Appendix — Providence Journal Co. v. Home Placement Service, Inc.

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United States Court of Appeals

For the First Circuit

No. 81-1783

HOME PLACEMENT SERVICE, INC. et al.,

PLAINTIFFS, APPELLANTS,

v.

THE PROVIDENCE JOURNAL COMPANY,

DEFENDANT, APPELLEE.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Francis J. Bore, U. S. District Judge]

Before

CorrFin, Chief Judge,

ALDRICH and BOwNES, Circuit Judges.

Ralph J. Gonnella, for appellants.

Joseph V. Cavanagh, Jr., with whom Knight Edwards and Ed-

wards & Angell were on brief, for appellee.

June 18, 1982

1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, is the sec-

ond against defendant newspaper publisher, Providence

Journal Company, for refusal to accept so-called rental infor-

mation advertising in its classified columns. The first resulted

in two decisions of this court, Walker v. Providence Journal

Co., 1 Cir., 1974, 493 F.2d 82, and Homefinders of America,

Ine. v. Providence Journal Co., 1 Cir., 1980, 621 F.2d 441,

ending favorably to the defendant. The present one is

brought by a new, unconnected plaintiff, Home Placement

Service, Inc.' In the first we held that even though defendant

may have had a monopolistic position, it was justified in

1 Joseph P. Muschiano, president of Home Placement, is also

named as a plaintiff. For convenience, we will refer to Home Place-

ment, singly, as plaintiff.

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HOME PLACEMENT SERV., INC. v. THE PROV. JOURNAL CO.

refusing the advertising because of its deceptive nature.

Defendant contends that the present case is simply a replay.

The district court agreed, and entered judgment for the

defendant. Plaintiff appeals.

It is true that the record in the prior case was introduced

herein for all purposes, and that the nature of plaintiff's

business followed the same format as Homefinders, some-

times known, generally, as Rentex, but there was further

evidence, which plaintiff asserted made a substantial dif-

ference. Unfortunately, so far as easy disposition of this ap-

peal is concerned, we must label as clearly erroneous the

court’s finding that plaintiff's new evidence “‘is a distinction

in search of a difference.... The respective schemes of

Homefinders and Home Placement are, for purposes of this

proceeding, indistinguishable.”” Rather, there were marked

differences, requiring, as matter of law, a different result.

Homefinders’ “scheme” was to advertise an individual

rental with a brief and untraceable description, followed by a

telephone number. The number was Homefinders’. The re-

sponder would be “told that the property advertised was no

longer available, but if the prospective tenant would merely

come to Homefinders’ office and pay the fee of $20, other

listings would be made available.”” Homefinders of America,

Ine. v. Providence Journal Co., D.R.L, 1979, 471 F. Supp.

416, 420. Homefinders’ advertisement frequently was totally

misleading — the property had never been available, indeed,

often there never was such; the sole purpose of the ad was to

sell the prospect a list of other properties. These further

properties, even if available, and some were not, would not

measure up to the attractive description in the fictitious

advertisement, nor could the prospect discover this until he

had made his payment. Disappointment, or worse, was a fre-

quent consequence.

The present plaintiff, also, was endeavoring to sell a list of

properties for which it required payment in advance, but

there was no misrepresentation as to the availability of, or as

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OPINION OF THE COURT

to the description of, the particular item advertised. The

statement in defendant’s brief that the ‘ads were similar, if

not identical in form, to the ads placed by Homefinders”’ is

not true, either as to availability, or description. The district

court had found that Homefinders’ ads were ‘‘calculated to

attract an unusual degree of attention. . . . For example, its

advertisements stated that children and pets were welcome,

utilities were paid and automobile parking was available.” Id.

This was readily accomplished because, as we said on appeal,

the bait was artificial. 621 F.2d, ante, at 444. While plaintiff,

also, had as its primary purpose the sale of lists, it did not use

deceptive bait, and the court’s finding that Home

Placement’s and Homefinders’ schemes ‘“‘both amounted to

bait-and-switch artifices which employed misleading adver-

tising’’ was an inaccurate equivalency.

As a result of Homefinders’ advertisements, defendant

received continuous complaints from its readers — defend-

ant’s brief described it as a “torrent.” In addition to the

unavailability of the property advertised, or, after payment,

anything similar, readers, as well as the owners themselves,

were sometimes put out by the fact that Homefinders listed

properties without authority. The totality of complaints was,

naturally, upsetting to defendant. It responded by adopting a

policy, set forth daily in its classified section, of not knowing-

ly accepting ‘‘advertising wh-re a fee is required to obtain

rental information,” and, when the present plaintiff applied,

adhered to it.

We had no difficulty in holding, quite apart from whether

the other aspects of the Sherman Act were satisfied — a

question we did not reach — that defendant was not required

to “immolate itself’ by publishing Homefinders’ misleading

advertisements of which its readers justifiably complained. In

the present case plaintiff's was a new business, and was cut

off almost immediately. Rather than a “torrent” of com-

plaints, there was not even a trickle.* Our first question, ac-

2 The concluding sentence in this part of the court’s opinion, “It

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HOME PLACEMENT SERV., INC. vy. THE PROV. JOURNAL CO.

cordingly, must be whether plaintiff's “‘scheme’’ was still suf-

ficiently objectionable to warrant the Homefinders treat-

ment.

Defendant has a number of difficulties. Not only were there

no actual complaints, but defendant failed to show any basis

for any, either that the specific advertised property was false

or exaggerated, or that plaintiff engaged in unauthorized

listing. There was no evidence that it intended to do so. The

substantive difference between plaintiff and Homefinders is

analogous to the difference between a retailer who has, and

advertises, a so-called lead, or loss-leader, to attract cus-

tomers who will, hopefully, purchase other articles as well,

and one who misrepresents a lead which, in fact, does not ex-

ist. The first practice is customary and ethical. The court’s

finding that “‘switching to a list of properties ... using as

bait an ad for a single [available] property’’ was deceptive

bait-and-switch, would mean that every broker who ad-

vertised a single listing, and hoped that if a prospect found he

did not like that one he might sell him another, is a bait-and-

switcher. This is inconceivable.*

It is true that there was evidence that a reader of classified

real estate advertisements may expect that there will be no

charge to him. The evidence was that in Rhode Island either

the advertiser is the lessor himself, or, if a broker, he will be

paid by the lessor. Whether, in order to avoid any possible

misunderstanding, defendant could reasonably have required

that the fee be disclosed in the advertisement was an alter-

native not proffered by defendant. Its announced policy made

it clear that it would not publish plaintiff's ads even with such

disclosure. For this it had no valid business reason. Were

plaintiff subsequently to succumb, and adopt Homefinders’

was only a matter of time before the complaints rolled in,” must

have been an inadvertency for “‘before the complaints would roll

in.” Even read as a no basis was shown for it.

8 We note that the Meneses 19a BT FTG. 1504 ne

ter of Rentex, Inc., T/A H 1976, 87 F.T.C. 1304, re-

ferred to in our prior opinion, did not find the sale of rental infor-

mation matter of but based on the sub-

improper as a principle, but was on

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OPINION OF THE COURT

objectionable practices, complaints would follow and defend-

ant could then stop receiving the advertisements. We cannot

accept that the sale of rental information is an inherently and

unfailingly deceptive practice, or that advertisements for

such necessarily engender complaints which affect the good

will of the advertising medium.

Nor can we accept defendant’s apparently paternal judg-

ment‘ that the public should not have to pay a fee to find

housing. This is a matter to be resolved through the workings

of the marketplace.® Some persons might well prefer to pay a

small fee for a genuine list than to have to pay, indirectly, the

larger brokerage commission incurred by the lessor. If, on

the other hand, the public were to find plaintiff's business un-

satisfying, presumably it would die a natural death. Surely no

newspaper can be thought to guarantee that everything it

advertises is a superlative bargain, or could claim such a

standard as an anti-trust defense.

This is not to say that defendant was not, as a newspaper,

presumptively free to choose its advertising. Defendant

testified, for example, that it would not advertise handguns,

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HOME PLACEMENT SERV., INC. v. THE PROV. JOURNAL CO.

or acupuncture. Absent special circumstances, it could

choose not to carry any particular advertisement or type of

advertising. E.g., PMP Associates, Inc. v. Globe Newspaper

Co., 1975, 366 Mass. 593. The difficulty here is that plaintiff

alleged special circumstances. So did Homefinders. We did

not reach those circumstances there because, as to that plain-

tiff, defendant had a legitimate business justification for re-

jecting the advertisements, and we would not allow Home-

finders to “piggy-back on the rights of other parties.” 621

F.2d, ante, at 444. Plaintiff here, however, is asserting its

own rights. We turn, accordingly, to the anti-trust aspect of

the case and, because the court did not reach it here, but did

reach it in Homefinders and the record is the same, we con-

sider the district court’s findings in that case, 471 F. Supp.,

ante. Basic to its decision was the following.

“The evidence in the record clearly shows and this

Court finds that the Defendant’s decision to reject Plain-

tiffs advertising and to institute its policy not to accept

ads from fee-charging firms was not in any way in-

tended to restrain trade or enhance Defendant’s own

position in the rental information market. Indeed, there

is no evidence that Defendant’s policy did anything

other than reduce its advertising revenues. Rather, it

was sound business judgment made at a financial sac-

rifice, intended to maintain a quality advertising section

for its readers.”’ 471 F. Supp., ante, at 422-23.

It was simply not so in Homefinders, or in this case, that

there was no evidence that defendant’s refusal to deal did

anything other than reduce its advertising revenues. There

was introduced on behalf of Homefinders, and reintroduced

on behalf of Home Placement, extensive testimony by a

qualified expert that a rental referral business is in competi-

tion with a newspaper selling more traditional forms of ad-

vertising rentals because it is “removing potential buyers of

... Classified advertising.’ Since plaintiff lists individual

lessors without charge, originally and ultimately, if its service

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OPINION OF THE COURT

became favorably known it could siphon off lessors by saving

them the cost of defendant’s columns. This evidence of direct

competition was uncontradicted, and given its logic, there

was no basis for rejecting it. What is more, during trial, the

court specifically accepted it. It interrupted plaintiff's ques-

tioning of its expert by remarking, “We have already

established through this witness that [in that case,

Homefinders] was competing with the Providence Journal.”’

This is the opposite of the court’s later statement that there

was no evidence that defendant’s forecivsing plaintiff did

anything other than reduce its revenues. By this final, totally

unsupported, finding, the court improperly undercut plain-

tiffs entire case.

