violations under Section 1 of the
Sherman Act, in direct conflict with decisions of this
Court and of other Courts of Appeal. .............
3. The court beiow improperly required specific predatory
intent for monopolization under Section 2 of the Sher-
man Act, in direct conflict with decisions of this
Court and of other Courts of Appeals. ...........
4. The denial of network programs pursuant to a com-
bination or monopolization as shown here violates the
Sherman Act, the very basis of the Federal Communi-
cations Act, and the public’s right to television view-
ALS ehh S66 6409 kno ce 04 06's 608 Wes
APPENDIX A—Opinion of the District Court ..........
APPENDIX B—Judgment of the District Court ........
APPENDIX C—Opinion of the Fifth Circuit, September
Te css dee dv setae
APPENDIX D—Judgment of the Fifth Circuit, September
SEE a ee ne rae
APPENDIX E—Opinion of the Fifth Circuit, February
CCL ON Lh cease sins keeib bs ew heseaee 6s
APENDIX F—Judgment of the Fifth Circuit, February
ek, iv uendasadedenies
APPENDIX G—Denial of Rehearing, May 7, 1979 ....
APPENDIX H—Statutory Provisions Involved .........
18
21
II
CITATIONS
CASES Page
Adickes v. S.H. Kress & Co., 398 U.S. 144 (1970) ..... 13
Admiral Theatre Corp. v. Douglas Theatre Co., 585 F.2d
FT Be CO TO. BOVE hsv senvgncd ch sacues vee’ id
American Fid. & Cas. Co. v. London & Edinburgh Ins. Co.,
S58 Fe SEG, S06 TO Gi. BOGE) acdc ck cccveeucccss 14
Aviation Specialties, Inc. v. United Technologies, Corp.,
ee Mi SR Re. teers errr ee re ee 14
Bailey v. Hartford Fire Ins. Co., 565 F.2d 826, 830 (2d
See: eiticw as Sadan We decie van ube ba pet seene cess 10
British Airways Bd. v. Boeing Co., 585 F.2d 946, 951 (9th
Cir. 1978), cert. denied, 99 S.Ct. 1790 (1979) ....... 10
Craig v. Sun Oil Co., 515 F.2d 221, 225 (10th Cir. 1975),
ont. Gomted, 430. TS. BFP CIPTE) oicc cas ccsacsccace. 10
Drexel v. Union Prescription Centers, 582 F.2d 781, 784
fo ge Se BR reer rrr re rT er ery 13
Fashion Originators Guild v. Federal Trade Commission,
114 F.2d 80, 85 (2nd Cir. 1940), aff’d., 312 U.S. 457
bo.) eer errr e rey eee ea ee Tee ee Tee 21
First Nat. Bank of Arizona v. Cities Service Co., 391
of ee a Perr ee Tries eee ree Te 10, 12, 13, 14
Fitzgerald v. General Dairies, Inc., 590 F.2d 874, 875-876
Coe Ste BONED. So erate wes Mek eb Sambew Keaesioastas 13
Florida Lime and Avocado Growers v. Paul, 373 U.S. 132
SR eee re wks eG Uc eud Uh Geavecevisawes tneesens 13
Fountain v. Filson, 336 U.S. 681 (1949) ............... 13
Fournier v. Canadian Pacific Railroad, 512 F.2d 317, 318
Cee ae Ce Lect Chl pcs cea a kak eee meee 13
Freeman v. Decio, 584 F.2d 186, 196-197 (7th Cir. 1978) 10
Gallagher v. Philadelphia Transp. Co., 185 F.2d 543 (3d
Se SE. wun bans canes dees spades saeeendeetastunes 13
Greyhound Computer Corp. v. International Business Ma-
chines Corp., 559 F.2d 488 (9th Cir. 1977), cert. denied,
ES | ewer eer eee Tere eee 23,24
Harold Friedman, Inc. v. Kroger Co., 581 F.2d 1068, 1080
OE eS Serer terre rer errr er eer ee 10
Hecht v. Pro-Football, Inc., 570 F.2d 982, 996 (D.C. Cir.
2077), cart. Gomes, 436 U.S. G56 ov cccccssvccecsccs 21,24
Leonard v. BHJK Corporation, 469 F.2d 108, 110 (D.C.
a: eS errerr rr rrr Ty re eee 13
McDonnell v. Michigan Chapter #10, 587 F.2d 7, 9 (6th
Cals SOE Svbcnn ebbin s Wks Kenaees denen coer ees kebes 10
Merit Motors, Inc. v. Chrysler Corp., 569 F.2d 666, 668-
ee A rere te errr et 10
Narez v. Wilson, 591 F.2d 459, 462 (8th Cir. 1979) ..... 13
ITI
CASES
mesons Broadcasting Co. v. United States, 319 U.S. 190
National Soc. of Professional Engineers v. United States,
ie ee CI ae panes Ss chek ase yeea ue auats <
Poller v. Columbia Broadcasting System, Inc., 368 U.S.
es ee eee dae du ea We dace bak
ae Broadcasting Co. v. FCC, 395 U.S. 367, 390
Ree ORE aha eee eek kad as bho o 6-0 kia &
Thyssen Plastik Anger KG v. Indenplas, Inc., 576 F.2d
Se EE Ge SUED vc wes edccccconncoesess
United States v. Aluminum Co. of America, 148 F.2d 416,
Co Be Re Ee err reer rrr ree
United States v. Diebold, Inc., 369 U.S. 654 (1962) ....
United States v. General Motors Corp., 384 U.S. 127 (1966)
United States v. Griffith, 334 U.S. 100, 107 (1948) ....
United States v. United Shoe Machinery Corp., 110 F. Supp.
295, 345 (D. Mass. 1953), aff'd per curiam, 347 U‘S.
Se GES Wiese cuca s ue beher we bhebubaG od aN eon o cae;
FEDERAL REGULATIONS
OF Crs Ss FOND x Kx ch eKEi dares ou viascccces
MISCELLANEOUS
FCC Docket 16041, 26 F.C.C. 772, 784-785 (1970) .....
FCC Docket 18927, 28 F.C.C. 169 (1971) .............
17
26
Supreme Court of the Mnited States
OCTOBER TERM, 1979
NO.
DELTA COMMUNICATIONS CORPORATION,
Petitioner
Vv.
NATIONAL BROADCASTING COMPANY, INC.,
AMERICAN BROADCASTING COMPANIES, INC.,
AND SOUTHERN TELEVISION CORPORATION,
Respondents
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
The petitioner, Delta Communications Corporation,
respectfully prays that a writ of certiorari issue to review
the opinion and judgment of the United States Court
of Appeals for the Fifth Circuit entered in this proceed-
ing on September 11, 1978, as modified on February 21,
1979.
OPINIONS BELOW
The opinion of the District Court for the Southern
District of Mississippi rendered February 25, 1976 is
reported at 408 F. Supp. 1075 and is reprinted as Ap-
pendix A hereto. Its final judgment is unreported and is
reprinted here as Appendix B. The September 11, 1978
per curiam opinion of the Court of Appeals adopting
2
the District Court opinion is reported at 579 F.2d 972
and is reprinted as Appendix C hereto. Its judgment is
reprinted here as Appendix D. The February 21, 1979
per curiam opinion of the Court of Appeals on rehearing,
affirming in part and vacating and remanding in part
the opinion of the trial court is reported at 590 F.2d
100 and is reprinted here as Appendix E. The judgment
on rehearing is reprinted as Appendix F hereto. The
Court of Appeals’ order of May 7, 1979, denying the
petition for rehearing and the petition for rehearing
en banc is reprinted as Appendix G hereto.
JURISDICTION AND STATUTORY
PROVISIONS INVOLVED
The original opinion and judgment of the Court of
Appeals for the Fifth Circuit were entered September 11,
1978. App. C, D. On February 21, 1979, petitioner's
timely petition for rehearing and petition suggesting rehear-
ing en banc was granted in part and denied in part (App.
E), and the September 11, 1978 judgment was modified
accordingly. App. F. On March 21, 1979, petitioner
filed a timely petition for rehearing and petition suggest-
ing rehearing en banc of the February 21, 1979 opinion
and judgment, and this petition was denied on May 7,
1979. App. F, G.
The jurisdiction of the District Court was invoked by
petitioner’s counterclaim in a suit brought against it
in that court by American Telephone & Telegraph Com-
pany (“AT&T”) under the Communications Act. 47
U.S.C. §§ 151 et seq. Petitioner’s counterclaim was
brought under the Clayton Act, 15 U.S.C. § 15, and
this Court’s jurisdiction is invoked under 28 U.S.C.
§ 1254(1). The relevant portions of Secs. 1 and 2 of
the Sherman Act are set forth in Appendix H.
3
QUESTIONS PRESENTED
1. In a complex antitrust case, may the trial court
grant summary judgment against the plaintiff as a result
of weighing the various inferences arising out of the
pre-trial record and basing its findings on those inferences
which it deems to be most probably believable or
plausible?
2. May the self interest of « defendant be used as
the sole excuse for otherwise illegal conduct under Section
1 of the Sherman Act?
3. Is specific predatory intent toward the injured party
a necessary ingredient of a finding of monopolization
under Section 2 of the Sherman Act?
4. May television networks and their affiliates, ex-
ercising monopolistic or quasi-monopolistic powers, act
to prevent local stations from entering new areas by
such tactics as restricting the availability of network
programs?
STATEMENT OF THE CASE
This is a private treble damage antitrust suit brought
by petitioner Delta Communications Corporation, a cor-
poration which in the 1966-1970 period undertook un-
successfully to operate a television broadcasting station
in Meridian, Mississippi.
Petitioner’s authorization from the Federal Communi:
cations Commission (“FCC”) was to operate in ultra
high frequency (UHF). The only allocation for broad-
cast in very high frequency (VHF) for the area was
held by the existing station, WTOK, owned by respondent
Southern Television Corporation (“Southern”), which,
prior to petitioner’s entry into the Meridian market, was
4
the only TV broadcasting station serving that market
from within. 1968-69 TV Fact Book.
Southern was a primary affiliate of CBS.’ However,
it had a secondary affiliation agreement with respondent
ABC under which it took many prime-time programs
for showing in non-prime-time periods. It also broadcast
the only programs of respondent NBC which NBC per-
mitted to be broadcast from within the Meridian area.
CA App. 1217.7 ABC had no primary affiliate serving
the Meridian market.
NBC had two primary affiliates in Mississippi—W LBT
in Jackson, and WDAM in Hattiesburg. The signal
ranges of these two stations reached (overlapped), in
the aggregate, about 24% of the area covered by the
signal range of petitioner’s station. App. A-6.
In 1967, when petitioner was planning its entry into
the market, Southern was then broadcasting the only two
NBC programs which NBC permitted to be broadcast
from within the Meridian area. CA App. 1217. Except
for these programs (which reached the entire Meridian
area) and the NBC programs of the Jackson and Hatties-
burg stations, which in the aggregate reached about
24% of the Meridian area, the area was blind to NBC
programs. App. A-6-9.
1. As here used the terms “primary affiliate’ and ‘secondary
affiliate’ both mean stations having first call on a network’s pro-
grams and receiving compensation from the network for broadcasting
its programs. The term “affiliate” or “affiliation agreement” refers
to a network-station arrangement giving the station first call on the
network programs but no network compensation for broadcasting
them.
2. “App.” as used in this Petition refers to an appendix attached
hereto. “CA App.” refers to the appendix filed with the Fifth Circuit
Court of Appeals.
5
In planning for its operations, petitioner, aware that
the availability of nationally televised programs from
one or more of the three national networks was essential
to a successful entry and operation of a TV broadcasting
station in Meridian, sought at the outset an affiliation
(first call on programs) with ABC and the right to
supplement its schedule of ABC programs with NBC
programs not then reaching the entire Meridian area.
App. A-23-24.
These approaches to ABC and NBC began in August
of 1967 prior to petitioner’s commencement of construc-
tion of its broadcast station. CA App. 412-420. Both
networks expressed interest and asked to be kept abreast
of construction progress, but both were noncommittal
as to the release of programs. CA App. 1222, 1224.
In November 1967, after petitioner’s emergence as a
competitor of Southern became known to ABC and
Southern, these parties executed a two-year renewal of
Southern’s secondary affiliation agreement with ABC
(giving Southern, rather than petitioner, first call on
programs). Also in November 1967, Southern took the
following additional exclusionary actions: concurrently
with cancellation of three hours of prime-time programs
of NBC (which did not become available to petitioner),
Southern increased its taking of prime-time TV shows
from ABC by three and one-half hours per week and
increased its taking of prime-time shows from CBS by
three hours per week. These increased prime-time hours
of programs would have been potentially available to
petitioner but for Southern’s preemption, and, as no NBC
programs were available to petitioner at that time, the
increases reduced by about 32.5% the prime-time hours
of nationally televised programs otherwise potentially
available for broadcast by petitioner. CA App. 428-451.
6
After thus renewing Southern’s first call rights on its
programs, and in December 1967, ABC advised pe-
titioner that it would release for broadcast by petitioner
certain programs not first chosen by Southern. It was
agreed that any programs so released to petitioner would
be without compensation to petitioner and without cost
to ABC, with petitioner paying for its own AT&T inter-
connection required for making the programs available.
CA App. 1317; App. A-24.
Later in December 1967, petitioner moved to obtain
an arrangement with NBC similar to that made by it with
ABC. CA App. 1222. This was followed by petitioner's
urgent requests to NBC for allowance of some NBC pro-
grams to fill gaps in petitioner’s broadcast schedule
resulting from the limited number and secondary choice
of ABC and CBS programs left available to petitioner
after Southern’s preemptions. CA App. 1151, 1152. All
of petitioner’s requests for NBC programs were made
on the express understanding that unless and until pe-
titioner could build an audience meriting compensation,
the programs would be furnished without compensation
to petitioner and without cost to NBC, with petitioner
paying for its own interconnection with AT&T as re-
quired for delivery of the programs. CA App. 1152,
1251.
In May of 1968, CBS agreed to allow petitioner to
broadcast programs not called for by Southern, its pri-
mary affiliate. App. A-8.
Petitioner began broadcasting on June 8, 1968, with
the availability of nationally televised programs limited to
programs of ABC and CBS which Southern did not wish
to show, NBC having declined to respond to petitioner's
7
urgent requests for NBC programs. App. A-8. After
intercession in July 1968 by petitioner's Washington
counsel with NBC’s Washington counsel (CA App.
1194), NBC began allowing a very limited number of
programs to petitioner. Subsequently, and effective in
July 1969, more than one year after petitioner’s sign-on,
NBC awarded affiliation to petitioner (first call on pro-
grams but no compensation or payment for line charges).
App. A-23.
During the entire period of time that NBC was refusing
to release any programs requested by petitioner, and
also while NBC was releasing to petitioner only very
limited programs, NBC’s primary affiliates in Jackson and
Hattiesburg were vigorously urging NBC not to allow
petitioner to broadcast NBC programs. CA App. 642,
858, 860, 1227. Their reason: petitioner’s broadcast of
such programs in the 24% of the Meridian area over-
lapped by the signals of the Jackson and Hattiesburg
stations would cause competition for listeners and viewers
in such areas, which competition they wished to avoid.
CA App. 859; App. A-68, 72, 73.
Petitioner made many claims of antitrust violations
by the respondents in its complaint, all of which it be-
lieves to be valid. However, for purposes of this Petition,
the primary claims were as follows:
1. NBC was guilty of violating Section 1 of the
Sherman Act by refusing to deal (denying programs re-
quested) due to a combination with one or both of its
Jackson or Hattiesburg affiliates.
2. Southern, holding monopoly power in the Meridian
area, was guilty of monopolization under Section 2 of
the Sherman Act by taking the exclusionary actions
8
described above in furtherance of its monopoly position.
ABC participated in such monopolization, and the re-
newal of the first call contract by ABC and Southern, at
a time when NBC programs were unavailable, and after
the emergence of petitioner was known, itself consti-
tuted a violation of Section 1 of the Sherman Act.
The trial court sustained respondents’ motions for
summary judgment, thus disposing of all claims in re-
spondents’ favor. App. A.
By per curiam decision rendered September 11, 1978,
the Court of Appeals adopted the District Court’s opinion
as its own and affirmed. App. C. On rehearing, the
appellate court, in a second per curiam opinion, again
affirmed the trial court’s judgment sustaining respondents’
motions on summary judgment as to the antitrust issues
but vacated and remanded certain other portions of
the District Court’s opinion dealing with Communications
Act claims. App. E.
It is important to a proper understanding of this
Petition to know that both the trial court and the
appellate court mistakenly treated petitioner’s basic
claim against the networks as one for denial of network
compensation. In very early position papers, depositions,
and the like, petitioner did explore the question of
whether unequal application by all the networks through-
out the nation of their compensation standards demon-
strated an illegal combination or conspiracy. But the
record is clear that all of petitioner’s requests for
programs from NBC (and its arrangement for the same
with ABC) were on the understanding that no request
for compensation would be made unless and until
petitioner’s audience justified it. Petitioner’s claims against
9
the networks is for denials of programs necessary to
achieve an audience meriting compensation.