Complementing the testimony about direct competition

was testimony that for rental referral services the classified

section of the largest metropolitan newspaper in the area is

not only the primary, but the essential medium for survival.

It is even required for larger transactions, sales.* In the

geographical area to which plaintiff appealed, plaintiff's

needs were such that the smaller dailies could not be suffi-

cient. This evidence, sniped at by showing certain alleged

local exceptions, but otherwise uncontradicted, indicates the

simplest form of attempted strangulation of a competitor by

refusal to deal. The only question is, did it give plaintiff a

case. We hold that it did, under both sections 1 and 2 of the

Act.

We believe the court’s finding there was no section 1 claim

for lack of a contract, combination or conspiracy in restraint

* Thus one of the state’s prominent brokers testified,

it’s been on a very basis.

Q * is that ?

A. “Well, it’s our opinion that the real estate purchasing

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HOME PLACEMENT SERV., INC. v. THE PROV. JOURNAL CO.

of trade, was wrong as a matter of law. Shortly after defend-

ant announced its policy, plaintiff's president, Muschiano,

was told, when he called in proposed advertising copy, that

plaintiff's advertisements could not be accepted. This, we

agree, was in itself unilateral, and permitted by United States

v. Colgate & Co., 1919, 250 U.S. 300. But matters did not end

there. When told plaintiff's ads would not be accepted,

Muschiano promised no longer to assess a fee in connection

with properties advertised in the Journal, and on that basis,

defendant agreed to resume publishing plaintiff's rental

advertising.’ The Court has repeatedly found concerted ac-

tion present when it could be determined from a course of

conduct that retailers agreed, in response to a man-

ufacturer’s request, or through coercion, to a manufacturer’s

conditions cf doing business. E.g., United States v. Parke,

Davis & Co., 362 U.S. 29, 38-46 (discussing cases); Albrecht v.

Herald Co., 390 U.S. 145. In the present case plaintiff ex-

pressly agreed to defendant’s condition, viz., not to charge a

fee in connection with advertised properties. Indeed, defend-

ant could not readily implement its policy without plaintiff's

agreement, it being impossible to tell from the face of an

advertisement whether it required the payment of a fee.

Since in the absence of defendant’s policy, plaintiff would

have charged a fee with respect to some of the advertised

properties, a combination was formed which, in effect, fixed a

maximum price of zero on plaintiff's sale of rental informa-

tion. This is sufficient concerted action to bring defendant’s

conduct within the ambit of section 1, as it is settled

__™ The court made no findings in this regard, but these facts are

Muschiano

“informed me that his organization was no longer going to

So ae a a

“I told him at this time he could begin running his rental

advertising again.”

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OPINION OF THE CUURT

that a plaintiff can claim an unlawful combination between

defendant and itself as of the day it unwillingly agreed to

comply with defendant’s restriction. Perma Life Mufflers,

Ine. v. International Parts Corp., 1968, 392 U.S. 134, 142;

Albrecht v. Herald Co., 390 U.S., ante, at 150 n.6; see Parke,

Davis & Co., 362 U.S., ante, at 45 n.6. Finally, the restraint

cannot be upheld as “reasonable’’ when it served no legit-

imate business purpose, and tended not to protect, but to

destroy, competition. Cf Chicago Board of Trade v. United

States, 1918, 246 U.S. 231, 238.

While we consider the court erred in holding that section 1

had not been violated, if, possibly, there could be a question of

fact here, there can be none with respect to section 2. The

evidence fully supported plaintiff's theory, as viewed by the

court, that “the Journal was using its dominance in the

newspaper advertising market to foreclose competition in the

housing vacancy information market.” Although the court

found defendant lacked monopoly power, the record was to

the contrary. To some extent, plaintiff helped to misdirect

the court by attempting to prove that defendant monopolized

the sale of newspapers and classified advertising throughout

the Providence-Pawtucket-Warwick SMSA, an area consist-

ing of much of central and northern Rhode Island, and parts

of southern Massachusetts. We tend to agree that even in

this larger market the court’s finding no monopoly was not

supported by the evidence, but there was no need to define

either the product, or the geographic market, so broadly.

The relevant market is “the narrowest market which is

wide enough so that products from adjacent areas or from

other producers in the same area cannot compete on substan-

tial parity with those included in the market.” Sullivan, An-

titrust 41 (1977). Or, as the Court has put it, “[Cjommodi-

ties reasonably interchangeable by consumers for the same

purposes make up that ‘part of the trade or commerce,’

ization of which may be illegal.”” United States v. E.

I. DuPont de Nemours & Co., 1956, 351 U.S. 377, 395. See

generally George R. Whitten, Jr., Inc. v. Paddock Pool

%

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HOME PLACEMENT SERV., INC. v. THE PROV. JOURNAL CO.

Builders, Inc., 1 Cir., 1974, 508 F.2d 547, cert. denied, 421

U.S. 1004. Thus, the relevant product is not all advertising,

or even all classified advertising, but merely daily newspaper

rental advertising. Defendant offered no rebuttal of

plaintiff's substantial evidence, through numerous witnesses,

that there was no effective substitute therefor. The court’s

reference to the alternatives of “radio, television, [and]

billboard,” overlooked the uncontradicted testimony of ex-

perts, and those in the business, that these are effective only

for institutional advertising, in conjunction with, but not in

substitution for, more specific daily newspaper ads. Nor are

weekly newspapers an adequate substitute, precisely because

they offer competition only once a week. In short, on the

evidence, none of the alternative media identified by the

court could be said to be “reasonably interchangeable’’ with,

or competing ‘“‘on substantial parity’’ with, the rental col-

umns of daily newspapers.

As for the geographic bounds of the market, the court

found that defendant maintained a circulation advantage of

152,379 to 5,846 within the so-called Providence City Zone,

consisting of Providence and ten surrounding communities,

including Warwick, Cranston, and, significantly, West War-

wick, where plaintiff was situated. It has not been disputed,

nor could it be, that within this zone defendant had a monop-

oly over the sale of newspapers. See Lorain Journal v.

United States, 1951, 342 U.S. 143. Correspondingly, though

the court did not pass on the matter, the evidence compels

the conclusion that defendant had monopoly power in the sale

of newspaper advertising for rental units located within the

City Zone. The only daily newspapers allegedly competing

with defendant for rental listings were smaller, local papers

scattered about, mostly outside the City Zone, notably in

Pawtucket and Woonsocket, Rhode Island, and Attleboro,

Massachusetts. Al: of these combined accounted for a market

share of 25 per cent, compared to the Journal’s 75 per cent, in

the Providence-Pawtucket-Warwick SMSA. Whatever ad-

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_ OPINION OF THE COURT

vertising competition these locals offered in their respective

areas, they were not effectively competing with the Journal,

individually or collectively, for the advertisement of property

located with the City Zone. Broker and expert testimony con-

firmed that the owner of property in Providence or Warwick

would not consider it a viable alternative to the Journal to

advertise exclusively in, say, the Woonsocket Call, or, for

that matter, to pay the greater expense of advertising in

several, or all, of the locals, when none had any significant

readership in the general area where the property was lo-

cated. That the Journal could hike its classified advertising

prices without fear of competition from the locals is reflected

by the fact that defendant was charging substantially higher

rates for a line of advertising than any of these alleged com-

petitors.

The court’s only response, that “there is no evidence to

support in any fashion the contention that [the City Zone] is

an existing submarket for renter information,” misses the

that is, “the power to control prices or exclude competition.”

United States v. E. I. DuPont de Nemours & Co., 351 U.S.,

ante, at 391. The breadth with which one defirc¢ the “‘sub-

market for renter information” could not possibly hide the

fact that within the City Zone, defendant had an uncontested

lock on the sale of rental listings. Plaintiff's case is not

provide “any meaningful circulation within your market area

your primary area of doing business, and trying to hit

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HOME PLACEMENT SERV., INC. vy. THE PROV. JOURNAL CO.

clusion to be drawn from the evidence was that with

to the sale of rental advertising within the City Zone defend-

ant was a monopolist.

Defendant’s second, alternative, line of defense, also

adopted by the court, was that whatever monopoly power it

possessed had not been used unlawfully. This, too, we find er-

roneous. As previously discussed, firms such as plaintiff

posed a potential threat to defendant’s monopoly position. If

plaintiff were successful, it could siphon off defendant’s

advertisers, and essentially redefine the market for the

listing of rental information, thereby perhaps forcing defend-

ant to lower its advertising prices. Because of its monopoly

over rental listings in the general area where plaintiff was

attempting to operate, the Journal’s refusal to run ads where

a fee was charged put plaintiff out of the rental referral

business. We have held that this refusal was not supported by

a legitimate business reason. In the absence of such, defend-

ant’s use of monopoly power to destroy a potential com-

petitor was a violation of section 2. E.g., Lorain Journal v.

United States, ante; Gamco, Inc. v. Providence Fruit & Pro-

duce Building, Inc., 1 Cir., 1952, 194 F.2d 484, cert. denied,

344 U.S. 817. It makes no difference that defendant’s

motives may be claimed to have been pure. Specific intent is

necessary only when an attempt to monopolize is alleged. See

Times-Picayune Pub. Co. v. United States, 1953, 345 U.S.

594, 626. Lack of bad purpose is irrelevant where the defend-

ant already possesses monopoly power and, without justifica-

tion, uses it to exclude competition. United States v. Griffith,

1948, 334 U.S. 100, 105. Byars v. Bluff City News Co., 6 Cir.,

1979, 609 F.2d 843. We agree with the court in Byars that

“what should matter is not the monopolist’s state of mind,

but the overall impact of the monopolist’s practices.’’ Id. at

860. When the foreseeable and proximate consequence of

defendant’s conduct was unreasonably to perpetuate an

already existing monopoly by excluding a potential com-

petitor, it would be of no solace to plaintiff, or the consumers

the anti-trust laws were designed to protect, that defendant

may not have been seeking this result.

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OPINION OF THE COURT

Plaintiff sought relief in the form of treble damages, at-

torney’s fees, and an injunction. Further proceedings will be

necessary to determine the appropriate form of injunctive

relief, if any is needed, and the amount owing in damages and

attorney’s fees.* We add that this is a case where it would be

easier all around, including for the judge himself, without any

possible reflection on him, to have the further proceedings

before another trier. Our reasoning on this subject is set out

in O’Shea v. United States, 1974, 491 F.2d 774, 778-79. This

is an automatic rule in some other districts, but, in case it is

not in Rhode Island, we so request here.

Reversed and remanded for further proceedings consistent

herewith.

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UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE iSLAND

HOME PLACEMENT SERVICE, INC.

and JOSEPH MUSCHIANO

PLAINTIFFS :

: C.A.

v. : 77-158

PROVIDENCE JOURNAL COMPANY

DEFENDANT

MEMORDANDUM

BOYLE, Francis J., District Judge.

In this action Plaintiff Home Placement Service, Inc. and

Joseph Muschiano [hereinafter, Home Placement], charge

Defendant Providence Journal Company [hereinafter, the

Journal] with violations of Sections One and Two of the Sher-

man Act. 15 U.S.C. §§ 1, 2 (1976).

Home Placement is a rental referral service. For a fee,

Home Placement promises prospective apartment and house

tenants that it will provide them, for one year, with a list of

available apartments and houses.

The Journal publishes Sunday and daily newspapers which

circulate throughout Rhode Island and parts of Connecticut

and Massachusetts. The Journal refused to carry Home

Placement’s advertisements in its papers’ classified section.

The Journal’s announced policy is not to accept any adver-

tisements from companies such as Home Placement, that is,

companies which charge prospective tenants a fee for rental

information.

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Home Placement argues this refusal constitutes an abuse

of monopoly power in contravention of Section Two of the

Sherman Act. In addition, Home Placement argues that

when it acceded to the Journal’s policy by no longer charging

for rental information, 2 combination or conspiracy was

formed between the Journal and Home Placement in viola-

tion of Section One of the Sherman Act. The arguments of

Home Placement are without merit.

This action follows upon the heels of an earlier action in-

volving the same Defendant, similar contentions and a differ-

ent plaintiff, Homefinders of America, Inc. Homefinders of

America, Inc. v. Providence Journal Co., 621 F.2d 441 (1st

Cir. 1980); Walker v. Providence Journal Co., 493 F.2d 82

(1st Cir. 1974). Those actions have essentially similar facts

and the parties agree that the record in those actions may be

used as the basis for determining this action, with the addi-

tional facts that this Plaintiff, Home Placement, did not seek

to advertise unavailable property and has no association with

the plaintiff in the earlier action, Homefinders of America,

Inc.

Both Homefinders and Home Placement provided informa-

first in the area of Providence, Rhode Island, some of its ads

known to be unavailable. When a prospective tenant re-

sponded to the ad, he or she was told that the advertised

1 Walker, plaintiff in the first case, Walker v. Providence Journal

Co., was a franchisee of Homefinders of America, Inc. Home-

finders later joined the litigation as a plaintiff. When the second

case, Homefinders of Ameria, Inc. v. Providence Journal Co., was

by the Court of Appeals, only Homefinders remained a

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property was unavailable, but that for a fee, Homefincers

would provide a list of available properties.

The evidence is that Home Placement provided the same

type of rental service. The modus operandi of both services

was similar. Prospective tenants were charged a small fee.

Landlords whose properties were listed paid no fee. Both

could not succeed without a high volume of tenant-clients.

Home Placement was organized in March of 1973, in order

to provide a Homefinders type of operation. Home Place-

ment’s manager, Mr. Muschiano, testified that its purpose

was to “run it on the idea of Homefinders.” Although, Mr.

Muschiano, had available a number of apartments which he

himself controlled, the same bait used by Homefinders was

used by Home Placement: A prospective tenant who called

was told that a list of rental apartments was available for a

fee of twenty dollars.

Although the advertisements submitted by Home Place-

ment might have accurately represented actual vacancies,

the practice of advertising a single property as available and

then switching to a list of properties was not different in

either substance or effect from the Homefinders operation.

Home Placement was also a scheme to sell a list of rental op-

portunities for a fee using as bait an ad for a single property.

Home Placement submitted this type of advertisement for

no more than two weeks, until the Journal announced its new

policy, on April 13, 1973, not to knowingly accept advertise-

ments where a fee is required to obtain rental information.

Although during this time the Journal received no complaints

concerning Home Placement, this is more probably attribut-

ed to the short period of time that Home Placement plyed its

trade. It was only a matter of time before the complaints

rolled in.

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SECTION TWO CLAIMS

Home Placement demonstrates no violation of Section

Two. The Sherman Act forbids monopolization and attempts

to monopolize. 15 U.S.C. § 2 (1976). Monopoly power, the

power to raise prices and exclude competition, is not, without

more, violative of Section Two. See United States v. Grinnell

Corp., 384 U.S. 563, 570-71 (1966). Section Two violations

have been found, however, where a monopolist abused its

position in the market where it competed. See, e.g., Otter Tail

Power Co. v. United States, 410 U.S. 366 (1973). In order to

succeed with its claim, therefore, Home Placement must

show both monopoly power and abuse of that power. Home

Placement shows neither.

Home Placement has not shown the existence of monopoly

power. Homefinders of America, Inc. v. Providence Journal

Co., 471 F. Supp. 417, 423 (D.R.I. 1979), aff'd on other

grounds, 621 F.2d 441 (1st Cir. 1980).

In Homefinders, the Plaintiff alleged the relevant product

market was the “housing vacancy information market.”

Plaintiff then argued that the Journal was using its domi-

nance in the newspaper advertising market to foreclose com-

petition in the housing vacancy information market. Plaintiff

alleged a cause of action. Unfortunately, Plaintiff did no

more: Plaintiff failed to define the housing vacancy informa-

tion market. Plaintiff failed to introduce evidence defining

the market despite the admonition of the Court of Appeals in

an earlier episode of the same case. Walker v. Providence

J>urnal Company, 493 F.2d 82 (ist Cir. 1974). Plaintiff in

Homefinders failed to prove a Section Two violation because

it failed to define the relevant product market. Inasmuch as

Plaintiffs in the case at bar rely on Homefinder’s record, their

claim must fail for the same reason.

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Assuming, for argument’s sake, the existence of monopoly

power, Home Placement has not proved its case, i.e., it has

not shown the requisite “bad conduct.”” Home Placement

points to the Journal’s alleged monopoly power and argues

that the Journal’s refusal to deal, without more, is violative of

the Sherman Act. This argument is congruous with neither

logic nor law.

The propriety of the Journal’s refusal rests on firm ground:

it sought to minimize the chance it would run afoul of the law

or harm its reputation. In other words, its refusal was a rea-

sonable business decision.

The decision of the Journal not to publish advertisements

such as those involved here was not made in a vacuum. As

discussed earlier, the Journal previously ran similar adver-

tisements which resulted in customer complaints. In Home-

finders, Plaintiff, a business similar to Home Placement, was

refused space in the Journal’s classified ad section after the

Journal received complaints from its subscribers. The Jour-

nal decided this type of advertisement possessed too great a

potential for misrepresentation with concomitant exposure to

liability and disadvantageous publicity. The Journal there-

after refused advertisements from all those who would

charge for rental information.

Home Placement argues Homefinders is distinguishable. It

argues that unlike Homefinders, which advertised unavail-

able properties, it did not. This is a distinction in search of a

difference. As stated earlier, the respective schemes of

Homefinders and Home Placement are, for purposes of this

proceeding, indistinguishable. Both amounted to bait-and-

switch artifices which employed misleading advertising. It

goes without saying that, monopoly by power or not, the

Journal will not be compelled to further a fraud on the

marketplace. Homefinders, 471 F. Supp. at 422-23.

Consequently, the Journal’s refusal does not violate Sec-

tion Two.

i ee

Al9

SECTION ONE CLAIMS

The Sherman Act forbids contracts, combinations, and con-

spiracies in restraint of trade. 15 U.S.C. § 1 (1976). After the

Journal announced its policy, Plaintiffs acquiesced, that is,

Plaintiffs stopped charging prospective tenants for rental in-

formation. Plaintiffs argue this acquiescence formed the

requisite combination or conspiracy for a Section One viola-

tion. The Journal’s refusal was unilateral; there was no com-

bination or conspiracy. Homefinders, 471 F. Supp. at 421-22,

aff'd on other grounds, 621 F.2d 441 (1st Cir. 1980). Compare

United States v. Colgate & Co., 250 U.S. 300, 307 (1919) with

Albrecht v. Hereld Co., 390 U.S. 145, 150 n.6 (1968) and

United States v. Parke, Davis & Co., 362 U.S. 29 (1960).?

Accordingly, judgment is entered for the Journal for costs.

FRANCIS J. BOYLE,

UnrrTep States District JUDGE

September 24, 1981.

ane Becher na tn Albrccht the nt -

is i . to

maintain resale ner co tidldties eitedtion One He tee.

tion of price is made in the case at bar.

A20

DISTRICT COURT OF THE

UNITED STATES FOR THE

DISTRICT OF RHODE ISLAND

KEITH WALKER, d/b/a HOMEFINDERS,

)

)

Plaintiff )

) CIVIL

v. ) ACTION

) No. 5133

THE PROVIDENCE JOURNAL COMPANY, )

ET ALS. )

Defendants )

OPINION

September 6, 1973

DAY, District Judge. In this civil action the plaintiff seeks

damages and declaratory and injunctive relief against seven

defendants. The defendants named in the plaintiff's lengthy

complaint are The Providence Journal Company; George Bel-

lano, individually and in his capacity as director of advertis-

ing for the Providence Journal Company; The Better Busi-

ness Bureau of R. I. Inc.; John Aiello, individually and as

operations manager of The Better Business Bureau of R. I.

Inc.; Rhode Island Consumer’s Council; Edwin T. Palumbo,

individually and in his capacity as director of said Rhode

Island Consumer’s Council, and Albert West, individually

and in his capacity as director of the Rhode Island State De-

partment of Business Regulations.

In his complaint, which was filed on March 6, 1973, the

plaintiff alleges that he operates a home rental information

service in the State of Rhode Island under the name of

A21

“Homefinders” for which he charges subscribers thereto an

annual fee of twenty dollars ($20). He further alleges that he

placed advertisements of the availability of his services in the

newspapers of the defendant, The Providence Journal Com-

pany, from August 4, 1972 until January 31, 1973, except for

a period of suspension in September, 1972, and that on

February 1, 1973, he was advised by said defendant that his

advertisements would no longer be accepted and that his clas-

Plaintiff claims that said refusal to publish his advertise-

ments was in furtherance of a conspiracy by the defendants

to lessen competition and constitutes a per se violation of 15

U.S.C. § 1 and alternatively a violation of 15 U.S.C. §§ 2, 13

and 18.