It should also be noted that in the early phases of
this proceeding, petitioner urged as against all three
networks, and also as against AT&T, claims of com-
bination among themselves or with affiliates of the
networks to deny entry or otherwise frustrate competition
by TV stations broadcasting in the UHF spectrum, and
a combination between AT&T and the networks to
initiate and maintain AT&T’s discriminatory tariff. In
the interest of reducing the complexity of this case,
these claims are now abandoned. Thus, no antitrust vio-
lation is now urged by petitioner as against AT&T
or CBS.
Finally, it should be noted that in addition to the
alleged antitrust violations, this suit includes a claim
by petitioner against AT&T for damages for alleged
violations of the Communications Act. This Communica-
tions Act phase of the case has been remanded to the
lower court for trial, and accordingly this Petition does
not seek review of this feature of the case.
REASONS FOR GRANTING
THE WRIT
1. By misconstruing dictum in a decision by this
Court, the courts below have established an import-
ant and erroneous rule that summary judgment
may be granted on the basis of the trial judge’s
choice of the most probable of conflicting inferences.
This case is one of an increasing number that have
allowed a variety of methods to prevent juries from
10
deciding important private antitrust claims. in_ this
instance, the method was summary judgment against
the plaintiffi—despite a complex record of conflicting
facts and obvious injury.
The basic error here springs from an original mis-
reading of this Court’s decision in First Nat. Bank of
Arizona v. Cities Service Co., 391 U.S. 253 (1968).
As demonstrated below, that original error permeated
the entire trial court decision and the appeal that
followed, so that the established law in the Fifth
Circuit, unlike that in all other Circuits interpreting
Cities Service,* is that summary judgment may be
granted on the basis of the trial court’s choice of the
most probable of conflicting inferences presented by the
record.
The trial court stated early in its discussion of sum-
mary judgment that Cities Service establishes the standard
to be followed. App. A-17. The court read dictum in that
opinion (391 U.S. at 280) as setting forth a new rule of
“probability” in complicated antitrust cases. App. A-18.
It then repeatedly applied this new rule to the “facts”
it found here. Thus, it said that petitioner’s claim failed
because the evidence “clearly points to the much more
plausible inference” that dealings with petitioner grew
3. Thyssen Plastik Anger KG v. Indenplas, Inc., 576 F.2d 400,
401-02 (ist Cir. 1978); Bailey v. Hartford Fire Ins. Co., 565 F.2d
826, 830 (2d Cir. 1977); Harold Friedman, Inc. v. Kroger Co.,
581 F.2d 1068, 1080 (3d Cir. 1978); McDonnell v. Michigan Chap-
ter #10, 587 F.2d 7, 9 (6th Cir. 1978); Freeman v. Decio, 584
F.2d 186, 196-197 (7th Cir. 1978); Admiral Theatre Corp. v.
Douglas Theatre Co., 585 F.2d 877, 889 (8th Cir. 1978); British
Airways Bd. v. Boeing Co., 585 F.2d 946, 951 (9th Cir. 1978),
cert. denied, 99 S.Ct. 1790 (1979); Craig v. Sun Oil Co., 515 F.2d
221, 225 (10th Cir. 1975), cert. denied, 429 US. 829 (1976):
Merit Motors, Inc. v. Chrysler Corp., 569 F.2d 666, 668-669 (D.C.
Cir. 1977).
11
from independent business judgments (App. A-19); that
petitioner failed to develop facts “from which the most
probable inference to be drawn was conspiracy” (id.);
that summary judgment was prover under Cities Service
“when an inference of non-consr “acy is more probable”
than petitioner’s contention of conspiracy (App. A-18,
19); that proof of NBC’s independent and normal operat-
ing policies “obliterates” any “inference of unlawful action
* * *” (App. A-26); and that the asserted motives of the
networks in refusing to deal with petitioner “are less
believable” than “the sound business judgment” attributed
to each network by the court. App. A-34.
At one point, the trial court purported in the text
of its opinion to assume that WDAM exerted pressure
on NBC not to give programming to petitioner. App.
A-68. However, the court in a footnote then totally
discounted the significance of WDAM’s assumed pres-
sure by concluding that an inference of “a scheme to
preserve Southern’s Meridian monopoly” is only required
“if it is the most plausible inference to be drawn from
all the facts,” which the court declined to do. App.
A-68 n. 76.
The dramatic way in which this “probability” approach
operated against petitioner is further illustrated by the
trial court’s approach to household viewing. The court
placed great emphasis upon the fact that NBC required
a station to be viewed by at least 6,000 prime-time homes
before the network would pay it for broadcasting the net-
work’s programs. E.g., App. A-13, 27-29. Yet when one
survey showed that petitioner had achieved the requisite
number of prime-time homes and was therefore entitled
to payment, the trial court adopted respondents’ argu-
ment (which had developed directly from “a complaint
12
by Southern” to the company performing the survey)
that this survey was not “reliable” but rather was the
result of a “mistake.” App. A-14-15, 27-28 n. 30. The
court therefore simply ignored the survey and its all-
important implications.
The Court of Appeals at first adopted the trial court’s
opinion as its own. App. C-1. On petition for rehearing,
the Court of Appeals purported to correct the District
Court’s application of Cities Service. App. E-2. The
proper rule, said the Court of Appeals, is that:
Insofar as any weighing of inferences from given
facts is permissible, the task of the court is not to
weigh these against each other but rather to cull
the universe of possible inferences from the facts
established by weighing each against the abstract
standard of reasonableness, casting aside those which
do not meet it and focusing solely on those which
do. * * * [Id.]
Inexplicably, however, the Court of Appeals then con-
cluded:
A reconsideration of the opinion [below] convinces
us that, in each instance complained of, the proper
rule as set out above has been applied. * * *
[App. E-4.]
In other words, after ruling that it never intended to
sanction the “probable inference” rule which underlay
virtually every important conclusion reached by the Dis-
trict Court (App. E-2), the Court of Appeals, without
any analysis of these detailed conclusions, nevertheless
held that summary judgment against petitioner was
justified.
2 Ne en Nae re nk SERA a on eee eee: ~t
13
Aside from the fact that the correct procedure in light
of the District Court’s repeated error would have been
to remand this lengthy and complex record for recon-
sideration under application of the proper standards,‘
the Court of Appeals cannot, by a single sentence, undo
what the trial court did in erroneous analysis after
erroneous analysis.
Of course, Cities Service was never intended to sanc-
tion the standards applied here, and such standards
are in direct conflict with those applied by other Courts
of Appeal and by this Court. As shown by Adickes v.
S.H. Kress & Co., 398 U.S. 144 (1970), United States
v. Diebold, Inc., 369 U.S. 654 (1962), and Poller v.
Columbia Broadcasting System, Inc., 368 U.S. 464
(1962), it is still the law that, on summary judgment,
conflicting facts are to be resolved in favor of the party
opposing the motion, that inferences to be drawn from
the underlying facts must be viewed in the light most
favorable to that party, that a defendant’s motion for
summary judgment must be denied unless it disproves
as a matter of law the existence of any facts from
which an inference supporting the plaintiffs allegations
may be drawn, and that, if the motion fails to do so,
all disputes of fact and of inferences to be drawn there-
from material to the issues in the case must be left for
decision on trial before court or jury.
4. See, e.g., Fountain v. Filson, 336 U.S. 681 (1949); Florida
Lime and Avocado Growers v. Paul, 373 U.S. 132 (1963); Gallagher
v. Philadelphia Transp. Co., 185 F.2d 543 (3d Cir. 1950). See also
Leonard v. BHJK Corporation, 469 F.2d 108, 110 (D.C. Cir. 1972)
and cases cited; Fitzgerald v. General Dairies, Inc., 590 F.2d 874,
875-876 (10th Cir. 1979); Narez v. Wilson, 591 F.2d 459, 462 (8th
Cir. 1979); Drexel v. Union Prescription Centers, 582 F.2d 781,
784 (3rd Cir. 1978); Fournier v. Canadian Pacific Railroad, 512
F.2d 317, 318 (2d Cir. 1975).
14
American Fid. & Cas. Co. v. London & Edinburgh
Ins. Co., 354 F.2d 214, 216 (4th Cir. 1965), is typical
of Court of Appeals decisions holding that not only
must the historic facts be free of controversy, but there
must also be no basis for controversy as to the inferences
to be drawn from them.
It is difficult to believe that any court, based on an
alleged dictum in Cities Service, would sweep away these
solidly éstablished doctrines and safeguards. Yet the
indications are unavoidable that this is precisely what the
court below has done. First, this was the interpretation
of Cities Service urged on the appellate court by NBC:
In First National Bank of Arizona v. Cities Service
Co., supra, 391 U.S. at 280, the Supreme Court
made clear that an antitrust plaintiff may not rely
on mere “inferences” of conspiracy where an in-
ference of non-conspiracy is “more probable.” [NBC
Brief at 20.]
And that this pernicious doctrine is now the law of the
Fifth Circuit is affirmed in a decision of that court
rendered two years after the trial court’s ruling here.
In Aviation Specialties, Inc. v. United Technologies
Corp., 568 F.2d 1186, 1193 (1978), the court said:
In the absence of such evidence, summary judgment
is proper when an inference of no conspiracy is more
probable than the plaintiff's asserted inference of
conspiracy [citing Cities Service].
The extraordinary results to be expected from the use
of this incorrect standard can be no better illustrated
than by what occurred here as to petitioner’s charge of
An Ae ROS ee 6 et Ne ONS LO i ad al tli Polar demas
15
combination between NBC and its affiliates WDAM and
WLBT to deny NBC programs to petitioner.
It was undisputed that petitioner was pleading with
NBC to give it programming without compensation to
petitioner and without cost to NBC; that NBC had the
physical power to give or withhold such programs; that
WDAM and WLBT were strongly urging NBC to exer-
cise that power to withhold all programs; that NBC did
in fact withhold all programs until about three months
after petitioner’s critical, first-impression, sign-on date,
and that NBC continued to withhold programs requested
by petitioner on such a no-pay, no-cost basis until more
than one year from that date. Further, in internal memo-
randa, NBC officials in 1969 conceded that the Meridian
area was important enough to be served from within
and that the showing of NBC programs by petitioner
would improve NBC’s performance in Mississippi and
Alabama. CA App. 1251-53.°
Obviously, on these facts a jury could have inferred
that NBC’s denial of programs was due to the affiliates’
pressures. Indeed, there being nothing substantial in the
record to refute these facts, a jury verdict to the con-
trary would likely have been contrary to the evidence.
But the trial court, armed with its “probability” concept,
could grant summary judgment and keep the case from
the jury by simply labeling as “more plausible” NBC’s
statements that it acted independently and wholly un-
influenced by its affiliates’ protests.
The Court of Appeals, by adopting the trial court
opinion, necessarily approved the trial court’s finding
5. An NBC official testified that Meridian ‘‘was a separate city
of license—where we should cooperate.” CA App. 860.
16
that the “most plausible” inference was one of lawful
action.
Moreover, the appellate court, in its decision on re-
hearing, actually applied the same “probability,” or
“choice of inferences,” doctrine enunciated by the Dis-
trict Court, even though renaming it, “weighing against
a standard of reasonableness.”
Thus, as proof that the trial court had applied the
“proper rule,” the Court of Appeals declared:
[Ajt no relevant time did [petitioner] command a
viewing audience approaching that required for af-
filiation by the basic policies of either ABC or NBC.
As the opinion of the [trial] court notes * * *,
“[t]hese policies evinced an economic judgment that
unless the network’s respective 6,000 or 7,000 house-
hold figure was met, national advertisers would not
be willing to increase their overall compensation to
the networks for the addition of the television sta-
tions.” We do not believe, in the face of such facts,
that an inference of anticompetitive conspiracy is
reasonable. * * * [App. E-2-3.]
If this is a holding that petitioner’s small audience ex-
cused network denial of compensation, it is irrelevant to
any issue in this case, for petitioner’s complaint was for
denial of programs, not denial of compensation. If it is
a holding that petitioner’s small audience excused the
denial of programs, it is a holding that until a new sta-
tion achieves an audience sufficient for affiliation, net-
works can with impunity deny it the programs without
which it cannot achieve such an audience.
In either event, it is a holding reached by the ap-
pellate court itself by means of its choice of the most
17
probable of conflicting inferences. This is so because
the court first accepts the trial court’s conclusion as to
the smallness of petitioner’s audience—a matter sharply
disputed in the record—and it then accepts the inference
that the networks’ audience requirements for either af:
filiation or compensation “evinced an economic judg-
ment.”
But the fact that, in practice, the networks often gave
programming or compensation where the asserted audi-
ence requirements had not been met and awarded com-
pensation to many new UHF stations disproportionately
low in terms of comparative audiences (see FCC Doc-
ket 16041, 26 F.C.C. 772, 784-785 (1970)) supports
a strong inference that such stated requirements were in
fact but convenience devices used with the approval or
cooperation of those stations favored by the networks to
hinder the entry of new competition by the withholding
of either programs or compensation or both.°
The importance of the issue here is so obvious that
it can hardly be made clearer by emphasis or elabora-
tion. It is as important as the right to trial by jury, for
if a court can preempt for itself prior to trial decisions
as to which inferences from the operative facts are “more
6. This inference finds strong support in the testimony of ABC’s
Director of Television Station Relations in the period here involved:
Well, as I said, in 1969 I was starting to change as far as
that. I just felt that the combined CBS or NBC station that
was also eligible or able to get the best ABC programs would,
in fact, stunt the ability of a station. I felt there was a certain
hypocrisy if we measure the station for 3,000 homes and we
told them, when you get to 5,000 homes we will get you an
affiliation, and at the same time, we would turn around and
give our best programs to the VHF. We were, in fact, hindering
them from getting those 5,000 homes and yet we were telling
them when you get to 5,000 homes we would give you an
affiliation. [CA App. 800.]
18
probable,” “more plausible” or “less believable,” no jury
will be available to perform its time-honored functon.
That is precisely what the Court of Appeals has sanc-
tioned here. And the issues thus raised are of especial
importance because they involve the practices of net-
works and broadcasting stations directly affecting the
rights and interests of the public they are charged to
serve. If there were ever an area where inferences should
be weighed by juries on a full record rather than by
judges engaged in a balancing act on an incomplete and
uneven record, it is here, where the contested actions
are not those of a single individual or an ordinary com-
pany, but of semi-monopolists affecting the viewing habits
and intake of literally millions of persons.
2. The court below improperly held that self in-
terest justifies antitrust violations under Section 1
of the Sherman Act, in direct conflict with decisions
of this Court and of other Courts ot Appeals.
The Court of Appeals and the trial court justified re-
spondents’ conduct as acts of self interest and thereby
found no violation of Section 1 of the Sherman Act. This
was clear and serious error which should not be allowed
to stand by this Court.
Thus, the appellate court necessarily agreed with the
specific findings by the trial court that both WDAM
(Hattisburg) and WLBT (Jackson) exerted pressure on
NBC not to allow programs to petitioner, and that such
programs, if allowed to petitioner, would have meant
competition “calculated to decrease WDAM’s and WLBT’s
audience” as well as income. App. A-68, 72, 73. Despite
the fact that NBC did precisely what the two stations’
19
pressure was designed to accomplish, the courts below
justified this entire pattern of conduct in these terms:
Unlike WDAM, WLBT shared no common director with
Southern; therefore, somehow:
Reason * * * dictates it [WLBT] must have been
acting only out of self interest. If WLBT per-
ceived limited competition to it from [petitioner] as
significant enough to justify these actions, it is
most reasonable to assume that WDAM was not
acting because of improper influence by a common
director but also out of self interest. [App. A-73-74;
emphasis added.”
The concept that the actions of all respondents here
complained of could not be violative of the antitrust
laws because motivated by self interest and good busi-
ness permeates the trial court opinion and was in no way
rejected by the appellate court.
The only plausible inference to be drawn from the
undisputed facts is that the networks were motivated
in their dealings with [petitioner] solely by their in-
terest in purchasing a distribution service for their
programs and advertisements. In [petitioner’s] case,
the offered audience was so small that the networks
concluded no national advertisers would pay them
for its addition to the system. [App. A-33; emphasis
partially by the court.]
7. In addition to the “self-interest” point being discussed here,
this passage vividly demonstrates the absurdity of the “probability
of inferences” approach discussed supra. Inference is built upon in-
ference built upon inference: Because WLBT had no common
director with Southern, one must infer that WLBT acted only out
of self interest, and that being true, one must further infer that an
entirely different station also seeking to avoid competition from
petitioner acted only out of self interest.
20
The same concept was even more clearly announced
by the appellate court in its opinion on rehearing:
[A]t no relevant time did [petitioner] command a
viewing audience approaching that required for af-
filiation by the basic policies of either ABC or
Nm, °° ©
We do not believe, in the face of such facts, that
an inference of anticompetitive conspiracy is reason-
able. [App. E-2-3.]
These precepts conflict with the holdings of other
Courts of Appeals and of this Court. Thus, in United
States v. General Motors Corp., 384 U.S. 127 (1966),
General Motors and a group of its Los Angeles dealers
combined to keep a minority of dealers from violating
their “location clauses” by selling cars through discounters
at other than their established locations. The trial court,
as in the instant case, found no conspiracy. This Court
said:
The trial court attempted to justify its conclusion
on the following reasoning: That each defendant
and alleged co-conspirator acted to promote its own
self-interest; that General Motors, as well as the
defendant associations and their members, has a
lawful interest in securing compliance with the
“location clause” and in thus protecting the fran-
chise system of distributing automobiles—business
arrangements which the court deemed lawful and
proper * * *,
These factors do not justify the result reached. /t
is of no consequence, for purposes of determining
whether there has been a combination or conspiracy
under § 1 of the Sherman Act, that each party acted
21
in its own lawful interest. [Id. at 142; emphasis
added. ]*®
Practically all violations of the antitrust laws are com-
mitted in the self interest of the violators.” Few such
violations are committed with personal ill will toward
a competitor or primarily to destroy that competitor.
So the justification accepted by the Court of Appeals
here would annihilate Section 1 of the Sherman Act
and judicially bless a high percentage of all antitrust
violations under that Section.
3. The court below improperly required specific
predatory intent for monopolization under Section
2 of the Sherman Act, in direct conflict with decisions
of this Court and of other Courts of Appeals.
The trial court, and necessarily the appellate court,
found that Southern “held the dominant monopoly power
in the Meridian television market.” App. A-64. They
nevertheless granted summary judgment against petitioner
because it was allegedly unable to show a single instance
in which Southern used its market domination to harm
8. Most Courts of Appeals have been faithful to the rule thus
enunciated, so that the standard in the instant case is in direct
conflict with them. See, e.g., Fashion Originators Guild v. Federal
Trade Commission, 114 F.2d 80, 85 (2nd Cir. 1940), aff'd., 312
U.S. 457 (1941) and Hecht v. Pro-Football, Inc., 570 F.2d 982,
996, (D.C. Cir. 1977), cert. den., 436 US. 956.
9. For a recent and dramatic example, see National Soc. of
Professional Engineers v. United States, 435 U.S. 679 (1978), in
which the petitioning association demonstrated not only that the
ethical ban it advocated was in its members’ self interest but that
without the ban, the quality of engineering work would become
dangerous to the health, safety, and welfare of the public. Jd. at
685, 694. This Court nevertheless struck down the ban under
Section 1 of the Sherman Act.
22
petitioner. Id. Petitioner, they said, must show “some
predatory or wilful act in the furtherance” of its mo-
nopoly. App. A-65.
After noting and discussing five specific acts of
predatory or willful conduct charged by petitioner (App.
A-65-80), the trial court in each instance accepted the
justification offered by Southern for its actions. For ex-
ample, in response to Southern’s sudden increase in its
ABC broadcasting upon learning of petitioner’s attempt
to obtain ABC's programs, the trial court said: petition-
er’s claim “fatally falters because it has wholly failed
to contradict the rational justification given by Southern
for these changes.” App. A-71; emphasis added. South-
ern’s conduct, the court blithely concluded, must be as-
sumed to be an “application of sound business principles”
tather than “an act in furtherance of a monopoly.”
App. A-72.
This is but one example. The trial court’s entire dis-
cussion adopted by the Court of Appeals was founded
on the proposition that predatory intent is essential to a
charge of monopolizing and that an exclusionary act of
monopolizing can be iustified by sound business practices
or “rational justification.” This proposition is in direct
conflict with holdings of this Court and of other Courts
of Appeals.
Thus, in United States v. Griffith, 334 U.S. 100, 107
(1948), this Court said:
It is indeed “unreasonable, per se, to foreclose com-
petitors from any substantial market.” [Citing au-
thority.} The antitrust laws are as much violated
by the prevention of competition as by its de-
struction.
23
On the lack of need to prove specific intent to monopo-
lize, this Court said in Griffith:
It is, however, not always necessary to find a specific
‘intent to restrain trade or to build a monopoly in
order to find that the anti-trust laws have been
violated. It is sufficient that a restraint of trade or
monopoly results as the consequence of a defend-
ant’s conduct or business arrangements. [/d. at
105.]
And the Court continued:
[E]ven if we assume that a specific intent to ac-
complish that [illegal] result is absent, [the defend-
ant] is chargeable in legal contemplation with that
purpose since the end result is the necessary and
direct consequence of what he did. [/d. at 108.]
That the intent of the monopolist does not have to
be predatory is again clearly stated in United States v.
United Shoe Machinery Corp., 110 F. Supp. 295, 345
(D. Mass. 1953), aff'd per curiam, 347 U.S. 521 (1954).
It is only fair to add that the more than 14,000 page
record * * * show that United’s power does not rest
on predatory practices. Probably few monopolies
could produce a record so free from any taint of
that kind of wrongdoing. The violation with which
United is now charged depends not on moral con-
siderations, but on solely economic considerations.
United is denied the right to exercise effective con-
trol of the market by business policies that are not
the inevitable consequences of its capacities or its
natural advantages. That those policies are not im-
moral is irrelevant.*°
10. The same lack of necessity of either specific or predatory
intent is inherent in the Second Circuit holding in United States
v. Aluminum Co. of America, 148 F.2d 416, 431-32 (2d Cir. 1945).
The holding in the instant case is also in conflict with Greyhound
24
The “sound business” aspect of the holding below is
also in direct conflict with the ruling in Hecht v. Pro-
Football, Inc., 570 F.2d 982, 996 (D.C. Cir. 1977),
cert. den., 436 U.S. 956:
* * * [T]he judge told the jury that in considering
whether the restrictive covenant was reasonable they
should “consider whether the provision [was] fairly
related to business considerations that the Redskins
or the Armory Board had to deal with at the time
they entered into the lease.” The court thus implied
that if there existed good business reasons for the
restrictive covenant the jury should not find the
restraint unreasonable. As Hecht points out, how-
ever, it is settled that the “antitrust outcome does
not turn merely on the presence of sound business
reason or motive” and that the “promotion of self-
interest alone does not invoke the rule of reason to
immunize otherwise illegal conduct.” The latter part
of the judge’s instruction was thus misleading and
should have been deleted. [Footnotes omitted]
Concentration of business in the United States is in-
creasing even in the face of the impediments offered by
our antitrust laws. With this increasing concentration
comes an increase in market power. Subtly and un-
obtrusively, American business is becoming less competi-
tive. If our courts judicially sanction all factually ex-
clusionary actions by those having monopoly power
Computer Corp. v. International Busniess Machines Corp., 559 F.2d
488 (9th Cir. 1977), cert. denied, 434 U.S. 1040 (1978), in which
the court held:
It is no answer to the charge to say that these practices are not
“predatory” but “honestly industrial”—that is, of a kind an
ordinary enterprise might utilize with impunity. If the jury
concluded IBM possessed monopoly power in the leasing of
general purpose computers, IBM would be precluded from em-
ploying otherwise lawful practices that unnecessarily excluded
competition from the sub-market. [559 F.2d at 498; footnotes
omitted.]
SE ES — a
25
where there is no showing of a specific, predatory intent,
or where the conduct is explainable as sound business, it
will destroy the effectiveness of Section 2 of the Sherman
Act. Specific intent is essential in a Section 2 Sherman
Act violation where the charge is attempt to monopolize,
but that was not the charge here. The charge here was
the exercise of monopoly power by Southern—one con-
cedely a monopolist and having such monopoly power.
It is clear that the holding in the instant case requiring
a specific, predatory intent as an ingredient of the of-
fense of monopolizing and justifying exclusionary ac
tions by a monopolist on the ground of sound business
judgment is contrary to the holdings of this Court and
of other Courts of Appeals. It is equally clear that the
issue is of great importance to the proper enforcement
of Section 2 of the Sherman Act.
4. The denial of network programs pursuant to a
combination or monopolization as shown here violates
the Sherman Act, the very basis of the Federal
Communications Act, and the public’s right to tele-
vision viewing.
In its Chain Broadcasting Regulations, upheld by this
Court in National Broadcasting Co. v. United States,
319 U.S. 190 (1943), the Federal Communications Com-
mission (“FCC”) undertook to strike at the very type
of arrangement which existed here between NBC and its
Jackson and Hattiesburg affiliates. One of the regula-
tions there involved (now 47 C.F.R. Section 73.658(b)
as adapted to television) provides in pertinent part:
(b) Territorial exclusivity. No license shall be
granted to a television broadcast station having any
contract, arrangement, or understanding, express or
26
implied, with a network organization * * * which
prevents or hinders another broadcast station located
in a different community from broadcasting any
program of the network organization * * *. As
employed in this paragraph, the term “community”
is defined as the community specified in the instru-
ment of authorization as the location of the station.
And the Commission’s Docket 18927 proceeding
(“Raleigh-Durham Proceeding”) 28 F.C.C. 169 (1971)
concerned “possible limitations on the extent to which
television stations may telecast the programs of more
than one of the three national networks.” The FCC’s
Report and Order in that proceeding makes clear that the
FCC regards as contrary to the public interest the bottling
up of network programs in one station as was accom-
plished here by Southern with the aid of both ABC and
NBC.
Thus this case, perhaps for the first time, brings under
antitrust scrutiny problems and practices of networks
and broadcasters condemned as undesirable restraints by
the FCC in its Section 73.658(b) regulation and in its
Docket 18927 proceeding.
A sensitive factor of overriding importance permeating
all of the questions presented here is that of the right of
the Meridian public to a chance to have multi-voiced
television media in that area, free of the exclusionary
acts by the monopolist Southern, or by any restraining
contract, combination or conspiracy in violation of Sec-
tion 1 of the Sherman Act. The right of the public is
superior to any private right of Southern or of the
networks.”
11. In Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 390
(1969), this Court said: “It is the right of the viewers and listeners,
not the right of the broadcasters, which is paramount.”
27
Respondent Southern was a conceded monopolist, and
ABC, NBC and CBS are clearly oligopolists and quasi-
monopolists. All were businesses affected with a public
interest. At the time petitioner signed on, CBS had a
primary affiliation with Southern, and ABC had made a
first-call commitment to that station. This put NBC in
a monopoly position with respect to first quality prime-
time TV network programs. In that status, and at that
critical, first-impression time, NBC denied all programs
to petitioner, though petitioner was offering to take such
programs without compensation to itself and without
cost to NBC. At the same time, Southern, with assistance
from ABC, exercised its monopoly power to restrict the
availability of network programs to petitioner. The effect
of the acts of NBC, ABC and Southern was to deny
the Meridian area a robust second 1V outlet for enter-
tainment and informative programs.”
The importance of the destructive and cooperative
efforts of the defendants in this case—and of similar
efforts undoubtedly taking place every day between net-
works and individual stations—should be of primary
concern to the public and to this Court. Time and time
again, throughout its opinion, the District Court,’* with
the specific approval of the Court of Appeals (App. E-3),
justified all actions of the networks complained of by
petitioner on the ground that petitioner never achieved
a better viewing audience. What the courts below totally
12. The record also shows that petitioner’s founders had plans
for the operation of new TV stations in five other cities comparable
to Meridian, had petitioner succeeded in the Meridian area. CA App.
1243-44. These plans were stopped in their tracks by the exclusionary,
anticompetitive treatment accorded petitioner. The adverse effect on
the public interest was thus even more far-reaching.
13. E.g., App. A-2, 27-28, 30, 31, 34, 50-51, 58-59.
28
failed to focus on was why the necessary viewing audience
was never achieved—if, indeed, it was not, which as
noted above was a point of contention.
The fact is that in the case of petitioner, as is true
in innumerable situations across the country, the networks
and their affiliates have a death grip on the budding
aspirations of new competitors, and in particular UHF
stations, By withholding all programming, by granting
some programs but not enough, by refusing to pay
AT&T costs, and by a variety of other methods, the
networks in concert with affiliates can prevent the achieve-
ment of a viewing level which in turn has been arbitrarily
set by the networks themselves.
That is what this case is about. It is not enough
to say that petitioner never became viable, or that its
“predicted audience was not worth purchasing.” App.
E-3. Its audience would have been worth purchasing but
for the concerted actions of respondents. In fact, a jury
might have decided that the very criteria established by
the networks for determining viability and “worthwhile-
ness” were arbitrary or illegally arrived at. In any event,
whether the criteria were valid or not, every action
taken by respondents which resulted in petitioner’s failure
to match the criteria should not have been viewed as
necessarily independent, legal and justified.
There is no evidence that the public interest or the
public welfare was an ingredient—even a minor one—
in the consideration of this case by the trial court or by
the Court of Appeals. Sound private business judgment
was the only test. It was as though the lawsuit involved
a few rival merchants dealing in widely available com-
modities.
29
CONCLUSION
It is submitted that the holdings of the Court of Ap-
peals on all issues represented by the foregoing questions
are in conflict with holdings of other Courts of Appeals
and of this Court; that the issues are of substantial im-
portance, and that this Petition should be granted to
consider, review and reverse the decision below.
Respectfully submitted,
JOHN COLEMAN DAWSON
36 W. Rivercrest Drive
Houston, Texas 77042
A. A. WHITE
2400 Two Shell Plaza
Houston, Texas 77002
RICHARD E. WILBOURN
P. O. Box 1389
Meridian, Mississippi 39301
RoBBIN R. DAWSON
2500 Two Shell Plaza
Houston, Texas 77002
Counsel for Petitioner
Of Counsel:
E. BARRETT PRETTYMAN, JR.
815 Connecticut Avenue, N.W.
Washington, D.C. 20006
APPENDIX A
OPINION OF UNITED STATES DISTRICT COURT,
S. D. Mississippi, E. D.
|
A-1
AMERICAN TELEPHONE AND TELEGRAPH
COMPANY, Plaintiff and Counter-Defendant,
V.
DELTA COMMUNICATIONS CORPORATION,
Defendant and Counterclaimant,
Vv.
AMERICAN TELEPHONE AND TELEGRAPH
COMPANY et al.,
Counter-Defendants.
Civ. No. 1564(C).
United States District Court,
S. D. Mississippi, E. D.
February 25, 1976.
* * *
CLARK, Circuit Judge.*
After sifting every bushel of speculative chaff suggested
by the claimant, the court finds not a single grain of
antitrust wheat to sustain the claims asserted. The
thousands of pages of depositions and affidavits presented
and the hundreds upon hundreds of pages of memoranda,
* Judge Charles Clark, United States Court of Appeals for the
Fifth Judicial Circuit, sitting by designation.
A-2
motions, replies, and answers do not show any genuine
issue of fact as to any claim which will support any
antitrust violation. Summary judgment is clearly proper
as to every possible antitrust issue.
The massive proof adduced shows this television broad-
caster’s failure was due to technological limitations and
operational problems encountered in commencing its
business life that were not the fault of any party sued.
The station never had a viewing audience to sell that
was worth more than the networks offered at various
times to pay. The antitrust statutes do not require net-
works to subsidize the entry of a television station into
the broadcast market. Similarly, no antitrust violation
was committed by the carrier of the television signal nor
by the existing local broadcaster either singularly or in
combination with the networks. Enforcement of the
carrier’s authorized tariffs was free from antitrust vio-
lation. The established broadcaster was not shown to have
taken any action in furtherance of its local-area monopoly
and the claims against it based on that status are un-
founded. Alleged Communications Act violations are
dismissed as matters within the primary jurisdiction of
the regulatory agency. In the exercise of its discretion
the court dismisses the pendent state antitrust claims.
American Telephone & Telegraph Company (AT
&T) originally brought this action against Delta Com-
munications Corporation (Delta) to recover 19,524.31
dollars, an alleged indebtedness for television audio and
visual local-channel communications service to Delta’s
television station WHTV-TV in Meridian, Mississippi.’
1. There are three types of services provided by AT&T which
are relevant to this litigation: Interexchange-channel service ( IXC)
or long-lines service connects telephone company central offices in
———— ——————
A-3
Delta denied this liability asserting illegality of the tarifis
covering these particular services. Delta also filed a
counterclaim against AT&T; Columbia Broadcasting Sys-
tem, Inc., later changed to CBS, Inc. (CBS); American
Broadcasting Company, Inc. (ABC); RCA Corporation,
later changed to National Broadcasting Company, Inc.
(NBC); and Southern Television Corporation, WTOK-
TV (Southern), charging these counterdefendants with
anticompetitive practices aimed at the destruction of
Delta specifically and ultrahigh-frequency (UHF) tele-
vision stations generally. This cause is now before this
court on separate motions for summary judgment by the
original plaintiff and each of the counterdefendants.
To reduce the complex matrix of facts, inferences,
and suspicions that complicate this proceeding, the court
waived its local rule so as to allow extended discovery
before requiring each of the parties to file a memorandum
which specified the legal theories and the supporting
facts upon which they would rely in this litigation.’
Delta’s initial and responsive memoranda have failed to
delineate any precise theories supporting its counter-
claim assertions. Instead, it presented numerous general
accusations supported by legal citations which are not
consistently apposite. To give the respondent the benefit of
the doubt in ruling on the pending motions for summary
judgment, this court has constructed the strongest tenable
delineations of antitrust violations which can be combed
from the documents presented. In addition to giving
different exchanges; local channels connect the telephone company
central office with a customers studio transmitter; and station con-
nections cover the service elements associated with connecting a local
channel to an interexchange channel.