This action is before me at this time on the prayer of the

plaintiff for a preliminary injunction enjoining thc defendant,

The Providence Journal Company, from refusing to accept

the classified advertisements of the plaintiff and from other-

wise engaging in acts or practices in violation of 15 U.S.C. §

1, 15 U.S.C. §§ 2, 13 and 18.and 42 U.S.C. § 1985, and various

Amendments to the Constitution of the United States. At the

conclusion of the hearing on said prayer for a prelminary in-

junction, I reserved decision pending the filing of memoranda

by counsel for the plaintiff and the defendant, The Provi-

dence Journal Company.

At the outset of said hearing counsel for the plaintiff stated

that the named plaintiff, Keith Walker, is no longer the plain-

tiff herein, having left Rhode Island, and that Larry Glist of

Denver, Colorado and Ronald Phares of Baltimore, Maryland

should be substituted as proper parties plaintiff, pursuant to

Rule 25(c) of the Federal Rules of Civil Procedure. No formal

substitution of parties has been entered in the record of this

action.

A22

on August 1, 1972, the plaintiff and Homefinders of America,

Inc., a Colorado corporation with offices in Denver, Colorado,

executed an agreement under which said Homefinders of

America, Inc. licensed him to use the designation “‘Home-

finders of Providence” and the right to offer listings of avail-

able real estate rental properties to the public exclusively in

the Counties of Providence and Kent, in the State of Rhode

Island. Said agreement was for a period of one (1) year from

the date thereof. Said agreement provides that: “Licensee

shall upon termination of this agreement, desist from any

further use of said trade-name or designation and upon termi-

nation of this agreement, the license granted by the Company

to Licensee hereunder shall immediately terminate.”

The evidence also establishes that on April 28, 1973, the

plaintiff, Keith Walker, left Rhode Island and abandoned the

license granted to him under said agreement, and his interest

therein was promptly terminated by said Homefinders of

America, Inc. There is no provision in said agreement author-

izing the transfer of said license to any other licensee.

Neither is there any provision therein for the reversion of any

interest therein to the Licensor. Said agreement carefully

avoids placing any post-termination obligation on the licen-

sor, Homefinders of America, Inc. and expressly states that

upon termination of said agreement the license created by

the agreement “shall immediately cease and terminate.”

It is undisputed that Keith Walker, the named plaintiff, no

longer has any interest in the business he conducted under

said license agreement. Injunctive relief operates prospec-

tively only, and since the injunctive relief sought herein is to

protect the business formerly conducted by him in which he

no longer has any interest, he clearly has no standing to seek

relief to protect that business. Mendez v. Bowie,

118 F. 2d 435, 439 (1st Cir. 1941), cert. denied, 314 U.S. 639

(1941).

A23

As hereinbefore recited, counsel representing the plaintiff

at said hearing contended that under the provisions of Rule

25(c) of the Federal Rules of Civil Procedure, this action may

proceed in the name of Keith Walker and that injunctive

relief may be granted. Rule 25(c) provides in pertinent part as

follows:

(c) Transfer Of Interest. In case of any transfer of in-

terest the action may be continued by or against the

original party, unless the court upon motion directs the

person to whom the interest is transferred to be substi-

tuted in the action or joined with the original party... .”

It is well settled that said Rw'e 25(c) governs procedural

matters only and does not provide a substantive basis for the

standing of Keith Walker or anyone else to seek the prelimi-

nary injunction sought in this action. Aluminum Extrusion

Company v. Soule Steel Company, 260 F. Supp. 221 n.5 (C.D.

Cal. 1966).

Since Keith Walker now has no standing to seek a prelimi-

nary injunction, injunctive relief may not be granted unless it

appears from the record herein that there is a party before

this Court who does have a right to maintain this action as the

assignee of said license. As hereinbefore recited, counsel for

the named plaintiff contended that Larry Glist and Ronald

Phares, officers of said Homefinders of America, Inc., have

standing to maintain this action and seek injunctive relief.

There was no evidence presented during said hearing of a

transfer by Keith Walker of his interest in said license to

either of them. Since the said Larry Glist and Ronald Phares

have no interest in said business formerly operated by Keith

Walker, they have no standing to seek an injunction to pro-

In his memorandum filed after said hearing, counsel for the

Ronald Phares had standing to seek injunctive relief, and

A24

now contends that said Homefinders of America, Inc. should

be substituted as the party plaintiff herein. In my opinion this

contention is likewise without merit. There is no provision in

said license agreement authorizing the transfer of said

license to any other person. Similarly, there is no provision

therein for the reversion of said license to said Homefinders

of America, Inc. Said agreement carefully avoids the imposi-

tion of any post-termination liabilities upon said Homefinders

of America, Inc. and expressly states that upon the termina-

tion thereof the license created by said agreement “shall im-

mediately cease and terminate.”

When said license agreement between Keith Walker and

Homefinders of America, Inc. was terminated by the latter,

any relationship between the parties thereto ceased to exist

as did the license which had been granted to the said Keith

Walker.

In my opinion there is no proper plaintiff before this Court

in this action. Accordingly, said prayer for preliminary in-

junctive relief against the defendant, The Providence Journal

Company, must be and it is denied.

s/ EDWARD W. DAY

District Judge

A25

Keith WALKER, d/b/a Homefinder’s,

Plaintiff, Appellant,

v.

PROVIDENCE JOURNAL COMPANY et al.,

Defendants, Appellees.

No. 73-1308.

United States Court of Appeals,

First Circuit.

Argued Dec. 5, 1973.

Decided Feb. 27, 1974.

Rehearing Denied March 14, 1974.

A franchisee of a housing vacancies information service

brought an action against a newspaper publisher in which he

claimed that the newspaper had sought to eliminate com-

petitors to its classified advertising section by refusing to

and left the jurisdiction before a hearing on his prayer for a

preliminary injunction, his franchise having been cancelled,

the United States District Court for the District of Rhode

Island, Edward William Day, J., dismissed the prayer for pre-

liminary relief on the ground that there was no proper plain-

tiff before the court, and the franchisee appealed. The Court

of Appeals, Levin H. Campbell, Circuit Judge, held that the

franchisor, although it was not a party to the action, retained

sufficient interest in the litigation as the franchisee’s succes-

sor that dismissal of the action for lack of proper party plain-

tiff was not warranted, but that the dismissal was nonethe-

less merited on the basis that no combination or conspiracy in

restraint of trade or attempt to monopolize the market for in-

formation about housing vacancies had been shown.

A26

Ralph J. Gonnella, Providence, R.I., with whom Hodosh,

Spinella, Hodosh & Angelone, Providence, R.I., Max D.

Stern, Stern & Shapiro, Boston, Mass. and Anthony F. Pen-

nacchia, Providence, R.I., were on brief, for appellant.

Knight Edwards, Providence, R.I., with whom Edward F.

Hindle, Jonathan E. Cole, Edwards & Angell, Michael

DeFanti, Hinckley, Allen, Salisbury & Parsons, Providence,

R.I., Richard J. Israel, Atty. Gen., and Dorothy A. Carr,

Special Asst. Atty. Gen., were on briefs, for appellees.

Before COFFIN, Chief Judge, MCENTEE and CAMP-

BELL, Circuit Judges.

LEVIN H. CAMPBELL, Circuit Judge.

Homefinders of America, Inc. (Homefinders), a corporation

with a primary place of business in Denver, Colorado, is en-

gaged in the business of licensing or franchising independent

businessmen in various states and Canada to use the Home-

finders trademark and its distinctive method of providing in-

formation about housing vacancies. Keith Walker, the plain-

tiff, was the franchisee for Rhode Island.

Walker brought suit in the district court on March 5, 1973,

alleging that the Providence Journal Co. (Journal), publisher

of the only statewide morning and evening newspapers

(which held at least two-thirds of all newspaper readership in

the state) had violated the antitrust laws, 15 U.S.C. §§ 1 and

2, by attempting to fix the price Walker could charge for his

service,’ by refusing to deal with him, and by attempting to

monopolize the market in rental information services by

eliminating competitors to the classified advertising section

of the papers. Walker sought preliminary and permanent in-

junctive relief and treble damages. This appeal is from the

The to fix a of zero by condi-

toning averting on Peastenieal been te teemaes

A27

court’s denial, after hearing, of a preliminary injunction upon

the ground that there was no proper plaintiff before the

court. We affirm, but for different reasons.

Walker commenced business in Rhode Island during 1972.

Following the Homefinders format he sold for $20 a ‘‘policy”’

entitling its holder to use for a period of one year the services

of Homefinders operations throughout the United States. A

policy holder was granted access to listings of vacancies clas-

sified according to the requirements of different clients; the

listings were in catalogues permitting selection by location,

price range, landlords’ willingness to take children, pets, etc.

phoned or personal inquiry.

Walker culled many but not all his listings from classified

newspaper ads. In turn Walker advertised his service in

advertising continued until January 31, 1973. On February 1,

1973, the Journal wrote to Walker that it would take no more

ads; it simultaneously cancelled the advertising contracts of

A28

two other firms in Rhode Island then providing rental listing

services for which they charged prospective tenants.* The let-

ter of cancellation recited that the new policy was for the ben-

efit of both the Journal and its readers.‘ Attempts to negoti-

ate a new format for the ads proved futile, although Walker

allegedly offered to cast the ads in any nondeceptive form

acceptable to the Journal and accurately describing the serv-

offers.

The hearing on Walker’s prayer for preliminary injunction

was had on May 10 and 11, 1973. Although his counsel ap-

peared, Walker himself did not attend. Counsel revealed that,

approximately two weeks prior to the date of the hearing

(although about three months after the Journal had stopped

running Walker’s ads and two months after the complaint

had been filed), Walker had closed his doors and left the state.

His franchise with Homefinders had thereupon, under its

terms, been cancelled. Counsel stated that the litigation

would go forward in the interest of a Mr. Glist, the president

and principal stockholder of Homefinders, and of another

stockholder. Later during the hearing, through statements of

counsel and testimony of Glist himself, it was developed that

Homefinders, after discovering Walker’s default, had named

Charles R. Campbell, the Boston licensee, to operate the

* One of the other firms changed operation

ws edad bts pak betaine ticaadin amaten

a dkaee aes came ieitanen dies tow ints about

Walker’s service td led directly to the cancellation, Plainuif i

claimed at oral argument that only five Rhode Island’s ap-

6,000 poli are known to to have

related to the criminal prosecution initiated against Walker's alleg-

ing that he acted as a real estate broker without a license. A similar

_—muamhei CC

268 Md. 344, 302 A.2d 1 (1973).

A29

Rhode Island franchise temporarily. Campbell, however, had

soon withdrawn, having found the cost of servicing existing

policies® to exceed any income that could be attracted without

newspaper advertising, and having also found that without

advertising it was difficult to attract the landlord listings

necessary to furnish service to policyholders. Glist testified to

Homefinders’ continuing desire to operate or license a Rhode

Island franchise whenever it became possible to advertise.