2. Poston v. Caraker, 378 F.2d 439 (Sth Cir. 1967) approved
the use of a similar procedure.
A-4
Delta the advantage of structuring for it the best possible
legal theories, this court, as required in summary judg-
ment actions, has resolved every issue of disputed ma-
terial fact in favor of Delta and has drawn every reason-
able inference from those facts in Delta’s favor on each
of the theories constructed. Poller v. CBS, 368 U.S. 464,
82 S.Ct. 486, 7 L.Ed.2d 458 (1962).
The intricate development of this opinion is intended
to provide a judicial blueprint which will detail the basis
for the court’s decision on every portion of the extensive
legal and factual development produced by industrious
counsel on both sides of the multiplex issues in this
difficult cause. The court has expticated the reasons for
rejecting every contention advanced, both to fully inform
the parties of the processes followed and thereby subject
its reasons to their most intimate and arduous testing
for error and to reassure itself of the independent sound-
ness of each disposition individually.
I. FACTS
A. The History of Delta’s WHTV Television Station
The television industry has a peculiar competitive
history. Competition in the industry has been limited both
by regulation of applicants and by the technology of
television broadcasting. Not only must applicants be well
financed, but only a few stations can be allowed to
broadcast in each coverage area. Use of the VHF spec-
trum, which was initially the only band used, has always
been restricted by the Federal Communications Com-
mission (FCC) in every broadcast area. Often in small
municipalities like Meridian only one VHF station will
be allowed. In an effort to promote competition in the
eee
ee «
_ _—_ ~-_ 3 ~~ —~
—
A-5
television industry, the FCC has been more liberal in
licensing UHF television stations. For quite some time,
however, these UHF stations suffered in their competitive
efforts because then existing television receivers had to
be supplementally equipped with a special channel re-
ceiver to enable the set to pick up signals in the UHF
band. In addition, special antennae are often required
for UHF reception. In 1964 Congress passed an act re-
quiring that all new television receivers have the capabil-
ity to pick up UHF signals.’ This legislation directly
led to a flood of applications and to a great influx of new
UHF stations. Thirty-seven of those new Stations, in-
cluding WHTV, however, “went dark” between 1966 and
1972.
Among those who became excited by the increased
development which liberal licensing of UHF television
produced was Weyman Walker. Although he had ex-
tremely limited experience in television broadcasting,
Walker was able to attract significant investors and de-
cided to incorporate and operate a UHF station in one
of three markets. He contracted with a television expert to
survey and report on the Meridian television market.
This report was prepared in the summer or fall of
1966. It ranked Meridian 159th in the national tele-
vision market. The report estimated that any new tele-
vision station going into this market would probably
suffer losses for the first 2 years. It warned of the possi-
bility of no immediate network affiliation and recom-
mended that any entry be based on a limited operating
day.*
3. The All-Channel Receiving Act, 47 U.S.C. §§ 303(s), 330.
4. When the station finally began operating in June of 1968,
it broadcast a full day instead of the suggested limited day; it
A-6
In 1968, at the time Walker and his associates were
considering the development of a UHF television station
in Meridian, Mississippi, the Meridian television market
was monopolized by Southern, a very profitable television
station with the call letters of WTOK. Southern was then
affiliated with CBS, and had been since 1954. Its rate of
payment from the network at that time was 500 dollars
per hour which provided it with income approximating
6,000 dollars per week. In addition, the CBS network
was paying the substantial signal delivery charges of
AT&T in connection with its programming. The physical
monopoly which Southern enjoyed because of the inherent
technical limitations of the television industry was elec-
tronically shared with at least two other VHF television
stations—WDAM in Hattiesburg, Mississippi and WLBT
in Jackson, Mississippi, both NBC affiliates—which en-
croached upon the Meridian market. These stations over-
lapped 24% of the projected Delta market.
August 28, 1967, Walker, as station manager of the
newly-founded corporation, Delta, visited with officials
of ABC to inquire about affiliation with his new tele-
vision station. On that occasion Walker was told “Build
it and we will look at it.” Then too he became aware
of ABC’s policy not to affiliate a television station which
has an average prime-time audience of less than 5,000
viewing households. ABC did not pay a station rate to
stations having an average prime-time audience less than
7,000 nor did they pay program delivery charges for
stations having an average prime-time viewing audience
less than 10,000. The minimum station rate which would
employed more personnel at higher salaries than recommended ; and
it decided, contrary to the report’s suggestion, to engage in ex-
pensive local live programming.
A-7
be paid if this level of viewership could be attained was
100 dollars per hour.
In July of 1967 Delta obtained a construction permit
from the FCC to build television station WHTV in
Meridian. Sometime between August and December of
1967 Delta’s Walker made an offer to ABC to build a
translator facility in Laurel which would increase circula-
tion and also to build a microwave delivery system
which would decrease the cost of transporting ABC’s
television signal. In connection with these promised im-
provements, Walker requested a 100 dollar per-hour
Station rate. Sometime late in 1967 Delta purchased the
site for its Meridian television station and began making
substantial plans for going on the air. On December 6,
1967 ABC granted Delta the right to televise all ABC
programs which were not being shown by Southern.
This offer included neither an agreement to pay a network
rate nor an agreement to pay AT&T delivery charges.
AT&T charges for the delivery of a television signal
comprise a substantial part of the operating expenses for
new television stations. In Delta’s case these charges
amounted to approximately 7,000 dollars per month.
Once a certain average prime-time viewership has been
established an affiliated network will usually absorb these
expenses as part of the compensation to the station
for the service of delivering the network’s programs.
In December of 1967 Delta contacted NBC seeking
to broadcast its programs. No affiliation request was
made at this time as Delta was still attempting to obtain
an ABC affiliation. In fact, all correspondence with NBC
by Delta during this period was on stationery which
indicated by a printed logo that the station had an ABC
affiliation.
A-8
In May of 1968 CBS agreed to allow Delta to use
certain programs which were not “cleared,” i. e., re-
quested for showing by Southern, its Meridian affiliate.
Under this agreement, these CBS programs carried no
payment of a network rate and CBS paid no part of
AT&T charges for delivery of the signal.
In June of 1968 Delta’s WHTV station finally went
on the air. The only network programs it was able to
present were the ABC and CBS programs which South-
ern did not wish to show. In August of 1968 several Delta
officials visited the FCC to discuss the problems they
were having affiliating with one of the national networks.
They were told by Commission personnel that it had no
authority to regulate networks concerning the arrange-
ments they made with various stations.
In September of 1968, coinciding with the beginning
of the new television season, NBC gave Delta the right
to broadcast seven programs. In May of 1969 Delta
was given a first-call affiliation by NBC. This meant that
Delta was given the opportunity to broadcast any NBC
programming it desired. However, this affiliation agree-
ment did not provide for the payment of a network
rate and Delta was required to pay all AT&T charges
incurred for delivery of the programs. As soon as it was
granted the first-call NBC affiliation, Delta cancelled
all of its ABC programming. On July 1, 1969 the NBC
affiliation became effective.
CBS was the first network to offer Delta a fee for
broadcasting its programs. In September of 1969 it
offered Delta a 35 dollar per-hour program rate. In
April of 1970 NBC gave Delta a 50 dollar per-hour
program rate. In August of 1970, Delta’ss WHTV-TV
A-9
station went dark. In January of 1971, a petition in
bankruptcy was filed by Delta. Its facilities and equip-
ment were subsequently sold to a Tupelo television
station.
Simultaneous with negotiations for network affiliation
and for fees, Delta was also involved in dealings with
AT&T concerning the various signal delivery charges
which television stations or the networks must pay.® On
September 20, 1967, AT&T advised Delta that its long-
line charges from Jackson to Meridian (8 hours per-day
minimum) would amount to approximately 4,744.25
dollars per month. On June 4, just prior to Delta’s WHTV
television station going on the air, AT&T revised its
quoted price to 5,524 dollars per month. Delta was
billed 6,839.25 dollars for its first month of 16 con-
secutive hours of service per day. During the time it
was broadcasting with full AT&T services, Delta incurred
monthly AT&T tariff charges of approximately 7,000
dollars.
In an effort to minimize its AT&T signal delivery ex-
pense Delta, in April of 1969, constructed a microwave
transmitter to transfer television signals from Jackson
to Meridian.*° This reduced the AT&T services required
and cut Delta’s cost to approximately 1,800 dollars per
month. At this time Delta was in debt to AT&T for un-
paid signal delivery charges of approximately 67,000
5. See note 1 supra.
6. The microwave transmitter allowed Delta to pick up a net-
work signal in Jackson and beam it to its station in Meridian. This
eliminated the need for AT&T long-lines service. Delta was still
required to pay AT&T charges for local-channel service to transport
the signal from the AT&T switchboard to Delta’s microwave trans-
mitter, both located in Jackson, and station-connection charges.
A-10
dollars. This included charges for long-lines, local-channel
and station-connection services performed prior to the
use of the private microwave.
On October 2, 1969 AT&T filed new tariffs which
increased the station-connection and local-channel service
charges still required to supplement the microwave service,
to approximately 4,000 dollars per month. On February
28, 1970, Delta again changed its operating format to
use a precontrol-room feed of its signal from WLBT-TV,
an NBC affiliate, in Jackson. This service cost Delta
400 dollars per month but avoided all AT&T charges.
The drawback to this arrangement was that Delta was
limited to airing programs carried simultaneously by
WLBT. Delta ceased broadcasting in August of 1970."
AT&T’s original complaint in this cause sought re-
covery for the cumulative charges incurred between Oc-
tober 1969 and April 1970 for station-connection and
local-channel services used subsequent to Delta’s April
1969 employment of the microwave transmitter.
B. Television Industry Economic Organization
Prerequisite to any analysis of antitrust violations in
this industry is an understanding of how this economic
milieu operates.* The television networks essentially serve
7. Central Television, Inc., (the assignee of Delta’s license and
presently the operator of WHTV as a satellite station) stated in
its application to the FCC for Delta’s license that Meridian “is
presently unable to sustain two viable full time television stations.”
Although, the application was signed under penalty of federal law
for false statements by F. Carrington Weems as President of Delta,
Weems denies having read the statement before he signed it. Be-
cause of this denial, the statement is not considered an admission
on Weems’ part for purposes of summary judgment.
8. For a general discussion see Federal Broadcasting System
v. ABC, 167 F.2d 349 (2d Cir. 1948).
EE eee
A-11
the industry as intermediaries that collect, produce, and
distribute. To generate income, networks sell broadcast
time to national advertisers. This time is packaged around
programs produced by the networks which are designed to
attract viewers. To distribute the packaged product to
the consumer of the advertising the networks purchase
from local television stations the service of broadcasting
both the programs and advertisements to persons living
within the station’s range.
The price a network pays a local station for the
service of broadcasting the package of programs and
advertisements is tailored to the size of the audience
which polling estimates that station attracts. In turn,
the network’s sales price to the national advertisers
for airing their advertisements is based upon the total
audience which that network’s affiliated stations and the
independert stations with which it has made agreements
to broadcast the particular package are predicted to
attract. The relevant consideration in fixing both the
price to be charged the advertiser and paid to the local
broadcaster is the size of the audience delivered.°
The networks usually compensate local television sta-
tions through a complicated combination of payments.
If the television station’s audience is substantial, the
network will agree to pay a network rate. This network
9. The importance of predicted audience was known to Delta
at the outset. The report which was commissioned by Walker opened
with the statement that “stations must be judged in terms of cir-
culation provided to the advertiser.” In addition, this same report
warned that the new station’s audience would probably not attract
a network with which to affiliate for the first 12 to 18 months. The
report’s affiliation warning proved accurate: Delta went on the
air in June of 1968 and the NBC affiliation became effective July 1,
1969.
A-12
rate is computed on what is called a per-hour prime-time
basis. For example, during most of the time relevant
to this litigation, Southern was being paid a 500 dollar
per-hour prime-time network rate. That rate meant the
network paid the television station a percentage of that
500 dollars for every prime-time hour of that network’s
shows run by the station. In addition, the station was
compensated a decreasing percentage of that rate for
every television show run during less favorable hour
categories. As an additional element of compensation,
the television networks usually absorb the AT&T de-
livery charges necessary to bring the network signal to
the local television station. The most expensive of these
categories of charges are those for long-line or IXC
services. That the total of these charges ‘could be sub-
stantial, is shown by Delta’s 7,000 dollar per-month bill
from AT&T for its first months of operation.
Network compensation to a successful television sta-
tion, then, involves a combination of payments to the
station of the network rate and absorption of the AT&T
delivery charges. Subtracted from these benefits is an
“affiliation fee” or a “waived hours” provision. This is
charged to the affiliate by the network to partially re-
imburse the network for the expenses incurred in de-
livering these programs to the local television stations.
During most of the time relevant to this litigation, the
monthly CBS “affiliation fee” or “waived hours” pro-
vision was calculated at 205% of its per-hour station
rate, or 1,025 dollars. The sum of these three factors
make up the net compensation paid to television stations.
An overview of the network’s income and payments to
local stations makes it obvious that the amount of the
A-13
station network rate paid to and AT&T delivery charges
absorbed for a television station are a function of the
amount of money that a national advertiser would be will-
ing to pay to the network for the addition to that
network’s total audience of the number of people the local
television station’s broadcast service would add.
ABC’s policy was that unless a television station could
deliver 5,000 average prime-time viewing households,
it would not affiliate. ABC required 7,000 average
prime-time homes before it paid a station rate and
10,000 before it would pay AT&T delivery charges. The
policy of NBC prohibited compensation below the level
of 6,000 prime-time homes. These policies evinced an
economic judgment that unless the network’s respective
6,000 or 7,000 household figure was met, national ad-
vertisers would not be willing to increase their overall
compensation to the networks for the addition of the
television stations.
Since the price paid for the service rendered is de-
termined by the size of the audience, it is apparent that
estimations of the size of that audience are extremely
relevant to any litigation which questions the legality
of the functioning of the industry. ABC’s research to
determine whether it would affiliate with Delta predicted
2,476 homes could be added to the network’s totaf viewer
audience by Delta’s broadcast signal. October 25, 1967
NBC research showed Delta would only add 500 un-
duplicated homes. In November 1968 the American Re-
search Bureau (ARB), an independent audience polling
organization which makes its results known to all sub-
scribers (who may be advertisers, networks, or broad-
casters), estimated that Delta’s WHTV-TV station reached
‘*
A-14
2,200 average prime-time viewing households; in Febru-
ary of 1969 it showed 2,700; in November of 1969
ARB showed less than 1,000; and in February of 1970
it showed 4,000. In April of 1970 Nielsen’s survey, an-
other similarly operated independent group which predicts
television audiences, showed 3,400 average prime-time
viewing households for Delta.
The regular ARB and Nielsen surveys were conducted
by the use of statistical sampling techniques in which a
random sample of the audience accounted for each pro-
gram it viewed in a diary. The telephone coincidental
surveys were conducted by telephone inquiry asking each
person called which program he or she was watching
at the time.’® The industry regarded the telephone coin-
cidental surveys as the less reliable of the two measures
of station audiences.
In addition to the above, two surveys were taken by
ARB at the behest of Delta. These were done by the tele-
phone coincidental survey method. The first showed that
Delta had a 68 percent share of the viewing audience
in Meridian compared with Southern’s 16 percent. After
a complaint by Southern, this survey was rescinded as
having been computed incorrectly and corrected results
were published which showed Southern with 62 percent
of the viewing audience and Delta with only 18 percent.
Since a mistake had been made on this survey, an ad-
ditional telephone coincidental survey was taken by ARB
10. The results of the regular ARB surveys attached as exhibits
to affidavits in this action show the stations’ relative market shares
in terms of an estimate of the average number of television house-
holds viewing each station. The results of the telephone coincidental
surveys attached as exhibits to affidavits filed in this action, however,
show the relative market shares in terms of the average percentage
of television households viewing each station.
A-15
which showed that Delta had a 23 percent share of the
audience and Southern with 64 percent. Both of these
telephone coincidental surveys were done between the
February 1969 and November 1969 regular ARB sur-
veys. During this same period, surveys of the Southern
audience indicated an average of from 29,000 to 35,000
viewing households. Both the use and the validity of these
surveys are particularly relevant to most of the antitrust
violations herein asserted.
In First National Bank v. Cities Service Co., 391 U.S.
253, 279, 88 S.Ct. 1575, 1588, 20 L.Ed.2d 569 (1968)
the Court in the course of discussing the appropriateness
of summary judgment in an antitrust action (a matter
discussed in detail in part II, infra), stated:
Obviously it would not have been evidence of
conspiracy if Cities refused to deal with Waldren
because the price at which he proposed to sell oil
was in excess of that at which oil could be obtained
from others. Therefore, it is only the attractiveness
of petitioner’s offer that makes failure to take it up
suggestive of improper motives. (emphasis added).
In Cities Service the Court held that even the defend-
ants’ failure to conclude the attractive bargain was in-
sufficient standing alone, to withstand a summary judg-
ment motion. In the instant case the bargain is de-
monstrably unattractive. The service of delivering a net-
work’s signal to Delta’s predicted audience was not worth
purchasing. The quoted passage from Cities Service
clearly indicates that no inference of anticompetitive con-
spiracy would be reasonable from the facts here which
show no more than the failure to conclude an unattrac-
tive bargain.
A-16
In the absence of any purpose to create or main-
tain a monopoly, the [sherman] act does not restrict
the long recognized right of trader or manufacturer
engaged in an entirely private business, freely to
exercise his own independent discretion as to parties
with whom he will deal.
United States v. Colgate & Co., 250 U.S. 300, 307, 39
S.Ct. 465, 468, 63 L.Ed. 992 (1918); accord, e. g.,
Weather Wise Co. v. Aeroquip Corp., 468 F.2d 716
(Sth Cir. 1972), cert. denied, 410 U.S. 990, 93 S.Ct.
1505, 36 L.Ed.2d 188 (1973); Bushie v. Stenocord
Corp., 460 F.2d 116 (9th Cir. 1972); Anaya v. Las
Cruces Sun News, 455 F.2d 670 (10th Cir. 1972); Daily
Press, Inc. v. United Press Int'l, 412 F.2d 126 (6th Cir.),
cert. denied, 396 U.S. 990, 90 S.Ct. 480, 24 L.Ed.2d
453 (1969).
II. IS SUMMARY JUDGMENT PROPER
IN THIS TYPE OF ACTION?
[1] Delta places a doctrinaire sort of reliance on
Poller v. CBS, 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d
458 (1962) to support its repeated assertions that sum-
mary judgment may not be granted in any phase of a
complicated antitrust case. Poller will not support such
broad assertions. It decided no more than that summary
judgment is improper where substantial factual evidence
“tended to show the existence of a conspiracy” against
an eliminated competitor notwithstanding the fact that
substantial evidence also tended to show the non-
existence of conspiratorial behavior.** Clearly, summary
judgment has not been discarded as wholly inappropriate
11. First National Bank v. Cities Service Co., 391 U.S. 253, 285,
88 S.Ct. 1575, i591, 20 L.Ed.2d 569 (1968).
A-17
in the field of antitrust law.’? Although summary judg-
ment is an available judicial tool in the antitrust area,
Poller does warn that it should be cautiously used. Poller,
however, is inapplicable to the instant situation because
Delta has failed to respond to motions for summary
judgment against it by supplying “substantial factual evi-
dence tending to show the existence of a conspiracy.””*
The standard to be used in determining the appropri-
ateness of summary judgment in complicated antitrust
cases is defined in First National Bank v. Cities Service
Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed. 2d 569
(1968). In that case the plaintiff alleged that Cities
Service Company was involved in a conspiracy to boycott
the purchase of his oil. The only fact the plaintiff was able
to show in support of his allegation was the abrupt de-
cision by Cities Service Company to halt negotiations
with him for the purchase of Iranian oil. The court con-
cluded that this one fact, if not met by any contrary
evidence, might well be sufficient to require that the
case be presented to the jury to determine the motives
12. See, e. g., id; Modern Home Inst., Inc. v. Hartford Acc. &
Ind. Co., 513 F.2d 102 (2d Cir. 1975); Scranton Construction Co.,
Inc. v. Litton Industries Leasing Corp., 494 F.2d 778 (Sth Cir.
1974), cert. denied, 419 U.S. 1105, 95 S.Ct. 774, 42 L.Ed.2d 800
(1975); Saenz v. University Interscholastic League, 487 F.2d 1026,
1028 (Sth Cir. 1973); Golden v. Kentile Floors, Inc., 475 F.2d 288,
291 (Sth Cir. 1973); Bushie v. Stenocord Corp., 460 F.2d 116
(9th Cir. 1972); Dahl, Inc. v. Roy Cooper Co., 448 F.2d 17 (9th
Cir. 1971); Jones v. Borden Co., 430 F.2d 568, 574 (Sth Cir. 1970):
A&M Stores, Inc. v. Hyram Walker, Inc., 427 F.2d 167, 168 (Sth
Cir. 1970); "Tripoli Co. v. Wella Corp., 425 F.2d 932 ‘(3d Cir.),
cert. denied, hy U.S. 831, 91 S.Ct. 62, 27 L.Ed.2d (1970); Daily
Press, Inc. United Press Int’l, 412 F.2d 126 (6th Cir.), cert.
denied, 396 US. 990, 90 S.Ct. 480, 24 L.Ed.2d 453 (1969): Mc-
Guire v. CBS, 399 F.2d 902 (9th Cir. 1969).
13. Fed. R. Civ. P. 56(c); First Nat. Bank v. Cities Service Co.,
391 U.S. 253, 285, 88 S.Ct. 1575, 1591, 20 L.Ed.2d 569 (1968).
A-18
of Cities Service Company for not dealing with the
plaintiff. But most important to today’s decision, the
court went on to state that the record in the case before
it contained such an overwhelming amount of contrary
evidence as to Cities Service Company motives that sum-
mary judgment was proper.
Not only is the inference that Cities’ failure to
deal was the product of factors other than con-
spiracy at least equal to the inference that it was
ue to conspiracy, thus negating the probative force
of the evidence showing such a failure, but the
former inference is more probable.
Id. at 280, 88 S.Ct. at 1588. In an apparent response to
Poller dicta which required cautious use of summary
judgments in complicated antitrust litigation, the Supreme
Court in Cities Service stated:
While we recognize the importance of preserving
litigants’ rights to a trial on their claims, we are not
prepared to extend those rights to the point of
requiring that anyone who files an antitrust com-
plaint setting forth a valid cause of action be en-
titled to a fulldress trial notwithstanding the absence
of any significant probative evidence tending to
support the complaint.
Id. at 291, 88 S.Ct. at 1593.
[2] Delta alleges almost the same conspiratorial web
as did the plaintiff in Cities Service. The only factual
underpinning to Delta’s major antitrust claim is that
the three major networks refused to deal with it on terms
it considered fair. Absent “substantial factual evidence
tending to show the existence of a conspiracy” Cities
Service teaches that summary judgment is proper when
es
A-19
an inference of nonconspiracy is more probable than the
plaintiff's asserted inference of conspiracy.
[3] Delta shows a variety of dealings with the net-
works which it alleges are tantamount to a refusal to deal.
It requests we make a quantum leap from these “re-
fusals” to the inference of a network conspiracy to re-
strain the development of UHF television stations. Delta’s
claim fails to meet the Cities Service summary judgment
test in that the mass of discovery developed in this case
clearly points to the much more plausible inference that
the network dealings with Delta grew not from any con-
spiratorial plan but from independent business decisions
which concurred in no more than the separate conclu-
sions that Delta was unable to deliver a sufficient tele-
vision audience to make more favorable dealing with
Delta economically sound.
“The Sherman Act is . . . no[t] a panacea for all busi-
ness affronts which seem to fit no where else.” Scranton
Construction v. Litton Industries Leasing Corp., 494
F.2d 778, 783 (Sth Cir. 1974), cert. denied, 419 US.
870, 95 S.Ct. 774, 42 L.Ed.2d 800 (1975). In this
case, Delta, the opponent to motions for summary judg-
ment which were soundly supported by massive factual
development, failed to adduce any substantial facts show-
ing conspiracy and failed to develop facts from which
the most probable inference to be drawn was conspiracy.
Under Cities Service, summary judgment should be
granted.
Il. FEDERAL ANTITRUST CLAIMS
Delta’s antitrust assertions cover a broad spectrum of
separate antitrust allegations. Often various claims are
A-20
lumped together accompanied by the assertion that a
particular antitrust “label” is not significant. But it is.
The antitrust laws are designed to prevent specific types
of actions which Congress and the courts have found to
be anticompetitive. Notwithstanding this defect in pre-
sentation, we have examined the general claims as though
they were particularized. Delta has failed to show any
material facts which will support a specific antitrust vio-
lation.
Delta’s claims, read in the light most favorable to it,
assert the following antitrust violations: (A) conspira-
cies in restraint of trade in violation of the Sherman Act
§ 1; (B) actions which are per se violations of § 1;
(C) acts of monopolization or attempts to monopolize
in violation of the Sherman Act § 2; and (D) violations
of the Clayton Act and Robinson-Patman Act.
A. Claims of Conspiracy Under Sherman Act § 1
Delta alleges two major conspiracies which unreason-
ably restrained its entrance into the television market:
(1) NBC, CBS, ABC, AT&T, and Southern all con-
spired to prevent it and other UHF stations from receiv-
ing fair remuneration from the television networks for
its service of delivering their signal, and (2) NBC,
CBS, ABC and AT&T conspired to establish, maintain and
apply AT&T tariffs for the delivery of network signals
which discriminated against Delta and other UHF sta-
tions.
1. Market Entry Conspiracy
[4] Delta claims that ABC, CBS, and NBC, along
with AT&T and Southern’s television station WTOK in
Meridian, conspired to restrict the entry of Delta into
A-21
the Meridian market and to restrict the entry of UHF
stations generally into the television market throughout
the nation in violation of § 1 of the Sherman Act.’* Delta
claims the major networks’ motivation for this conspiracy
is twofold: first, should UHF stations be allowed to de-
velop, the end result would be the creation of an in-
dependent television network which would be in direct
competition with the existing major networks; second,
the development of such stations would eventuate in
UHF stations which would compete with the five broad-
casting stations each major network is allowed to own by
FCC regulations. The motive claimed for AT&T’s par-
ticipation is the ease of dealing with only three major
networks as compared to more networks or additional
numbers of independent television stations. The motive
assigned for Southern is that the failure of Delta would
preserve its monoply in the Meridian market.’® Delta
asserts that the following conclusory facts show the ex-
istence of a conspiracy by the three major networks.
Each is said to have denied Delta a) the right to broad-
cast their programs’® and b) a true affiliation agreement;
and, each network refused c) to pay AT&T delivery
14. Delta relies on Associated Press v. United States, 326 U‘S.
1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1945), in making this claim.
In Associated Press there was no question as to the existence of
the agreement or conspiracy. This, of course, is where Delta’s reliance
misses the mark. Delta is unable to show any conspiracy in the
instant case.
15. Delta’s monopolization claim against Southern is more fully
discussed in Section III (C)(3) of the opinion, infra.
16. The FCC has subsequently dealt with the problem of new
stations not receiving network programs in markets where all net-
works afe not affiliated with local stations. The new FCC require-
ments make it much easier for a new station to receive network
programming. 47 CFR § 73.658.
A-22
charges and d) to pay Delta an adequate rate for the
services rendered.
The prerequisites for a violation of § 1 of the Sherman
Antitrust Act are twofold: First, there must be a con-
spiracy, i.e., an agreement between at least two parties.’”
Second, the conspiracy must unreasonably restrain trade.’*
Delta has failed to prove both prerequisites. It does not
point to a single fact to show the existence of a con-
spiracy between the networks.’ In effect, the numerous
pleadings presented by Delta admit there is no direct
evidence of conspiracy. Lacking direct evidence, Delta
must rely on circumstantial proof of the existence of such
a conspiracy. For this proof to be sufficient it must show
that the activities of the networks were consciously
parallel. Conscious parallelism, however, has not read
conspiracy out of the Sherman Act.” Therefore, Delta
not only must show that the networks’ actions were con-
sciously parallel, but also that they were contrary to the
17. See, e. g., Interstate Circuit, Inc. v. United States, 306 U.S.
208, 59 S.Ct. 467, 83 L.Ed. 610 (1939); Six Twenty-nine Produc-
tions, Inc. v. Rollins Telecasting, Inc., 365 F.2d 478, 484 (Sth Cir.
1966).
18. Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502,
55 L.Ed. 619 (1911).
19. All of the major participants in the Delta venture (Walker,
Weems, Ackerman, Britton, Japhet, C. Jones, Weiner, Sharp, Speir,
Wilbourn) when deposed were unable to point to a single fact
probative of conspiratorial activity on the part of the plaintiff and
counterdefendants.
20. Theater Enterprises, Inc. v. Paramount Film Distributing
Corp., 346 U.S. 537, 74 S.Ct. 257, 98 L.Ed. 273 (1954); accord
Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke and Liquors Ltd.,
416 F.2d 71, 85 (9th Cir. 1969), cert. denied, 396 U.S. 1062, 90
S.Ct. 752, 24 L.Ed.2d 755 (1970).
a ee eS ae TORE ee, OP ee
ee ere
A-23
economic self-interest of the networks.”* Since each of
the major networks dealt differently with Delta, no direct
or circumstantial evidence is shown from which parallel
actions can be inferred.
The first approach NBC received from Delta was as a
station, indicating affiliation with ABC, seeking programs
that might be used to fill in or round out its schedule.
The station went on the air in July of 1968 and in Sep-
tember of 1968 when the new fall season began NBC
offered seven programs to Delta. In December of 1968
Delta initiated an active quest for an NBC first-call af-
filiation.”” In May of 1969 that affiliation was awarded
effective in July of 1969. The delay was due to the giving
of a required 28-day notice to Southern. In March of
1970 NBC helped arrange a precontrol-room feed from
an NBC affiliate in Jackson which saved Delta approxi-
mately 3,500 dollars a month in AT&T tariffs. In April
of 1970 NBC paid Delta a 50-dollar-per-hour program
rate even though Delta was unable to meet NBC’s policy
of not offering any station rate until the station could pro-
duce 6,000 average prime-time homes (the normal rate
for 6,000 homes was 100 dollars). In addition, there was
21. Theater Enterprises, Inc. v. Paramount Film Distributing
Corp., 346 U.S. 537, 74 S.Ct. 257, 98 L.Ed. 273 (1954); ALB
Theater Corp. v. Lowe’s, Inc., 355 F.2d 495, 500 (7th Cir. 1966);
Delaware Valley Marine Supply Co. v. American Tobacco Co., 297
F.2d 199, 203 (3d Cir. 1961), cert. denied, 369 U.S. 839, 82 S.Ct.
867, 7 L.Ed.2d 843 (1962); Adilgram v. Lowe’s Inc., 192 F.2d 579,
583 (3d Cir. 1951), cert. denied, 343 U.S. 929, 72 S.Ct. 762, 96
L.Ed. 1339 (1952).
22. A letter from Calvin Jones, the new station manager of
Delta, dated January 2, 1969, to the vice president of station-
relations of NBC, admitted that even this late, Delta’s “operating
policy in Meridian is weighted in behalf of ABC.”
A-24
no “waived hours” deduction provision in the 50-dollar
fee paid by NBC.**
ABC on December 6, 1967, made available to Delta
all of the ABC programs which were not being used by
Southern. This policy was continued on a no-pay no-
delivery-charge basis throughout Delta’s career.
CBS’s first-call contract with Southern had been in
existence since 1954. Late in 1967 Delta requested CBS
to allow the telecast of all CBS programs which were not
being used by Southern. This request was promptly grant-
ed and CBS offered to allow Delta to pick up the signal
from the Meridian AT&T switchboard which would have
saved Delta the AT&T long-lines delivery charges. The
reason why Delta chose not to accept this offer does not
appear in the proof developed. Early in 1969 CBS offered
a 35-dollar-per-week network rate to Delta.
[5] From these recitals of uncontroverted fact it can
be seen that the networks did not treat Delta in any fa-
shion even remotely resembling conscious parallelism.
Delta claims, however, that since none of the networks
ever paid delivery charges for the delivery of the pro-
grams and since none of the networks ever offered an
“adequate” network rate, there was to that extent parallel
action. In addition, Delta claims that these same parallel
acts were endured by all UHF stations and that they re-
sulted in the failure of Delta and the 36 other UHF sta-
tions which have gone dark between the years of 1966
23. A letter from one of the Delta principals to NBC in April
of 1970 stated: “If WHTV survives in Merdian . . . it will be due
in large part to the faith and assistance provided by NBC... .”
This is noted, not for the accuracy of the compliment, but to demon-
strate the uncontradicted attitude of Delta’s then management toward
one network’s activity now alleged to be conspiratorial.
A-25
through 1972.** This assertion by Delta, however,
completely misconceives the point of the conscious
parallelism test in a circumstantial evidence case. It
is not enough for a plaintiff to show conclusory
parallelisms which are indicative of the harm suffered, it
is necessary to allege specific parallelism probative of
conspiracy or joint action.** The record developed here
after voluminous discovery belies conspiratorial or joint
activity. Each of the networks contracted with Delta for
different amounts of programs at different times. Al-
though only two were willing to pay a network fee, each
of them reached their decisions at different times and paid
different amounts. Only one network ever awarded a
first-call affiliation.
Judged by the standard applicable to summary judg-
ments,”* it is clear that Delta has failed to show any ma-
terial facts from which a jury could conclude that there
was conscious parallelism in the activities of the major
networks, and therefore could infer there was a network
conspiracy.