At the hearing plaintiff's counsel took the position that

Walker was no longer a party. But he insisted that F.R.Civ.P.

25(c) provided for a “substitution” of parties, and that

Walker’s interest in an injunction had been “transferred” to

Homefinders. When the hearing ended it was unclear wheth-

er Homefinders or Glist meant to intervene formally. yy

Twenty days after the hearing, but three months before the

district court rendered its decision, plaintiff's counsel filed

two affidavits. One was from Walker, then residing with his

vife’s family in Arizona, asserting his intention to continue

as plaintiff and a desire to return to run the Rhode Island

franchise, but only if financially able. The other was from

Homefinders, stating that it had notified Walker that the

Rhode Island franchise rights would be granted to him when

and if “the franchise commences to operate again”’, and stat-

ing an intention to retain Walker’s attorneys to litigate this

case. Homefinders did not, however, move to be substituted

or to join as a plaintiff (nor was joinder ordered by the court).

In an amended complaint filed with leave in June, 1973,

Walker carried on as the sole plaintiff.

The district court on September 6, 1973, dismissed the

prayer for preliminary relief against the Journal after an

Seen drtare ro Re aed umn are oe

his sudden Island and may have left other

debts. These ee

iaiiies th Westar either with the Rhode

A30

opinion which ended with the somewhat enigmatic statement

that there is ‘‘no proper plaintiff before the court in this ac-

tion.” Although that ground, standing alone, might suggest

that the entire action should be dismissed, the ruling related

solely to Walker’s standing to seek a preliminary injunction.

There is no indication that the court meant to foreclose

Walker’s claim for damages or even, to the extent different

facts might later be developed, his prayer for a permanent in-

junction. And because a more complete picture may yet be

developed, our own present opinion, relating solely to the rec-

ord as it now stands, should not be read to preclude the dis-

trict court from reaching other conclusions concerning the in-

terests and intentions of Walker (and Homefinders) should an

expanded record warrant them.

But for present purposes, and on the existing record, we

disagree with the district court’s conclusion, as we under-

stand it, that preliminary relief had to be denied for want of a

showing that there was a proper plaintiff. Although we think

there are other reasons to deny preliminary relief, it should

not have been denied on the ground stated.

{1} An antitrust defendant does not necessarily avoid in-

junctive relief because it succeeds in driving a proper plaintiff

out of business before the court has time to rule on a request

for an injunction. Even though he is not currently conducting

business in the market allegedly encumbered with the illegal

conduct, an aggrieved party may retain a sufficient interest

to seek and obtain injunctive relief against a violation of the

antitrust laws. Zenith Radio Corp. v. Hazeltine Research,

Inc., 395 U.S. 100, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969), on

remand 418 F.2d 21 (7th Cir. 1970), rev’d on other grounds

401 U.S. 321, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971). He “need

only demonstrate a significant threat of injury from an im-

pending violation of the antitrust laws or from a contempo-

rary violation likely to continue or recur.”’ Jd. at 130, 89 S.Ct.

A31

at 1580. In Bus Employees v. Missouri, 374 U.S. 74, 78

(1968), it was held that even though the acts complained of no

longer had a direct injurious effect, plaintiff could still seek

an injunction where the dispute remained unresolved* and

there was “not merely the speculative possibility of . . . some

future ... dispute, but the presence of an existing unre-

solved dispute... .”

It is true that the genuineness of Walker’s desire to return

to the market from which the Journal’s conduct allegedly

drove him is questionable. As for Walker, the alleged injury

may be complete rather than continuing, thus rendering a

preliminary injunction inappropriate as to him. While Walker

asserted by affidavit a qualified intention to return to Rhode

Island, we cannot say the district court was found to believe

him.

[2,3] Homefinders, however, remains subject to current in-

jury from the alleged antitrust violation. As a transferee of

Walker’s interest in the Rhode Island market, its position

undergirds Walker's. See F.R.Civ.P. 25(c). When the original

complaint was filed Walker was still transacting business;

* Our case of Mendez v. Bowie, 118 F.2d 435 (1st Cir.), cert. denied

sub nom. Rios v. Bowie, 314 U.S. 639, 62 S.Ct. 76, 86 L.Ed. 513

(1941), is nc< to the contrary. Plaintiff sought an inj against

and for trespass to land, but sold the after com-

mencement of the suit. We held that the action for damages, but

not for an injunction, survived the sale. However, plaintiff in

Mendez sold his entire interest in the land; Walker and Homefind-

ness that he do so. Moreover, plaintiff's sale did not deprive the

apptireat = thes the gorieiper of fine bet diay bak wk te

“apparent ... not to

bettas ieveived to this Wihegiion. ecient Ga a

contrast, does want to participate and supports the relief

an interest in Mendez.

tgs

A32

although during the pendency of the action the Walker fran-

chise “terminated” and was not “‘assigned’’ to Homefinders,

Homefinders, as franchisor, automatically reacquired the

rights it had ceded to Walker. It came again to possess the

right to place or operate a franchise in Rhode Island. Home-

finders, furthermore, was obligated, through its remaining

franchisees, to service the policies. When the agreement was

terminated, Walker: was required to turn all his books and

records over to Homefinders and Homefinders was entitled

to use a $20,009 reserve fund, established by the agreement,

to service Walker’s policies, znd to charge Walker for any ad-

ditional sums expended in so doing.’ Finally, once Homefind-

ers succeeded to the right to conduct or relicense the Home-

finders operation in Rhode Island, it also found itself saddled

with the same burden borne by Walker—the inability to

advertise the business in the Journal.®

[4] Rule 25(c) provides that in case of any transfer of in-

terest the action may be continued by the original party

unless the court upon motion directs substitution or joinder.

Homefinders should have moved for joinder, but its mere

failure to do so was not fatal. See 3B Moore’s Federal Prac-

tice { 25.08. Homefinders has made known its interest in car-

rying forward the litigation. We would feel differently had

7 The fact that Homefinders has, instead of using these options,

left the policyholders to shift for themselves without either service

or refunds might militate against the grant of equitable relief, but

it would not undermine Homefinders’ standing to seek it.

on tee ee ee ee ee

pond or el has already been a participant in the market

and is therefore even more closely connected to it than was the

eae i supra. Cases cited by the Journal such as Holi-

of America, Inc. v. B&38 ., 409 F.2d 614 (3d Cir.

are “cases rather than anti-

TAIL snottharieneeenmadin ea

Se ceigact maeek Seed. at 618 n.13.

A33

the district court on reasonable terms ordered Homefinders

to join, and had Homefinders declined.* The court could have

forced Homefinders either to join or forfeit any further claim

of interest in the litigation. But it did not do so and, under

Rule 25(c), Homefinders must be counted in determining

whether there is a “proper plaintiff before the court.”

Walker and Homefinders together possess the totality of

rights, duties and expectations concerning the operation of a

Homefinders business in Rhode island. These present in-

terests, combined with the alleged past injuries, provided

adequate standing to seek the issuance of injunctive relief

should it otherwise have been appropriate.

[5] While there was thus a showing of standing and interest

sufficient to seek a preliminary injunction against the alleged

antitrust violations, it does not follow that the district court

erred in withholding relief, nor that we should direct that an

injunction be entered. A plaintiff urging us to adopt such a

course, notwithstanding the district court’s failure to reach

its legal claims, has to show that, on the record as developed

in the district court, it is virtually certain to prevail. Automat-

ic Radio Mfg. Co. v. Ford Motor Co., 390 F.2d 113 (1st Cir.),

cert. denied 391 U.S. 914, 88 S.Ct. 1807, 20 L.Ed.2d 653

(1968). It has not made such a showing.

[6,7] Plaintiffs urge that the Journal has violated both §§ 1

and 2 of the Sherman Act. The § 1 claim fails because the rec-

ord in this case does not disclose the presence of a ‘“‘combina-

tion or conspiracy”’; it appears, instead, that the Journal has

acted on its own. Since a corporation cannot conspire with its

own employees, Joseph E. Seagram & Sons, Inc. v. Hawaiian

® Under Rule 21 the court on its own initiative could have ordered

po ancien ey cement rm pimp Spy ome pe

a

to be i to its role

ponlitieant Hie titigunt BA Moore’e Pedeeal Proctice 4 21.04 (1) & [2];

Hackner v. Trust Co., 117 F.2d 95 (2d Cir.), cert. denied

313 U.S. 559, 61 S.Ct. 835, 85 L.Ed. 1520 (1941).

A34

Oke & Liquors, Ltd., 416 F.2d 71, 82-84 (9th Cir. 1969), cert.

denied 396 U.S. 1062, 90 S.Ct. 752, 24 L.Ed.2d 755 (1970),

plaintiff must search elsewhere for a plurality of actors pur-

suing a “joint [and] collaborative” policy. United States v.

General Motors Corp., 384 U.S. 127, 145, 86 S.Ct. 1321, 16

L.Ed.2d 415 (1966). The only other named defendants in this

case have, so far as the record discloses, done nu more than

forward to the Journal complaints about Walker’s service.

They have not embarked with the Journal upon a joint course

of conduct. Nor is Walker helped by his imaginative theory

that the Journal collaborated with Walker because, when the

Journal refused to accept Walker’s ads, Walker ceased advr-

tising. Although the conspiracy requirement of § 1 may have

faded enough over the years to include even conspiracies with

unwilling coconspirators, see Albrecht v. The Herald Co., 390

U.S. 145, 88 S.Ct. 869, 19 L.Ed.2d 998 (1968), and con-

spiracies with customers, United States v. Parke, Davis &

Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960), the doc-

trine is not yet so chimerical that the refusal of one party to

deal or agree further with another can be construed as an

agreement.

[8] This leaves only the § 2 theory that the Journal was at-

tempting to monopolize the Rhode Island market in ‘‘infor-

mational services.” This market presumably refers to the

market for information about housing vacancies; we say

presumably because plaintiffs have made no attempt to

define the market, and have made no proof that the Journal

has anything approaching a monopoly in it. Such careful defi-

nitions and proof are indispensable in antitrust actions. It

may be that, utilizing the theory of United States v. Otter

Tail Power Co., 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359

(1973), plaintiffs will be able to demonstrate that the Journal

A35

has used an alleged monopoly in the newspaper or advertis-

ing markets to attempt to establish a monopoly in the market

for vacancy information. Cf. Lorain Journal Co. v. United

States, 342 U.S. 143, 72 S.Ct. 181, 96 L.Ed. 162 (1951). But

we cannot say that plaintiff demonstrated on the record be-

fore the district court such a likelihood of success on the

merits as would have required the issuance of a preliminary

a ying prelienl a ay

A36

HOMEFINDER’S OF AMERICA, INC.

and Keith Walker, d/b/a

Homefinder’s, Plaintiffs,

v.