The court’s conclusion does not fail to consider Delta’s
questions, such as: Why was NBC’s original program
grant limited to only seven programs? Why did NBC wait
until September of 1968 to allow NBC programs to be
broadcast by Delta? These questions are typical and are
24. In 1969 CBS had 190 television station affiliates; of those,
26 were UHF. In 1970 ABC’s UHF affiliates composed 20 percent
of the total affiliates; by 1974 that percentage had risen to 27.
In 1974 NBC had 43 UHF affiliates. Total UHF stations operating
in 1974 were 195.
25. See, e. g., Theater Enterprises, Inc. v. Paramount Film Dis-
tributing Corp., 346 U.S. 537, 74 S.Ct. 257, 98 L.Ed. 273 (1954).
26. See Section IT of this opinion, supra.
A-26
expressed only to demonstrate that they are irrelevant.
The facts suggest a host of different justifications. Indeed
the detailed proof of independent and normal operating
policies, which indicate completely innocent and non-
conspiratorial activity, obliterates the inference of unlaw-
ful action Delta suggests. In the face of this sort of fac-
tual record, these tenuous insinuations will not substitute
for proof that a conspiracy existed between the networks
to hinder Delta in particular or UHF stations in general.
Even if some genuine issue of fact exisied as to
parallel activity, the record is insufficient to resist a
motion for summary judgment on the claim of a § 1
Sherman Act violation. The uncontradicted proof shows
that the actions of the major networks at all times were
taken in response to sound economic considerations. To
show conspiracy in a circumstantial evidence case, Delta
must demonstrate not only parallel activity, but that
the actions were in apparent contradiction to the net-
works’ economic self-interest.*” To prevail on its claim
of a § 1 Sherman Act violation, Delta must additionally
show that these actions, in furtherance of the conspiracy,
were an unreasonable restraint on trade."
In the case sub judice, these showings include the
weighing of the same considerations and, therefore, will
be discussed together. The relevant “actions” are the
networks’ decisions to deny an “adequate” network rate
and to refuse to absorb the cost for the delivery of the
television signals to the stations or, in other words, the
networks’ decisions not to pay or not to pay enough
27. See note 21, supra.
28. Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502,
55 L.Ed. 619 (1911).
~——
a ae
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— ON ey ee ee ey ee
eee
SS eee
A-27
for the service which they were purchasing from Delta.
Any network decision not to pay what Delta’s services
were worth would have been contrary to the networks’
self-interest. The uncontradicted proof is that the service
was not worth buying for a price higher than that paid.*"
As discussed above, the worth of a television stations’
service to a network is determined by the size of the
audience which the station is able to deliver. The nature
of the industry is such that the measurement of this
audience is never capable of exactness. It is always esti-
mated on the basis of surveys and predictions. At no
time did any of the research which regularly formed the
basis for network action show that the Delta audience
met, or might in the near future reasonably meet, the
minimum network requirements for affiliation.*® The
29. In the final instance, Delta relies on an analogy drawn from
Milgram v. Lowe’s, Inc., 192 F.2d 579 (3d Cir. 1951), cert. denied,
343 US. 929, 72 S.Ct. 762, 96 L.Ed. 1339 (1952), in an attempt
to show that it is alleging sufficient parallel action to withstand
summary judgment. But, in that very case, after holding that an
antitrust violation existed, the court required that “the distributor
. . . give plaintiff an equal opportunity with the operators of con-
ventional theaters to bid for pictures on first run.” The court went
on to say that the reason that parallel activity in Lowe’s could
be the basis for a finding of a conspiracy to restrain trade was that
here we add that each distributor refuses to license features on
first run to a drive-in even if the higher rental is offered. Each
distributor has thus acted in apparent contradiction to his own
self-interest. This strengthens considerably the inference of con-
spiracy....
Id, at 583 (emphasis added). The roles of the purchaser and seller
in Lowe’s are reversed from the case presented by Delta, but the
lesson is the same. An inference of conspiracy or anticompetitive
activity neither arises from a refusal to sell a product or service
for less than it is worth nor from a refusal to buy a product or
service for more than it is worth.
30. Delta alleges that the second coincidental survey performed
during the summer or fall of 1969 by ARB showed 6,000 average
A-28
most telling fact is found in the total lack of contradic-
tion to statements by two network officers who swore
that no surveys, either independent or network-conducted,
ever showed Delta broadcast to an average prime-time
audience large enough to attract any additional revenue
from national advertisers for the addition of Delta to a
network. Since the research showed that the service Delta
was attempting to sell was not worth buying, the only
possible way to make out a §1 violation would be
a) to show that the measurements used were invalid, or
b) to show that the standards used by the networks for
determining compensation were unreasonable.
Delta repeatedly asserts that if ABC or NBC had
used a more reasonable assumption to calculate the
number of viewer television sets capable of receiving a
UHF signal (a percentage designated as the UHF con-
version figure) and had accounted for the cable television
audience, the 6 or 7 thousand figure required would have
been reached as early as June of 1968 when the station
first signed on. The mass of discovery evidence presented,
however, fails to suggest that any facts exist to support
these assertions. To receive a UHF signal, a television
must have the appropriate tuning apparatus and often
must have a special antenna. Delta claims that the con-
version factor used in the research to determine its audi-
ence was too low; however, the census reports for 1970
and the expert report prepared by the station prior to
prime-time viewing homes. As discussed in Section I(B) of this
opinion, supra, telephone coincidental surveys were treated by the
industry as less reliable than regular surveys. No regular independent
survey showed Delta over ABC’s 7,000 or NBC’s 6,000 average
prime-time viewing homes minimum level for station compensation.
A-29
its operation show that the figures used were reasonable.”
This summary judgment decision does not rest in anywise
upon resolution of this apparent factual issue. Rather,
Delta has presented no facts which show the UHF con-
version figure used was incorrect. More importantly,
Delta has failed to show any facts which would raise
an inference, if the UHF conversion figures were in-
correct, that the error resulted from any network’s con-
spiratorial act to purposefully restrain trade.
The record does not disclose any facts which would
prove that the networks acted wrongly in refusing to
include cable television audience statistics in determining
Delta’s potential audience. A network’s direct interest in
a broadcast station’s capability is in increasing the total
of homes which can view that network’s program and
advertising package if the station broadcasts its signal.
Adding the cable homes which would receive Delta’s
signal, if those homes were already receiving the relevant
network’s signal via another station through the cable,
would not add viewers to the overall audience of the
network. For this reason it was reasonable or at least
not unreasonable to refuse to include them in the compu-
tations.
The final and telling consideration is that Delta has
failed to point to a single fact which would allow a
reasonable inference that the networks have purposefully
31. In the research conducted by the networks, UHF conversion
figures in the neighborhood of 30-40 percent were used. The report
commissioned by Walker before the Delta venture was begun esti-
mated a conversion figure of 30-35 percent. The 1970 United States
Census reports show, depending on the market definition used, the
UHF conversion percentage of total television homes to be between
27.8 and 35.3.
A-30
misdirected their research so as to restrain trade by un-
reasonably barring the entry of Delta or UHF stations
into the television industry. There was a reasonable cor-
relation between the private network research and the
independent survey research which, absent any indication
of conspiracy between the networks and the ARB and
Nielsen survey organizations, buttresses the conclusion
the networks did not conspire in relying on the research
of these independents as well as on their own private
surveys in predicting Delta’s capability.
Delta claims that the 6 or 7 thousand household-
viewers figure used by the networks was an improper
standard upon which to base payment to television sta-
tions. The station claims that the use of this standard
restrains trade by preventing Delta and other UHF sta-
tions from receiving network revenue. Delta points to
the statements of two network personnel as supporting the
conclusion that the networks acted in apparent contra-
diction to their self-interest and unreasonably by not pay-
ing more for Delta’s service regardless of the circulation
figure. Delta’s assertions, however, completely miscon-
strue the import of each of these individual statements.
Both men clearly indicate that they consider it not to be
economically profitable to pay for Delta’s service, but
that the station’s future potential is such that it might
develop a profitable audience. The statements indicate no
more than that it might be advantageous to the network
in the future to subsidize the station at the present time.
In fact, one even said that if it were up to him, he would
make the decision in favor of subsidy. It would be un-
fair to leave this issue without noting the network
spokesmen’s statements that Delta’s circulation was so
poor that its addition to any network system would not
ee
A-31
produce a single additional dollar in income to the
network from national advertisers is undisputed. Clearly,
any station rate or payment of delivery fees by a network
to Delta, based on the then known survey figures, would
have been a gift. The Sherman Act does not command
gratuitous compensation. Even though CBS and NBC
both later made independent business decisions to award
a station rate to Delta before the available research
indicated that it would be profitable, a decision to make
such a contribution in hopes of long term profitable
return is a speculative risk within the business judgment
of the individual networks and not one compelled by
the antitrust laws. Any support for Delta from this
action would have to be culled from a sort of they-should-
have-speculated-sooner approach which will not suffice
to prevent summary disposition.
Delta is unable to show that it could present any
material fact which would allow an inference that the
networks purposefully mismeasured Delta’s audience or
that the networks improperly set their compensation
standards. To the contrary, the proof is clear that Delta
was unable to reach present, broadly applied standards.
The hard but unequivocal facts reveal their service was
not worth buying and this was the reason that the net-
works did not buy it.** That action is not in apparent
32. There are considerations aside from audience level which
enter into any independent business decision regarding affiliation.
Affiliation carries certain costs including constant communications
between the station and network—visits by network representatives,
regular monitoring and analysis of the station promotional assistance
and, when justified by the station’s audience, the station’s hourly
rate. In addition, a poorly run station also reflects badly upon the
network since the network’s logo is prominently displayed both by
the station and in promotional campaigns. We note this not to sug-
gest that such considerations were applied to Delta but to say that
adherence to a minimum threshold for affiliation is business justified.
j
{
A-32
contradiction of economic self-interest nor is it an un-
reasonable restraint of trade.
~~ Delta has failed to show it could produce any facts
probative of conspiracy; it has been unable to make a
circumstantial showing of conspiracy in that it can neither
show conscious parallelism nor actions in apparent con-
tradiction of economic self-interest. It has also not been
| able to show an unreasonable restraint of trade. Summary
/ judgment is proper in favor of the defendant networks
as to the § 1 Sherman Act claim alleged.
CBS is able to take advantage of an additional defense
relative to this antitrust allegation. When Delta came on
the scene in June of 1968, CBS was affiliated with
Southern and had been so associated continuously since
1954. When requested by Delta to allow it to broadcast
programs not being broadcast by Southern, CBS im-
mediately complied with the request. CBS was also the
first network to pay Delta a station rate for the broadcast
of its programs. It is altogether unreasonable to assert
that the actions of CBS toward Delta were unfair. The
legal first-call affiliation agreement** between CBS and
Southern fully justifies the extent of its activity. In
Paramount Film Distributing Corp. v. Applebaum, 217
F.2d 101 (Sth Cir. 1954), the court ordered a party
dismissed from an antitrust action when that party was
prevented from dealing more fully with the plaintiff be-
cause of a pre-existing valid affiliation agreement with
another company. CBS’ situation in this case is identical
to the dismissed party’s in Applebaum; therefore, for
this additional reason, summary judgment is proper as
33. See Federal Broadcasting System, Inc. v. ABC, 167 F.2d
349 (2d Cir. 1948).
er Ae Nene ase
A-33
to CBS.** In addition, because of the existing agreement
with Southern, Delta never requested affiliation with
CBS.
Delta claims the network’s motive for this conspiracy
was to forestall the development of UHF stations in
general so a) they could not become viable competitors
to the five stations directly owned by each of the three
major networks, and b) they could not form a fourth
major network which would be in direct competition
with the current networks. These alleged motives are
completely unreasonable. The only plausible inference
to be drawn from the undisputed facts is that the net-
works were motivated in their dealings with Delta solely
by their interest in purchasing a distribution service for
their programs and advertisements. In Delta’s case the
offered audience was so small that the networks con-
cluded no national advertiser would pay them for its
addition to the system.
In the first place, only two of the 37 UHF stations
which went dark were in any markets which were in
competition with the directly owned stations of the
networks, and those two were successor stations in the
same city. Success by Delta or the other UHF stations
would not have provided any competition to these
stations. Additionally, many of the unsuccessful UHF
stations were in communities which previously had only
one or two television outlets. While a second or a third
station in such markets would provide an outlet for one
or both of the existing networks not then being shown, it
34. The only allegation against the networks which CBS might
not escape under Applebaum is the allegation that CBS and the other
networks did not pay Delta an adequate station rate.
A-34
is altogether implausible that this situation could precipi-
tate the formation of a fourth major network. Both
asserted motives for the alleged refusal by the networks
to deal fairly with Delta and other UHF stations are
less believable than is the motivating factor of sound
business judgment which resulted in each network offer-
ing no more to Delta for its service of distributing pro-
grams than that service was worth. Clearly, § 1 of the
Sherman Act has not been shown to have been breached.
Delta claims that Southern was an actor in the alleged
conspiracy in that: 1) it influenced the ARB surveys
to show a lower than accurate reflection of Delta’s view-
ing audience; 2) it conspired with WDAM in Hattiesburg
and WLBT in Jackson to keep NBC from affiliating
with Delta; 3) it increased its scheduled ABC programs
to prevent Delta’s access to those programs; and 4) it
had knowledge of, and acquiesced in, the conspiracy
above.
Each of the first three substantive assertions is further
discussed in Section III(C) (3) of this opinion. However,
in addition to Delta’s failure to allege material facts to
support any of them, summary judgment is proper here
because none of these asserted elements in any way
supports a conspiracy between the networks and Southern
to harm either Delta or UHF stations generally. Each
assertion constitutes no more than an independent action
or act in concert with other stations. No allegation of
concerted action involving the defendant networks is
presented. There is no need to examine claim (4)—
that WTOK acquiesced in this conspiracy**—in light
35. See United States v. Crescent Amusement Co., 323 US. 173,
65 S.Ct. 254, 89 L.Ed. 160 (1944).
et ree rete 2
A-35
of the conclusion that Delta is unable to show that there
exists an illegal conspiracy in which to acquiesce.
Delta claims that AT&T took part in this conspiracy
by: 1) giving automated answers to inquiries regarding
tariffs; 2) misquoting tariff amounts prior to the operation
of the station; 3) refusing to intercede with the networks
to arrange network payments of tariffs or with the
FCC to provide some relief from the tariffs; and 4) by
refusing ETV service** when it was requested.
AT&T is bound by law to charge and collect the
fee fixed by the tariffs for its services,*7 so to the extent
that its responses to tariff inquiries are properly classed
as wooden, they had to be. No facts are claimed to exist
which would support any claim of intentional misdirection
regarding the misquoted tariffs. As a regulated carrier
in interstate commerce, AT&T had to negotiate neither
with the networks nor with the FCC because Delta was
unhappy with the tariff which the law required AT&T
to charge.
There appears to be a factual dispute regarding the
refusal of the ETV service. If it was material, it would
36. ETV service is a type of television signal transporting servi
provided by AT&T. It originally was only available to ocnetional
television stations but is now more broadly used. Its major advantage
is that it is less expensive than regular service. Its major drawbacks
are that no switching from one network to another is available
AT&T does not monitor the signal to ensure there are no problems,
and there is no auxiliary power source available in case of power
failure. Most commercial stations, because of these disadvantages
opt for regular television signal transportation service.
37. AT&T v. Florida-Tex. Freight, Inc., 357 F.Su
(S.D. Fla.), af’d, 485 F.2d 1390 (Sth Cir. 1973); sen tM
Anonima Venezolana de Nevegacion v. A. J. Perez Export Co., 303
F.2d 692, 696 n. 12 (Sth Cir.), cert. denied, 371 US. 942. 83 SCt
321, 9 L.Ed.2d 276 (1962); United States v. Associated Air Trans.
port, Inc. 275 F.2d 827, 832-33 (5th Cir. 1960).
A-36
prevent summary judgment. Delta claims it was denied
ETV service; AT&T claims that no request for it was
made. However, as with the other three claims asserted
against AT&T, whether ETV service was denied is
immaterial. Each of these claims alleges only independent
wrongdoing on the part of AT&T toward Delta. These
wrongs do not tend to establish a conspiracy with the net-
works to hinder market entry by Delta or UHF stations
in general.
AT&T’s asserted motive for involvement in this con-
spiracy is to preserve the ease of dealing with only
three network customers and to avoid the “burden” of
dealing with numerous independent stations. This in-
ferred motive would be logically inconsistent with the
motive Delta assigns to the networks’ “conspiracy”—
to prevent the development of a fourth major network.
Preventing the development of a viable fourth network
would cost AT&T substantial income from additional
traffic. Any conceivable greater ease in dealing with
only three as opposed to four networks would be an
insubstantial deterrent to receipt of such a benefit. Even
if Delta should not be held to consistency in the various
motives it implies, and assuming successful UHF stations
would be absorbed by the existing networks, no motive
either reasonable or unreasonable to suppress UHF
development would exist because increased UHF broad-
casting would simply increase AT&T income. If the
assumption is made that new stations would remain
independent, there would then be an additional burden
on AT&T in dealing with such independent stations.
However, the inference that this burden, offset by its
accompanying increase in income, would motivate in-
volvement in a conspiracy to restrain the entry of Delta
SAA Oe ee nc a et cn lay Rican
A-37
and UHF stations into the television market approaches
being ridiculous. After all, AT&T exists to do business,
not to avoid doing it. In sum, Delta has not asserted
a single reasonable * sive for AT&T’s involvement in
its suggested conspiracy.
Delta also asserts that AT&T had knowledge of the
networks’ conspiracy and acquiesced in it.** This claim
must also fail. There are no facts to support the existence
of an illegal conspiracy nor facts to support any motive
for AT&T’s acquiescence in such a conspiracy.
2. Tariff Conspiracy
[6] Delta makes an additional broad conspiratorial
allegation. It claims that the networks and AT&T in
furtherance of an illegal conspiracy, established and/or
applied a tariff structure which operated to restrain the
entry of Delta and other UHF television stations into
the television market. Delta points to two aspects of the
tariff structure which operated unfairly against it and
other UHF stations.
First, Delta objects to the way in which AT&T applies
the requirement of the tariff that charges be based upon
the lowest possible combination of air mileage between
all points to which a customer orders service. The tariff
characterizes the difference in charges to networks and
indiviuual stations as multi-point vs. dual-point charges.*®
The operation of this system is most easily understood
through the use of the following illustration:
38. See United States v. Crescent Amusement Co., 323 U.S. 173,
65 S.Ct. 254, 89 L.Ed. 160 (1944).
39. See AT&T tariffs Nos. 155 and 160.
A-38
100 miles
— oe =
C,
a
A network purchaser from AT&T would normally order
the same signal delivered to many different points. If it
should order service from Point A to Point B, a distance
of 100 miles, the applicable increment of its overall
charge will be based upon the tariff’s per mile rate times
100. If the network were to add the same service to Point
C which falls exactly on this line of shortest air mileage
between Point A and Point B, there would be no addi-
tional long-line service cost to the network because the
total mileage ordered by the same customer would remain
at 100 miles. If the network were to add to its order
service at Point D instead of Point C the shortest air line
service distance between Points A, B and D will be 120
miles. The incremental increase, therefore, for ordering the
service extended to Point D will be calculated on only
the 20 mile difference. On the other hand, if an inde-
pendent station located at Point D should place an order
for delivery of the same network's signal from Point A
to Point D, it would be billed for the tariff rate times
A-39
60 miles, even though the network might still be paying
AT&T for delivery of service between Points A and B.
Under this application of the tariff AT&T calculates
the tariff charge for taking the signal from the point
ordered to the point of delivery on a customer by cus-
tomer basis. This is a wholly reasonable, if not the only
practicable, method of application. The fact that Delta
and other single service customers could achieve a savings
if calculations of their costs could include the service
rendered to another customer fails to demonstrate con-
spiratorial activity.
Delta’s second tariff allegation charges discrimination
in the creation, continuation, and application of occa-
sional-use vs. regular-use tariff rates. The FCC has pre-
viously determined that this portion of the tariff structure
which authorizes charges at one rate per hour, per mile
for monthly service (8 or more consecutive hours per
day, per month) and a much higher rate per mile, per
hour for occasional service (anything less than 8 con-
secutive hours per day) can operate in a discriminatory
manner. Hughes’ Sports Network, Inc. v. AT&T, 25
FCC 2d 550 (1970). Delta asserts that AT&T's rate
structure forced it to pay for regular-use monthly service
(which would entitle it to use 15-16 hours per day),
which it could not fully use, because the fee for that
service was less than occasional-use service for the 7 non-
consecutive hours per day it actually needed. The result
was, Delta asserts, that it had to pay for 2 hours of
AT&T service for every one which it actually used. In
addition, Delta contends that it would not have used as
many hours of long-lines service if it had not been forced
by the rate structure to pay for the service on the monthly
A-40
service basis. Although this tariff structure has been held
illegal as applied to a part-time network user, the Com-
mission has never declared the tariff unfair as it affected
an individual broadcaster such as Delta. Nevertheless,
for purposes of assessing this antitrust allegation the court
assumes the tariff structures discriminate against Delta
in the manner alleged.
Delta’s antitrust claim here, as elsewhere, is not specific.
In an effort to construct the case most strongly in Delta’s
favor, we construe it to have alleged four tariff-related
activities in furtherance of an overall conspiracy to re-
strain the development of UHF television.
i. Conspiracy to establish tariffs.
Delta contends that the three major networks and
AT&T conspired to establish these tariff structures to pre-
vent the development of UHF television stations, The
motives alleged for this conspiratorial behavior are those
discussed and discounted above.*’ A meticulous review
of the entire bulk of discovery reveals not a single fact
which directly supports an inference of such a conspiracy.
Instead, Delta is forced once again to rely on no more
than its assertion of conscious parallelism between the
networks and AT&T and on actions in apparent contra-
diction of the economic self-interest of all conspirators."
Three things show this reliance is misplaced.
First, the mere existence of the tariff cannot be said to
indicate parallelism. The applicable TV tariff structure,
which included both of these alleged discriminatory items,
was established in 1948 before UHF television was a
40. See section III(A)(1), supra.
41. See note 21, supra.
a eR lt ee KS tk te a hae OT a te wc
A-41
practical reality and long before Delta was conceived.*”
Moreover, both of these structural elements were present
in other AT&T communications tariffs created before
1948.*° Chronologically, the tariff could not have been
42. Ever since the television tariff structure was established, the
FCC has continually been involved in its investigation and examina-
tion. The tariffs became effective May 1, 1948. The FCC proceeding
which originally examined these tariffs was docket No, 8963. That
proceeding remained before the FCC until May 18, 1960 when the
FCC finally terminated its investigation. The FCC adopted a policy
of continuing surveillance and said that “in the event the future
developments make it desirable to investigate specific matters now
encompassed herein” the FCC would “institute new proceedings
regarding such matters.” Hughes Sports Network, Inc. v. AT&T, 25
FCC2d 560 (1970). Hughes Sports Network was an active partici-
pant in docket No. 8963 and the issue of discrimination in the
occasional-use vs. regular-use tariff structure was before the FCC in
that proceeding. While docket No. 8963 was before the FCC, a
study commission was appointed by it to report on television net-
works. This report, the Barrow report, was begun in 1955 and
concluded in 1957. Proceedings in docket No, 12782 were instituted
in 1957 after the filing of the Barrow report. An additional study
group was formed to report on television networks during this pro-
ceeding leading to the filing of the Bryant report on July 2, 1965
(an interim report was filed in 1960). Hughes filed its action assailing
the tariff structure June 3, 1965. The Hearing Examiner and the
FCC Review Board’s affirmance ruled that the occasional-use vs.
regular-use provisions of the tariff discriminated against Hughes.
Hughes Sports Network, Inc. v. AT&T, 25 FCC2d 550, 560 (1970).
The full FCC reversed and remanded, but only on the previous
holding that Hughes was not entitled to damages. 34 FCC2d at 691.
This issue was appealed to the Second Circuit, Cause No. 73-1216,
but prior to briefing agreement was reached between AT&T and
Hughes which disposed of the matter. This kind of open, continual,
active examination of the tariff structure argues forcefully against
pr Aen ad that conspiratorial activity marked the establishment
of the tariffs.
43. AT&T's private line tariffs which cover telephone, telegraph,
data transmisgions, document reproduction, and other communication
services, all include the dual-point vs. multi-point “dilemma.” AT&T
asserts that it provides approximately 137,000 interexchange (long-
lines) services to about 8,000 customers—approximately 9,000 of
these services to about 1,400 customers involve multi-point service.
Multi-point service to ABC, CBS and NBC constitute less than
A-42
established as part of a conspiracy to restrain the develop-
ment of an industry which did not exist at the time the
tariff was created. Delta is unable to point to any fact
indicating parallel activity in the tariff’s establishment.
Second, Delta has been unable to show any facts which
would indicate these tariffs were established contrary to
the economic self-interest of the networks.** In fact,
Delta’s claim is just the opposite—it asserts that the
established tariffs operate disproportionately to the bene-
fit of the economic interests of the networks.
Third, Delta is unable to show any direct facts point-
ing to conspiracy.
This circumstantial evidence attempt fails because Delta
is unable to show either conscious parallelism or actions
contrary to economic self-interest. Such lack of proof to
oppose the well-supported motions for summary judgment
leaves Delta’s attempt to support its assertions of con-
spiracy far short of the mark.
ii. Conspiracy to maintain tariffs.
Delta also contends that AT&T’s failure to change the
tariff once UHF television became a viable industry was
an action, or more appropriately an inaction, in further-
ance of its conspiracy with the networks to restrain the
development of UHF television. Once again Delta com-
pletely failed to show a single fact indicative of con-
10% of the various private line services that AT&T provides to all
of its customers. These provisions (multi-point vs. dual-point) have
been involved in private line service tariffs since at least 1934.
44. E. g., Milgram v. Lowe’s, Inc., 192 F.2d 579 (3d Cir. 1951),
cert. denied, 343 U.S. 929, 72 S.Ct. 762, 96 L.Ed. 1339 (1952).
A-43
spiracy. In addition, the only parallel activity*® demon-
Strated is that neither the networks nor AT&T sought to
change the tariff structure. The conclusion that this in-
action alone will not support an inference that a con-
spiracy existed between AT&T and the networks is
bolstered by the lack of any showing that Delta or any
other broadcaster instituted proceedings to have the FCC
relieve them from the tariff structure. Finally, we note
that Delta does not even assert that such inaction con-
tradicted any economic self-interest of any alleged con-
spirator.*° The asserted motives for this conspiracy have
been completely discussed and discounted above.‘
iii. Noer-Pennington
[7, 8] Delta claims the networks actively supported the
existence of this tariff structure during various proceed-
ings before the FCC.** Delta asserts that this activity
was in furtherance of the conspiracy to restrain the
development of UHF television. Insofar as Delta’s allega-
tions seek to base recovery on the networks’ efforts to
continue the existing tariff structure or even to gain from
the FCC a structure they considered more beneficial, they
are not well taken. The right to petition administrative
agencies for favorable action is outside the perimeter of
activity proscribed by antitrust laws. United Mine Workers
v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d
626 (1965); Eastern Railroad Presidents Conference v.
45. E. g., Milgram v. Lowe’s Inc., 192 F.2d 579 (3d Cir. 1951),
cert. denied, 343 U.S. 929, 72 S.Ct. 762, 96 L.Ed. 1339 (1952).
46. E. g., id.
47. See section III(A) (1) of the opinion, supra.
48. See note 42, supra, for a discussion of the FCC proceedings
which examined television tariffs.
A-44
Noer Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523,
5 L.Ed.2d 464 (1965).
Reading this claim most favorably to Delta, it ap-
parently asserts that the networks appeared before and
urged the FCC to continue or to adopt tariffs which favored
the networks to the detriment of Delta. The fact that
such actions were taken by all of the networks does not
subject the activity to antitrust scrutiny. Clearly each
individual network would have had the right to petition
the administrative agency for action which it hoped
would be favorable to its interest. In view of the common
self-interest shared by the networks in the tariff provisions,
it would render the right meaningless if the fact that all
of the networks rather than only one sought to exercise
the right of petition should cause the protected activity
to lose its shelter.
The alleged supportive activity before the FCC is im-
mune from antitrust scrutiny.
iv. Application of the Tariffs
[9] Delta finally claims that AT&T furthered the
conspiracy by the manner in which it applied these
tariffs. This alleged action is also beyond the scope of
antitrust examination. The statutory scheme which gov-
erns communications common carriers requires the tariffs
to be filed with the FCC and notice to be given which
allows time for objection. 47 U.S.C. §§ 201-09. Fol-
lowing this procedure and absent any decision by the
FCC to the contrary, the tariffs have the effect of law;
AT&T is required by law to collect these tariffs once
they become effective.“* To hold that the application of
49. AT&T v. Florida-Tex. Freight, Inc., 357 F.Supp. 977, 979
(S.D. Fla.), afd, 485 © 2d 1390 (Sth Cir. 1973); accord, Compania
-_
A-45
these tariffs is violative of the antitrust laws, absent
any factually supportable allegation that they were il-
legally established, would be to hold that federal law
proscribes that very action which it prescribes. Therefore,
this court holds that AT&T is immune from an antitrust
violation which depends upon AT&T actions in charging
and attempting to collect tariffs approved by the FCC.”
v. Summary
In essence these claims amount to no more than
extrapolations of the same allegation—ihat AT&T and the
networks conspired to establish, keep, and apply tariffs
which Delta claims operated to hamper its entry into
the television industry. The problem for the assertion is
that Delta is unable to demonstrate any fact which would
suggest a conspiracy to establish or continue these tariffs
except for proving that the tariff existed. This does not
constitute a sufficient opposition to the motions for
summary judgment.’ In addition, the networks are
immune from antitrust scrutiny for their efforts before
the Commission to continue or to adopt new tariffs which
are favorable to their interests. Finally, AT&T is immune
from any allegation that its application of these tariffs,
Anonima Venezolana de Navegacion v. A. J. Perez Export Co., 303
F.2d 692, 696 n. 12 (Sth Cir.), cert. denied, 371 U.S. 942, 83 S.Ct.
321, 9 L.Ed.2d 276 (1962); United States v. Associated Air Trans-
port, Inc., 275 F.2d 827, 832-33 (Sth Cir. 1960).
50. Lamb Enterprises, Inc. v. Toledo Blade Co., 461 F.2d 506,
513 (6th Cir.), cert. denied, 409 U.S. 1001, 93 S.Ct. 325, 34 L.Ed.2d
262 (1972); see Gordon v. New York Stock Exchange, Inc., 422
US. 659, 95 S.Ct. 2598, 45 L.Ed.2d 463 (1975); United States v.
National Association of Securities Dealers, Inc., 422 U.S. 694, 95
S.Ct. 2427, 45 L.Ed.2d 486 (1975); cf. Jeffrey v. Southwestern Bell,
518 F.2d 1129, 1133 (Sth Cir. 1975).
51. First National Bank v. Cities Service Co., 392 U.S. 253, 88
S.Ct. 1575, 20 L.Ed.2d 569 (1968).
A-46
alone, can be proscribed by the antitrust laws. Therefore,
summary judgment as to this allegation is proper.
[10] Were this court to have found some evidence
of conspiracy sufficient to prevent a grant of summary
judgment, however, this issue would still not be ripe for
trial. The resolution of the factual controversy regarding
whether the criticized elements of the tariff structure
actually harmed Delta would then be at the center of such
litigation. Carter v. AT&T, 365 F.2d 486 (Sth Cir.
1966), cert. denied, 385 U.S. 1008, 87 S.Ct. 714, 17
L.Ed.2d 546 (1967) firmly establishes that “all questions
relating to the justness, reasonableness, validity and effect”
of tariffs are more properly within the primary jurisdic-
tion of the FCC. 365 F.2d at 492.
Delta claims that it does not question the lawfulness
of the tariffs, but only questions their application as part
of a conspiracy to restrain trade. Acknowledgement of
this argument would subvert both Carter and this court’s
pretrial orders’ excluding issues as to the validity of
52. In the order of February 11, 1972, this court ruled:
This issue came on to be heard on various motions filed by
certain of the counter-defendants herein, and at the outset of the
hearing, the Court raised on its own motion the question of
the necessity of referring this case to the Federal Communications
Commasion (FCC) under the doctrine of primary jurisdiction,
as enunciated in the case of Carter v. AT&T (C.A. 5, Tex.),
365 F.2d 486 (1966).
This issue had previously been raised by a motion filed by
counter-defendant American Telephone and Telegraph Company
(AT&T) to the original Counterclaim filed herein by Delta
Communications Corporation (Delta). Said Counterclaim was
thereafter amended, and at a hearing held in this cause on
Jan 14, 1972, counsel for Delta advised the Court that the
A Counterclaim raised no issue as to the validity of
AT&T's interstate tariffs on file with the FCC, but raised issues
only as to the application of said tariffs.
The Court therefore treated the present hearing as an informal
pretrial conference and discussed sai) question with counsel for
A-47
tariffs in this law suit. Carter dealt with this very same
approach and rejected it.’ Delta is foreclosed from this
Delta and AT&T. Counsel for Delta again advised the Court
that the Amended Counterclaim does not raise any issue as to
the validity of said tariffs but that it does raise issues as to their
applications.
The Court therefore finds and adjudicates that it has been
conclusively established that there is no issue involved in this
case concerning the validity of said tariffs and that there is,
therefore, no necessity for referring this case at this time to
the FCC for preliminary determination of the validity of said
tariffs, in accordance with the decision in Carter v. AT&T.
The Court further finds that it has jurisdiction to try the
issues raised by the pleadings herein. (Emphasis added).
This order of February 11, 1972, was reconfirmed by this court’s
orders of May 30, 1972, and March 1, 1973. Thus, in its order of
March 1, 1973, this court ruled in paragraph 2(c):
c. Without modifying or limiting any prior Orders of this
Court, interrogation at such depositions concerning any claim or
allegation of Delta Communications Corporation as to the tariffs
of American Telephone and Telegraph Company shall be limited
to the subject matter of any misapplication of such tariffs or
application of them in a discriminatory manner.