PROVIDENCE JOURNAL COMPANY et al.,

Defendants.

Civ. A. No. 5133.

United States District Court,

D. Rhode Island.

June 8, 1979.

Rental referral firm brought suit against newspaper com-

pany and others, alleging that the newspaper’s refusal to ac-

cept the firi:’s advertising violated antitrust laws and seek-

J. Boyle, J., held that: (1) the newspaper’s action in rejecting

plaintiff's advertising and in establishing a policy not to ac-

cept advertising from rental referral firms which charged

fees to prospective tenants was not a combination in restraint

of trade in violation of the Sherman Act; (2) the actions of the

newspaper fell squarely within the rule that, in absence of

any purpose to create or maintain a monopoly, the Sherman

Act does not restrict a business person’s right to exercise dis-

cretion as to parties with whom he will deal; (3) plaintiff failed

to establish the element of joint action required by the Sher-

man Act; (4) the alleged combination did not in fact unreason-

ably restrain trade, and (5) the evidence did not support plain-

tiff’s contention that the newspaper had monopoly power

over the renter information market.

A37

OPINION AND ORDER

FRANCIS J. BOYLE, District Judge.

This is an action in which Plaintiff, Homefinder’s of Amer-

ica, Inc., seeks damages and mandatory equitable relief

against Defendant Providence Journal Company, its Director

of Advertising, George Bellano, and so-called nominal De-

fendants John Doe and Jane Roe, described as customers of

Plaintiff and Defendant Providence Journal Company whose

present identities are unknown. Plaintiff's Complaint is

based upon Sections 1 and 2 of the Sherman Anti-Trust Act

of 1890, 15 U.S.C. §§ 1 and 2. The action was heard on a sec-

ond Amended Complaint on its merits following denial of a

preliminary injunction. Walker v. Providence Journal Com-

pany, 493 F.2d 82 (1st Cir. 1974).?

" Maateste & Saleh Udanen al talbbibiannd ot tailtentinn

the individual Defendants and in accord with Plaintiff’s con-

cession at oral argument as to the individual Defendants,

judgment will enter in their favor for costs.

The basis of this action is the refusel of Defendant, Provi-

dence Journal Company, hereafter Defendant, to accept

Plaintiff's advertising for publication in its newspapers con-

cerning available rental housing vacancies, and the adoption

by Defendant of a policy declining to accept any advertising

for publication where a fee is required of prospective tenants

in order to obtain rental information.

Plaintiff in substance contends a violation of Section 1 of

the Sherman Act, 15 U.S.C. § 1, by reason of the acqui-

escence of two firms, other than Plaintiff, who furnished

rental information for a fee, in the policy of Defendant to

refuse to publish advertisements, as a per se violation or a vio-

1 Plaintiff Keith Walker’s action has been dismissed for failure to

respond to discovery requests.

A38

lation of the “rule of reason.” Additionally, Plaintiff alleges

violations of Section 2 of the Sherman Act, 15 U.S.C. § 2,

claiming that Defendant monopolizes and, also, attempts to

monopolize the renter information service market by means

of its strategic dominance over the daily newspaper market

in the relevant geographic area.

In addition to testimony presented at an extended hearing,

the Court has also considered as evidence testimony sub-

mitted in connection with a hearing on Plaintiff's prayer for

preliminary injunction on May 10 and 11, 1973 and portions

of depositions designated by counsel. The Court makes the

following findings of facts and conclusions of law:

Plaintiff is a Colorado corporation created in 1971. In 1976,

its name was changed to Pacific-Atlantic Development Co.,

Inc. Initially, it operated a rental information service at

Denver, Colorado. It collected information concerning avail-

able rental properties, listed the information and sold the in-

formation to prospective tenants for a fee. Landlords were

permitted to list their properties without charge. Prospective

tenants purchased a contract or policy from Plaintiff—valid

for a year. The information collected by Plaintiff was then

States, in parts of Canada, and Australia. In general, Plain-

tiff provided its franchisees with instructions in its method of

providing renter information and provided assistance in the

? Plaintiff has additionally moved to amend the second Amended

Complaint to add as i two individuals, the Board of

Realtors, the customers of Plaintiff, the customers of Defendant,

and real estate brokers who comply with Defendant's policy. Addi-

tionally, five Defendants were eliminated as Defendants by amend-

A39

actual operation of the franchise, including accounting serv-

ices and advertising advice for a percentage of the fran-

chisee’s gross income.

On August 1, 1972, Plaintiff entered into a franchise agree-

ment with one Keith Walker, who was then an employee of

another franchisee, whereby Walker was granted an ex-

clusive license to offer listings of available real estate limited

to Providence and Kent Counties in the State of Rhode

Island. The agreement was terminable by either party upon

30 days written notice and upon termination the franchisee

was required to immediately transfer to Plaintiff all out-

standing and current listings, customer records, documents,

books of account and all other records relating wo the opera-

tion of the franchise, and all mail. Upon termination, the

franchisee was required to furnish services to customers for a

period of one year. Upon the franchisee’s failure to continue

to provide services for a period of one year, the Plaintiff was

authorized to expend a reserve account of up to $20,000 to

honor franchisee’s commitments. The reserve account was

created by a charge of 5% on gross sales until the reserve ac-

count, retained by Plaintiff, amounted to $20,000

Plaintiff at the time of trial was not engaged in any rental

information service anywhere. It now operates a check

cashing service in Denver, Colorado. The reason assigned for

its withdrawal from the rental information business was a

Federal Trade Commission Consent Order which Plaintiff

found difficult to supervise and which, it was testified, could

have subjected Plaintiff and its officers to personal liability.

In the Matter of Rentex, Inc. T/A Homefinders of America,

ete., et al., 87 F.T.C. 1340 (May 25, 1976).

Although Plaintiff now asserts that, if it is successful, it

will revive its business at Providence, Rhode Island, this as-

sertion is contrary to Plaintiff's explanation of the purpose of

this litigation stated in its weekly newsletter to dealers pub-

lished shortly after this litigation was commenced. It stated:

A40

THE LAWSUIT IN PROVIDENCE:

The situation in Providence is as follows. First of all, our

attorney, Mr. Tony Pennacchia, has suggested that since

Mr. Walker has left we should not reopen the Providence

office and that we should not service the accounts in the

Providence area. I am sure this seems a great deviation

from our normal policy; however, Mr. Pennacchia’s rea-

soning is that there will be a certain amount of consumer

protest due to the fact that no dealer is in Providence to

service the local accounts. Our firm in the lawsuit and

this situation to blame the newspapers for, in fact, our in-

ability to service these accounts. In other words, we are

alleging in our lawsuit that not only has the company suf-

fered irreparable harm by the newspaper’s actions and

not only has Mr. Walker suffered irreparable harm from

the newspaper, i.e. he went out of business, but also the

consumers in the Providence area who have contracted

with us for our services are also individually and collec-

tively suffering damages which will be laid to blame

directly upon the action of the newspaper’s refusing to

run our advertising. We feel that by blaming the news-

paper for this action this tends toe strengthen our position

that the newspaper is a monopoly and a defacto public

utility who can create great harm and damage upon not

only a firm and its employees per se, but also a communi-

ty at large. Consequently, at this time we will not replace

the dealer in Providence and the Providence accounts

will go unserviced. This should not cause great hearm

(sic) to our reputation since, as you know, each of you will

soon be changing to the use of Rentex and whereas it is

contrary to our normal code of ethics of operation, I be-

lieve Mr. Pennacchia’s point is well taken and this action

could ultimately serve to benefit the company and

possibly the consumer.

A4l

The Court cannot accept as fact Plaintiff's assertion that, if

successful in this action, it will revive its renter information

service in the Providence area. In addition to the fact that the

F.T.C. order of May 25, 1976 will severely curtail Plaintiff's

modus operandi, it appears that it is now engaged in only two

businesses, check cashing and this litigation. Its representa-

tions concerning future operation are not credible.

Plaintiff seeks damages for Defendant’s past refusal to ac-

cept its advertising and seeks to compel Defendant to accept

its advertising in the future. Plaintiff cloaks its demands

under the provisions of an Act of Congress adopted ia 1890,

which sought to prevent combinations or incentional action

designed to eliminate or limit freedom of economic opportu-

nity. This legislation recognized the need to insure conditions

of free competition in a society constitutionally endowed with

a considerable degree of opportunity of choice. It is Plaintiff's

argument that while it may advertise as it chooses, Defend-

ant lacks the choice of declining to print that which Plaintiff

wishes to publish. Plaintiff would have this Court ignore the

probable effect of Defendant’s publication of Plaintiff's ad-

vertisements. In mildest terms, the nature of Plaintiff's ad-

vertising is misleading. It sought to notify the public, not of

the qualities and virtues of its service, but of the alleged avail-

ability of particular properties. At first blush, this seems to be

inconsistent with Plaintiff's own interest, since the commod-

ity which it had for saie was information concerning the avail-

ability of certain properties which would be disclosed only

upon the payment to Plaintiff of its fee. In fact, the purpose

of this advertising eminently served Plaintiff's purpose. It in-

serted advertisements which were calculated to attract an

unusual degree of attention, indicating that properties were

available for rent under circumstances that were, to say the

least, unusual. For example, its advertisements stated that

children and pets were welcome, utilities were paid and auto-

A42

mobile parking was available. Complaints concerning this

type of advertising establish without doubt that it is what has

been called “‘bait’”’ advertising. When the prospective tenant

called the listed telephone number, it turned out to be Plain-

tiff’s telephone and the exuberant prospective tenant was

told that the property advertised was no longer available but

if the prospective tenant would merely come to Homefinder’s

Office and pay the fee of $20, other listings would be made

available. In some instances, it is admitted, properties were

advertised by Plaintiff without the knowledge or consent of

the owner, and in terms quite different from those which the

owner had in mind.

Plaintiff in oral argument contends that the purpose of this

type of advertising was to notify the public that it had listings

of properties in particular areas. This explanation cannot be

accepted. It is clear that Plaintiff's admittedly deliberate mis-

representation was solely for the purpose of entrapping des-

perate people seeking a place to live by enticing them as cus-

tomers through false, unauthorized and misleading adver-

tisements. Contrary to Plaintiff’s pious protestations of prin-

ciples necessary to free competition, Plaintiff would require

Defendant to become an unwilling co-conspirator to mislead

the customers of Defendant Providence Journal Company.

[1] Plaintiff first argues that Defendant Providence Jour-

nal Company violated § 1 of the Sherman Act, 15 U.S.C. § 1.

Section 1 provides in part:

Every contract, combination in the form of trust or other-

wise, or conspiracy, in restraint of trade or commerce

among the several States, or with foreign nations, is de-

clared to be illegal . . .

In order for Plaintiff to succeed on this theory, it must

necessarily establish that the Defendant Journal either com-

bined or conspired in restraint of trade within the meaning of

the Act. The record indicates however, and this Court finds

A43

as a matter of law, that the Journal’s action in rejecting

Plaintiff's advertising and establishing its policy not to accept

advertising from any rental referral firm who charged a fee

to the prospective tenant does not violate § 1 of the Sherman

Act.

[2] The purpose and policy of the Act is to preserve com-

petition by eliminating conduct whose purpose or effect was

to restrain or obstruct the course of trade.

{In the absence of any purpose to create or maintain a

monopoly, the 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. And, of

course, he may announce in advance the circumstances

under which he will refuse to sell.

United States v. Colgate & Co., 250 U.S. 300, 307, 39 S.Ct.

465, 468, 63 L.Ed. 992 (1919).

[3, 4] The announcement of policy and simple refusal to

deal, without more, is not barred by § 1. Section 1 bars con-

certed activity in the form of a combination or conspiracy to

effectuate a policy in restraint of trade. Plaintiff alleges that

the co-conspirators with Defendant Journal were the two

firms who like Plaintiff charged a fee to tenants, the Board of

Realtors, real estate brokers who complied with Defendant’s

policy, as well as the customers of both Plaintiff and Defend-

ant. In substance, Plaintiff argues that their acquiescence in

Defendant’s policy, be it voluntary or involuntary, satisfies

the collaboration requirement of § 1. The Court holds that it

does not.

[5, 6] The facts establish that Defendant’s actions were

unilateral and fall squarely within the Colgate doctrine, as

limited by later Supreme Court decisions. See: Albrecht v.

Herald Co., 390 U.S. 145, 88 S.Ct. 869, 19 L.Ed.2d 998

(1968); United States v. Parke, Davis & Co., 362 U.S. 29, 80

AiA

S.Ct. 503, 4 L.Ed.2d 505 (1960); Federal Trade Comm. v.

Beech-Nut Packing Co., 257 U.S. 441, 42 8.Ct. 150, 66 L.Ed.

307 (1921). Defendant instituted a new policy and communi-

cated it clearly to its readers and customers by means of a

printed announcement in its advertising section. It then pro-

ceeded to adhere to its new policy as announced, but it em-

ployed no coercive or threatening means or other affirmative

action prohibited by § 1 in order to secure compliance with its

policy. The Court does not accept Plaintiff's argument that

Defendant, by inviting readers to call if they were charged a

fee, was utilizing a reporting system which constituted pro-

hibited affirmative action. This Court must determine

whether an unlawful combination is proved by judging what

the parties actually did, rather than by the words they used.

United States v. Parke, Davis & Co., 362 U.S. at 44, 80 S.Ct.

503. Defendant Journal’s conduct does not resemble the

elaborate enforcement schemes which the Supreme Court

found to be illegal combinations in both Albrecht and Parke,

Davis.

(7, 8] Furthermore, “i]t is not sufficient to merely allege

acquiescence and thus claim a combination has beet. demon-

strated.” Spectrofuge Corp. v. Beckman Instruments, Inc.,

575 F.2d 256 (5th Cir. 1978) at 289. The Court must

scrutinize the totality of circumstances which induced the

alleged acquiescence after a simple policy announcement.

Where the customer acquiescence was “‘hased solely on the

individual self-interest of the customer in continued

dealings” with the Defendant, such acquiescence is not an

agreement within the reach of the Sherman Act.

This is true even though it is recognized that there is

no difference in economic effect between adherence to a

manufacturer’s policy effected by prohibited agreement

and adherence effected by conduct within the narrew

safety zone offered by Colgate.

A45

Ford Motor Company v. Webster’s Auto Sales, Inc., 361 F.2d

874, 879 (1st Cir. 1966); United States v. Parke, Davis & Co.,

362 U.S. at 44, 80 S.Ct. 503. Plaintiff fails to establish the ele-

ment of joint action and thus fails to sustain its § 1 claim.

[9] If Defendant Journal’s conduct were viewed as satisfy-

ing the § 1 combination conspiracy requirement, which this

Court expressly finds unsatisfied, Plaintiff fails to prove that

the alleged combination does in fact unreasonably restrain

trade. Standard Oil Co. of New Jersey v. United States, 221

U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911); Chicago Bd. of

Trade v. United States, 246 U.S. 231, 58 S.Ct. 242, 62 L.Ed.

683 (1918). Plaintiff's argument that Defendant’s conduct

should be regarded as illegal per se is without merit. The ap-

plication of the per se ruie which does not take into account

the market power of the parties, the purpose of the restraint,

or the legitimate business reasons for the practice, is limited

to those practices which have a “‘pernicious effect on competi-

tion” which lack “any redeeming virtue.” Northern Pac. R.

Co. v. United States, 356 U.S. 1, 4, 78 S.Ct. 514, 2 L.Ed.2d

545 (1958).

[10] Applying the more flexible Rule of Reason recently

embraced anew by the Supreme Court in Continental T.V.,

Ine. v. G.T.E. Sylvania, Inc., 433 U.S. 36, 97 8.Ct. 2549, 53

L.Ed.2d 568 (1977), a wide variety of factors are to be con-

sidered in order to determine legality. The inquiry must focus

on a consideration of the impact on competitive conditions.

Standard Oil v. United States, supra, 221 U.S. at 65, 31 S.Ct.

502. There is a total lack of evidence which remotely suggests

the slightest impact on competitive conditions. The Plaintiff's

contention that Defendant Journal’s classified advertising is

the only method of communicating with prospective tenants

is patently absurd if what Plaintiff has in mind is attracting

customers by so-called “‘tombstone advertising’’; that is, ad-

vertising which proclaims the alleged virtues of Plaintiff's

A46

service as opposed to advertising which relates to particular

properties. Plaintiff ignores not only other methods of com-

munication, radio, television, billboard, weekly newspapers,

so-called shoppers’ guides and throw aways, but has avoided

totally any references to other sources of renter information

such as real estate agents and indeed “For Rent” signs

perched in vacant tenement windows.

Plaintiff's argument starts with the conclusion that classi-

fied advertising concerning the availability of potentia! rental

proverties is imperative to Plaintiff's success and then

argues that in view of the extensive circulation of Defendant

Journal’s classified advertising, it must be considered to be a

monopoly. This intellectual “bootstrapping” would enlarge

the scope of Section 1 to the point where no businessman

could refuse to deal.

Under the Rule of Reason analysis, the purpose of the ar-

rangement is a serious consideration.

The history of the restraint, the evil believed to exist, the

reason for adopting the particular remedy, the purpose

or end sought to be attained, are all relevant facts. This

is not because a good intention will save an otherwise

ion or the reverse, but because

objectionable

knowledge of intent may help the court to interpret facts

and to predict consequences.

Chicago Bd. of Trade v. United States, supra, 246 U.S. at 238,

38 S.Ct. at 244.

[11] The evidence in the record clearly shows and this

Court finds that the Defendant's decision to reject Plaintiff's

advertising and to institute its policy Lot to accept ads from

fee-charging firms was not in any way intended to restrain

trade or enhance Defendant’s own position in the rental in-

formation market. Indeed, there is no evidence that Defend-

ant’s policy did anything other than reduce its advertising

revenues. Rather, it was sound business judgment made at a

financial sacrifice, intended to maintain a quality advertising

A47

section for ite readers. After receiving complaints from

readers as to the quality of service Homefinder’s was provid-

ing, and recognizing the obvious potential for abuse in other

such firms, Defendant made a legitimate consumer-oriented

decision to stop dealing with fee-charging firms.

[12] In substance, Defendant was primarily motivxted by

its legitimate concern that the ads it was pubiishing were in-

jurious to the public in that they constituted a “orm of decep-

tive advertising. In view of the fact that unfair or deceptive

acts or practices in commerce are unlawful under 15 U.S.C. §

45, it was certainly good business and ethical judgment for

Defendant, believing Homefinder’s ads to be deceptive, to

discontinue its dealing with it. Plaintiff here is alleging seri-

ous anti-trust violations, yet the very foundation upon which

those alleged violations rest was Defendant’s refusal to par-

ticipate in a potentially unlawful operation.* 15 U.S.C. § 45,

although found in a different chapter than 15 U.S.C. § 1 and §

2, was designed to supplement and bolster the Sherman Act.

Its very purpose was to eliminate unfair competition and

practice which if left untouched would inevitably become the

evils prohibited by the Sherman Act. F’. T. C. v. Mocion Pic-

ture Adv. Co., 344 U.S. 392, 73 S.Ct. 361, 97 L.Ed. 426

(1953); Fed. Trade Comm. v. Raladam Co., 283 U.S. 643, 51

S.Ct. 587, 75 L.Ed. 1324 (1931); Butterick Pub. Co. v. Federal

Trade Commission, 85 F.2d 522 (2d Cir. 1936.)

Section 2 of the Sherman Act, 15 U.S.C. § 2, compliments

the prohibition of combinations to monopolize forbidden by §

1 of the Sherman Act. Its thrust includes the prevention of

unilateral action to attempt to obtain monopoly power or the

actual aquisition of monopoly power. It is essential to this

Bi pede. nye tapeedbnemmpaters wie Gon bentgrass

the Federal Trade Commisdion elt tm ghee autonty, inuding

wee

A48

aspect that a determination is made concerning what product

and wh«* market is at issue.‘

In Walker v. Providence Journal Company, supra, the

Court of Appeals stated that plaintiff had not demonstrated

on the record, at that time, such a likelihood of success on the

merits of its Section 2 claim that would have required the is-

suance of a preliminary injunction. In its opinion the Court of

Appeals, in part, stated:

This market presumably refers to the market for infor-

mation about housing vacancies; we say presumably be-

cause plaintiffs have made no attempt to define the

market, and have made no proof that the Journal has

anytlung approaching a monopoly in it. Such careful

definitions and proof are indispensable in antitrust ac-

tions.