53. The best illustration is to accept momentarily the concession
of appellants that the tariff is authoritatively held to be valid
administratively for regulatory purposes, to which they add, but
not valid for antitrust purposes. We can recognize, of course,
that in this some time weird antitrust world, in which antitrust
policies appear to have an overpowering influence in the running
clash between supposedly coordinate executive agencies or de-
partments of the same government, cf. California v. FPC, 1962,
369 U.S. 482, 82 S.Ct. 901, 8 L.Ed.2d 54, it is possible for the
Courts to hold finally that this result could occur. But that
choice ought not to be made, the occasion for facing such a
possibility ought not to be forced until it is inescapably neces-
sary. The very difficulties inherent in that prospect demonstrate
that. . . . If, as the law clearly permits, the monopolistic and
antitrust implications of the practices compelled by the tariff
were among the factors considered and evaluated by the FCC,
a Court would be hard put in either contriving or thereafter
verbalizing a concept which, in a sort of now-you-see-it, now-
you-don’t sleight of hand, would allow the tariff to be valid and
yet invalid at one and the same time.
Carter v. AT&T, 365 F.2d 486, 495-96 (Sth Cir. 1966), cert. denied,
385 U.S. 1008, 87 S.Ct. 714, 17 L.Ed.2d 546 (1967).
A-48
argument for an additional reason. Delta must be alleging
either (1) that it was harmed by AT&T’s establishment
or maintenance of an illegal tariff in conspiracy with
others or (2) that it was harmed by AT&T’s application
of this particular tariff structure. As discussed in (iv)
above, AT&T is required to apply these tariffs by law;
therefore, they are immune from antitrust scrutiny for a
claim alleging no more than that AT&T applied the
tariffs it was required to appiy.
If, on the other hand, Delta is alleging that AT&T
was involved in a conspiracy to establish or maintain
illegal tariffs—an antitrust claim for which AT&T might
not be immune—the FCC imprimatur of validity and
legality lies upon the tariffs which are at the heart of the
antitrust issue.”
Delta would avoid the doctrine of primary jurisdiction
by claiming that one of the elements of the alleged
anticompetive tariff, occasional-use v. regular-use, already
has been held both unreasonable and discriminatory in
Hughes Sports Network. As is more fully discussed in
Section IV(B) of this opinion, Delta reads Hughes Sports
Network much too broadly. That case only decided that
this tariff structure was unreasonable and discriminatory
as it applied to Hughes. There are significant factual dif-
ferences between Hughes’ use of the tariffs and Delta’s.
It is quite possible that the FCC would determine that the
tariff is also unreasonable and discriminatory to Delta;
it is at least equally possible that the FCC might hold
otherwise. In addition, no antitrust claims were presented
in Hughes Sports Network.
54. Id. at 494.
A-49
If the court be in error in concluding that Delta has
been unable to show any material facts indicating the
existence of a conspiracy, thus making summary judg-
ment improper, this court would dismiss this particular
antitrust claim because the FCC has not been given an
opportunity to determine whether these tariffs were
either unreasonable as to or discriminated against Delta.
B. Per Se Violations of Sherman Act §1
There are certain agreements or practices which
because of their pernicious effect on competition
and lack of any redeeming virtue are conclusively
presumed to be unreasonable and therefore illegal
without elaborate inquiry as to the precise harm they
have caused or the business excuse for their use.
Northern Pacific Ry. v. United States, 356 U.S. 1, 5,
78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958).
Delta alleges the following per se violations of § 1
of the Sherman Act: (1) the networks were involved
in a group boycott, (2) each individual network engaged
in an Otter Tail boycott," (3) the networks and AT&T
enforced a tying arrangement, (4) the networks, South-
ern, and two other broadcasters divided the Meridian
broadcast market and (5) the networks and Southern
were guilty of price fixing.
1. Group Boycott
Delta claims that the facts discussed in section III(A)
of this opinion are sufficient to allow the jury to con-
clude that the networks were involved in a group boycott
55. Otter Tail Power Co. v. United States, 410 U.S. 366, 93
S.Ct. 1022, 35 L.Ed.2d 359 (1973).
A-50
or a concerted refusal to deal which is a per se violation
of § 1 of the Sherman Act.** The essence of the allegation
is that the networks did not deal with Delta in terms
Delta considered fair. The extensive discussion above
has demonstrated no facts were suggested that could make
even the minimal showing required to substantiate the
existence of concerted action on the part of the networks.
Such concerted action, however, may be inferred from
similar action when a per se violation is claimed. Here,
though, the proof shows without conflict that the separate
actions of the networks were not similar, but different.
Each of the networks dealt with Delta and each dealt
with it differently. This lack of sameness prohibits any
inference of concerted action. Delta concedes this but
asserts that since no network ever paid an adequate
station rate to it and none ever paid the AT&T delivery
charge for the programs, these refusals were so eco-
nomically destructive that they were tantamount to a
common refusal to deal. In addition, Delta contends
the common refusals authorize an inference of concert.
[11-13] Without deciding whether a concerted refusal-
to-deal can ever be found to be a per se violation when the
refusal claimed is a refusal to buy, such a per se violation
does not exist unless the product or service which is the
subject of the refusal to buy can affirmatively be shown
to be worth buying. This is especially so when, as here,
the refusal to deal is defined by the plaintiff as a refusal
56. See, e. g., United States v. General Motors Corp., 384 US.
127, 86 S.Ct. 1321, 16 L.Ed.2d 415 (1966); Klor’s v. Broadway-
Hale Stores, 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959);
Theater Enterprises, Inc. v. Paramount Film Distriduting Corp.,
346 U.S. 537, 74 S.Ct. 257, 98 L.Ed. 273 (1954); Nelson Radio
and Supply Co. v. Motorola, Inc., 290 F.2d 911 (Sth Cir. 1952);
cert. denied, 345 U.S. 925, 73 S.Ct. 783, 97 L.Ed. 1356 (1953).
ate
A-51
to buy at an “adequate” price. Where the concert
asserted is predicated on a failure to buy a service worth
money for a moneysworth price, the plaintiff has the
burden of demonstrating that his product has some value
above the price paid or offered. In the case at bar the
undisputed material facts show that the service Delta
was attempting to sell was not worth buying. Irrespective
of whether reasonableness under the “rule of reason”
should be considered when examining a claimed per se
violation or whether a refusal to deal violation is in-
herently limited to refusal-to-sell situations, a refusal to
buy a product for more than it is worth simply cannot be
a violation of the antitrust laws.
2. Otter Tail Boycott
[14, 15] Delta cites Otter Tail Power Co. v. United
States, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359
(1973), as creating a new § 1 per se violation category—
individual refusal to deal.*' Delta claims that Otter Tail
allows the finding of a per se violation even though there
be no finding of concert. Otter Tail cannot be read to
reach such a proposition. Otter Tail Power Company
monopolized 91% of the relevant market. The domineer-
ing activities of a monopolist have always been subject
to special antitrust scrutiny. None of the networks is a
monopoly.” A refusal to deal by any of them individually
would not be a per se violation of § 1. Even if it is as-
sumed that the per se category of violations will be
expanded to cover asserted individual refusals to deal,
57. See Stanton, The Demise of Traditional Antitrust Law Con-
cepts, 44 Miss. L. J. 582 (1973).
58. See section III(C)(2) of this opinion, infra.
A-52
no such refusals were involved in this case. The absence
of Otter Tail facts make that decision inapposite.
3. Tying Arrangements
[16] Delta claims that the payment of tariff charges
by the networks for their affiliated stations results in an
illegal tying arrangement which is a per se violation of
§ 1 of the Sherman Act. The classic tying arrangement
involves a seller in a dominant market position relative
to one product, A, requiring the purchaser to buy an
additional product, B, in order to be permitted to
purchase A.°*
The tie alleged by Delta is one by a network in which
a station broadcasting a network program also receives
payment by the network of the tariffs incurred in the
delivery of that program. Delta claims this tie results
in a greater expense to networks when they affiliate with
stations and, therefore, a disincentive to affiliate which
directly harms Delta. It also asserts that the tariffs would
not be discriminatory against individual stations if all
individual stations were required to pay them.
This tying arrangement allegation almost defies con-
ventional analysis. The one alleged to have created the
59. In Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 78
S.Ct. 514, 2 L.Ed.2d 545 (1953), the Supreme Court defined a
tying arrangement as: “an agreement by a party to sell one
product but only on the condition that the buyer also purchases
a different (or tied) product. . . .” 356 U.S. at 5, 78 S.Ct. at 518.
Sulmeyer v. Coca Cola Co., 515 F.2d 835, 844 (Sth Cir. 1975),
cert. denied, US. , 96 S.Ct. 1148, 47 L.Ed.2d 341 (1976);
accord, Fortner Enterprizes, Inc. v. United States Steel Corp., 394
US. 495, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1968); Driskill v. Dallas
Cowboys Football Club, 498 F.2d 321 (Sth Cir. 1974); Coniglio v.
Highwood Services, Inc., 495 F.2d 1286, 1289 (2d Cir.), cert. denied,
419 U.S. 1022, 95 S.Ct. 498, 42 L.Ed.2d 296, 43 U.S.L.W. 3295
(U.S. Nev. 19, 1974).
A-53
tie is not the party possessing market dominance. The
alleged tied product is one sold by a third party. Delta
confuses the roles of buyer and seller in this particular
broadcast transaction.
The only pathway to resolution of the issue lies in the
same distillation of the economics of the television indus-
try as explained above.®’ In capsule, the network pur-
chases service from local television statious—the service
of distributing programs and advertisements to the sta-
tion’s audience. The price paid for the service is negoti-
ated between the networks and the station with the
primary determinant being the size of the station’s audi-
ence. The price is usually a combination of two elements:
(1) direct payment to stations, gauged by the size of the
station’s audience; and (2) fixed payments to AT&T to
cover the cost of delivering the programs to the stations.
Delta’s assertion must then be viewed in this light: the
networks, which are purchasing a service, have tied to
their purchases an additional obligation on their part to
pay to a third party a related cost. The “tied-in” payment
is for a necessity to the purchase transaction—the trans-
portation of the signal to be broadcast frem its source
to the station selling the broadcast service. If this can
be called tying at all, it ties the purchase of a service from
a station to the gift of a related service that otherwise
would have to be bought by the seller to make the sale
effective. This sort of purchase has never been held to
be an antitrust violation, and it seems doubtful such has
ever before been alleged. In any event, this is not a tying
arrangement which is a per se violation of § 1 of the
Sherman Act.”
60. See section I(B) of this opinion, supra.
61. In Sulmeyer v. Coca Cola Co., 515 F.2d 835 (Sth Cir. 1975),
cert. denied, US. , 96 S.Ct. 1148, 47 L.Ed.2d 341 (1976),
A-54
Delta has moderated its initial claim in this regard
to urge that while not a classical tie, the arrangement is
analogous to one and, therefore, should be considered a
violation of Sherman § 1. Generally, Delta is saying that
the entire economic scheme of the industry is designed to
create a barrier to entry. This argument breaks down into
two points: (1) that the networks should have paid Del-
ta’s AT&T delivery charges, and (2) that those charges
were unfair as to independent stations. In section III(A)
(1) of this opinion (refusal to deal conspiracy) the first
specific is discussed and in section III(A)(2) of the
opinion tariff conspiracy) the second is discussed—this
court held that neither violates § 1 of the Sherman Act.
Not all barriers to market entry are violative of the anti-
trust laws. Even considered in the best perspective for
Delta, these are not.
4. Division of Markets.
[17] Delta claims that Southern and stations WDAM
in Hattiesburg, and WLBT in Jackson horizontally di-
vided the relevant market and that this division resulted
in the exclusion of Delta.*? The product involved is tele-
vision advertising time. The relevant market which was
allegedly divided, though never clearly defined by Delta,
the court was faced with a somewhat similar situation. Competing
soft drink bottlers alleged that Coca Cola was tying the sale of a
new product to the provision of an advertising campaign for that
product. In holding that this did mot allege a tying violation the
court stated:
Coca Cola Company advertising purchases actually defrayed
business expenses that the bottler might otherwise have incurred
to effectively market Sprite in his area of operations.
Id. at 845.
62. See United States v. Addyston Pipe & Steel Co., 175 US.
211, 241-42, 20 S.Ct. 96, 107, 44 L.Ed. 146 (1899).
A-55
could only have been an area comprising 24% of the
Meridian market. This 24% is situated where the signals
of the broadcasters overlap. It is the only area in which
the stations alleged to be dividing the market techno-
logically could compete.”
There are two basic types of advertising time sold by
television stations: time sold to the networks which, in
turn, has been sold to advertisers, and time directly sold
to advertisers by the station. This claim cannot involve
a division of the Meridian market as to time directly
sold to advertisers. Furthermore no party could “divide
the market” as to time sold to networks which the net-
works have sold to firms who have made common pur-
chases from all three networks. The allegation must be
limited to a division of the market of advertising time
sold to networks which have sold it to advertisers who
buy time on only one network. In all other advertising
markets there is no division of territory because there will
be competition among either the stations or the networks
for that advertiser’s purchases of time for broadcasting
into the overlap area.
Delta has presented no probative evidence that this
narrow Classification of advertisers even exists, and if it
does, whether its significance justifies antitrust examina-
tion. No reliance, however, is placed on this absence of
proof in granting summary judgment. Rather, it is predi-
63. Several years ago WDAM in Hattiesburg made a conscious
decision to compete in the overlapped territory by increasing its
signal to the maximum allowed by the FCC. During Delta’s existence
WLBT aided Delta by allowing it to use a precontrol-room feed to
acquire NBC programs being shown by WLBT, thus bypassing
AT&T local channel service charges. Neither WDAM’s purposeful
competition, nor certainly WLBT’s aid, indicate predatory division
of territory.
wee
cated upon undisputed facts which show that there has
been no division of the market. Delta alleges that South-
ern, WDAM and WLBT agreed that Southern would sell
its national network advertising time (i.e. time on net-
work programs) only to ABC and CBS but not to NBC;
that WDAM< agreed it would broadcast only CBS and
NBC advertising time and not ABC; that WLBT agreed
only to broadcast national advertising time of NBC and
ABC but not CBS. Even if this is true, it can be seen
that Southern competes with WDAM as to CBS sales
and with WLBT as to ABC sales. WLBT and WDAM
compete as to NBC sales. In addition, it is an undisputed
fact that Southern actually sold time to NBC, which
means that there was competition among all three stations
for NBC time. No division of the market has occurred
here.
Delta also claims a vertical division of the markets
occurred, alleging the exact facts above. The undisputed
facts show that no division occurred. More significantly,
however, Delta does not claim or offer support in fact
to indicate that any division of markets had its source
in the networks. A prerequisite to the existence of a
vertical division of this market is that the source of the
division be the networks. Since this is not asserted or
shown, summary judgment is proper.
In addition, Delta has failed to allege how either
market division actually harmed it. Delta contends the
market was divided so as to eliminate it from broadcasting
network advertising and eventually raising its audience
to receive remuneration for that service. But the only
alleged division did not operate in that manner. Delta
was able to broadcast programs of ABC and CBS im-
mediately after going on the air and shortly thereafter
A-57
it was authorized to broadcast NBC programs. Less than
one year after it began operations, it received a first-call
NBC affiliation. Therefore, the alleged division did not
keep Delta from receiving network programming.
If Delta meant to assert its harm was that it received
unfairly low remuneration for the broadcast of the net-
work programs and advertisement, that result in no logical
manner could be the outgrowth of the alleged division.
The division was of areas for network advertising and
program distribution, not of funds received for their
broadcasting.
Delta is unable to demonstrate any genuine issue exists
because its response failed to develop or suggest facts
which would show any division of the markets or any
harm suffered were that division to exist.
5. Price Fixing
[18] Delta asserts that the networks fixed the prices
which were paid to Southern by paying only a single
common station rate. This price fixing is alleged to have
reduced competition for Southern’s broadcast of network
programs. Had there been competition, Delta asserts that
the prices paid to Southern by the networks vying for its
broadcast signal would have climbed until one of the
networks was priced out. The claim goes that the out-
priced network would have then turned to Delta for
broadcast of its signal. On this theory, it is alleged that
a per se violation of § 1 of the Sherman Act has taken
place.
64. See United States v. Socony-Vacuum Oil Co., 310 U.S. 150,
60 S.Ct. 811, 84 L.Ed. 1129 (1940).
A-58
Delta does not allege that there was a lack of com-
petition for Southern’s services prior to the signing of
Southern to an affiliation agreement. Rather it contends
that after the affiliation agreement had been negotiated,
the other two networks fell into line and offered to pay
the same station rate for the broadcast of their respective
programs that competitive forces had caused to be ne-
gotiated with the affiliated network. The station manager
of Southern admitted that this practice had been followed
by the networks relative to its station.
[19] A seller has a right to establish a price for his
product or service and require that all purchasers pay that
price.*° The only reasonable assumption this record indi-
cates is that Southern, the seller here, decided upon an
affiliation based upon both the compensation and the
quality of the programs offered; and that, once affiliated,
Southern exercised its pricing ri
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