Walker v. Providence Journal Company, supra, at 87. After

a plenary trial, the circumstances remain the same.

Plaintiff's evidence is directed solely to the market for clas-

sified advertising in newspapers of individual properties for

rent. In its effort to establish the product, Plaintiff has

established that it supplies information to its customers con-

cerning particular available rental properties. This is a serv-

ice and is similar to the service which the Defendant provides

to its readers in the classified section of its newspapers. As a

consumer may obtain the information in the possession of De-

fendant concerning vacancies by purchasing its newpapers, a

consumer can obtain the informati n in the possession of

Plaintiff by paying it a fee.

‘ Plaintiff's Pre-Trial Memorandum, P. 57, note 52 contends that

per sscnwner th bw hn power and therefore ‘‘a prod-

uct and is not needed for the market

terest bg imped United States v.

Vacuum Oil Co., 310 U 224, 60 S.Ct. 811, 84 L.Ed.

1129 note 59. Nothing in note 59 supports this contention or

even remotely suggests it.

A49

In spite of the observation of the Court of Appeals in this

action that relevant market must be carefully defined and

proof is indispensable, it is far from crystal clear exactly what

the Plaintiff contends. Perhaps the best statement of its most

recent contention is found in its proposed findings of fact, as

follows:

28. The relevant geographic market for purposes of

Plaintiff's Section II (sic) claim, is the Providence—Paw-

tucket—Warwick, Standard Metropolitan Statistical

Area (P.P.W.—S.M.S.A.) A relevant geographic sub

market is the Providence City Zone as designated by the

29. The relevant product market for purposes of plain-

tiff’s Section II (sic) claims are:

a) Daily newspaper readership.

b) Daily newspaper advertising.

These markets are interdependent and comprise the

daily newspaper market.

30. Daily newspapers are a distinct and separate prod-

uct market from all other forms of advertising media.

Plaintiff contends that because of Defendant’s policy, it is

denied access to the relevant daily newspaper advertising

market, and that Defendant possesses this power of elimina-

tion due to its “. . . ‘strategic dominance’ over the daily news-

paper market and that it possesses monopoly power in the

daily newspaper market in the relevant geographic areas.”

(Reply Memorandum of Plaintiff, Page 6).

Plaintiff contends both a vertical and a horizontai effect of

the Defendant’s policy, i.e. horizontal in the sense that the ef-

fect of the policy is to preserve the Defendant’s position as a

distributor of rental information from competition, and ver-

tical in the sense that all rental referral firms are eliminated

from the marketplace.

&

A50

Plaintiff argues three theories “‘of monopolization’’:

(1) Unlawful use of monopoly power in readership to

foreclose competition in the marketplace;

(2) Bottleneck analysis; and,

(3) Unlawful use of monopoly power in advertising to

foreclose competition in the marketplace.

Plaintiff argues as its first theory that Defendant has used

its monopoly power in readership to foreclose competition in

the marketplace, citing Otter Tail Power Co. v. United States,

410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973); United

States v. Griffith, 334 U.S. 100, 68 S.Ct. 941, 92 L.Ed. 1236

(1948); and Gamceo Inc. v. Providence Fruit & Produce Build-

ing, 194 F.2d 484 (1st Cir. 1952).

Plaintiff argues as its second theory that the denial of ac-

cess to a “scarce facility” necessary for competition is a viola-

tion of Section 2 as the creation of a bottleneck impeding the

free flow of commerce.

The third string to Plaintiff's argumentative bow is the

contention that Defendant’s use of monopoly power in adver-

tising denies competitors a marketplace.

Additionally, Plaintiff argues an “attempt to monopolize’”’

by eliminating all rental referral firms from competition with

Defendant’s marketing system.

Lastly, Plaintiff argues that the only justification defense

available to Defendant is that ‘‘physical limitations’ compel

Defendant to choose between competitors.

The breadth and sweep of Plaintiff's arguments have a

tendency to produce a breathless state of mind which re-

quires a step backward to place this controversy in manage-

able perspective. Put in less complex and more easily under-

stood terms, the Plaintiff argues that Defendant has a duty to

publish Plaintiff's advertisements, irrespective of content, in

order that Plaintiff may operate its business at the least ex-

A51

ant is guilty of what Plaintiff calls “monopoly action.”

Plaintiff does not argue “‘that the Defendant Providence

Journal Company unlawfully acquired monopoly power in the

daily newspaper market. On the contrary, the more likely

conclusion is that the Defendant is ‘a natural monopoly in the

relevant market.’ ”’

[13] The test of violation of Section 2 of the Sherman Act is

two-fold: (1) the possession of monopoly power in the relevant

market and (2) the willful acquisition or maintenance of that

power as distinguished from growth or development as a con-

sequence of a superior product, business acumen or a historic

accident. United States v. Grinnell Corp., 384 U.S. 563,

570-571, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966). See also: Kan-

sas City Star Company v. United States, 240 F.2d 643, 660

(8th Cir. 1957); Union Leader Corp. v. Newspapers of New

England, Inc., 284 F.2d 582 (ist Cir. 1960); Cole v. Hughes

Tool Company, 215 F.2d 924 (10th Cir. 1954). Twenty-five

years ago, the Supreme Court pointed out that at that time

only eight percent of daily newspaper cities enjoyed the clash

of opinion which competition among publishers of the daily

press could provide and that “... daily newspaper competi-

tion within individual cities has grown nearly extinct.”

Times-Picayune v. United States, 345 U.S. 594, 603, 73 S.Ct.

872, 877, 878, 97 L.Ed. 1277 (1953).

It is the nature of the business that the dominant cause of

newspaper monopoly is “efficiencies of large circulation

size.” Monopoly in the Daily Newspaper Industry, 61 Yale

L.J. 948, 1005 (1952). Further, the local reader who has an in-

terest in local events will not have that interest satisfied by

an out-of-town newspaper. The circulation statistics in-

troduced by Plaintiff fully support these observations.

In those communities, Pawtucket-Central Falls, and Woon-

socket, Rhode Island, and Attleboro, Massachusetts, com-

munities located in the Providence-Pawtucket-Warwick

A52

S.M.S.A., and in which local daily newspapers are published,

the Defendant is at a competitive disadvantage. This is also

true with respect to some communities adjacent to Paw-

tucket-Central Falls, Woonsocket and Attleboro, e.g. Lin-

coin, Burrillville, Cumberland, North Smithfield, Rhode

Island, and North Attleboro, Norton, Plainville, Blackstone

and Millville, Massachusetts. The circulation advantage of

the Defendant has the appearance of what one of Plaintiff's

witnesses characterized, in another context, as a “swiss

cheese”’ effect. In all of the other communities located in the

Providence-Pawtucket-Warwick, S.M.S.A., Defendant has a

circulation advantage with an advantage of 152,379 to 5846

in the Providence City Zone so-called, consisting of the com-

munities of Providence, Cranston, East Providence, North

Providence, Johnston, Barrington, Bristol, Warren, War-

wick, West Warwick and East Greenwich, Rhode Island.

Furthermore, by limiting the geographic area to the Provi-

dence-Pawtucket-Warwick S.M.S.A., or as a submarket, the

Providence City Zone, so-called, the Plaintiff has eliminated

the competitive effect of the two daily newspapers published

in the southern part of the State of Rhode Island, in the com-

munities of Newport and Westerly. This omission is signifi-

cant in that although editions of Defendant’s newspaper are

specially published for those areas, and the Defendant’s daily

newspapers are sold there, it is at a distinct competitive dis-

advantage. The same observations can be made concerning

the Fall River, Massachusetts area.

[14] It is only in the so-called Providence City Zone that it

can be said that Defendant has “strategic dominance’”’ of the

daily newspaper market. This is a geographic area with the

City of Providence at its center and adjacent communities in

a rough semi-circle extending from East Providence on the

east, southerly along both sides of Narragansett Bay and

westerly and northerly to North Providence, all within the

A53

State of Rhode Island, and constituting only a portion of the

Providence—Pawtucket— Warwick S.M.S.A. However, there

is no evidence to support in any fashion the contention that

this area is an existing submarket for renter information.

Furthermore, there is no evidence that Defendant main-

tains monopoly power. There is no evidence to establish the

basic premise of Plaintiff’s contention upon this branch of the

argument, i.e., that Plaintiff controls the renter information

market. As previously stated, other methods of obtaining in-

formation concerning rentals were ignored by Plaintiff, but

this Court may not be so oblivious to the economic facts of

life. It is a fact that Defendant sells more newspapers than

other newspapers published in certain areas of the State of

Rhode Island. This fact is a considerable step away from the

bald unsupported conclusion asserted by Plaintiff that, there-

fore, it possesses monopoly power with respect to renter in-

formation.

Plaintiff's Complaint is denied and dismissed. Judgment

will enter for Defendant Providence Journal Company for

costs.

SO ORDERED.

A54

HOMEFINDERS OF AMERICA, INC.,

Plaintiff, Appellant,

v.

PROVIDENCE JOURNAL COMPANY et al.,

Defendants, Appellees.

No. 79-1396.

United States Court of Appeals,

First Circuit.

Argued Feb. 6, 1980.

Decided March 26, 1980.

As Amended on Motion for Correction or

Modification of Opinion April 22, 1980.

Franchisee whose business consisted of selling listings of

properties available for rent brought antitrust action against

newspaper. The franchisor was joined as plaintiff and the

United States District Court for the District of Rhode Island,

Francis J. Boyle, J., 471 F.Supp. 416, dismissed. The Court

of Appeals, Aldrich, Senior Circuit Judge, held that the news-

paper did not violate the Sherman Act when it refused to run

A55

ALDRICH, Senior Circuit Judge.

This is an action under sections 1 and 2 of the Sherman Act,

15 U.S.C. §§ 1, 2, brought initially by one Walker, a fran-

chisee of Homefinders of America, Inc., against Providence

Journal Co., publisher of a daily metropolitan newspaper.

Homefinders later was joined as plaintiff, see Walker v. Prov-

idence Journal Co., 1 Cir., 1974, 493 F.2d 82, and is now the

sole plaintiff remaining. Plaintiff alleges that on and after

February 1, 1973, defendant unlawfully refused to run classi-

fied advertisements desired by Walker, causing him financial

loss and ultimately to go out of business and preventing plain-

tiff from re-establishing a Rhode Island franchise. The case

was tried to the court. After extensive findings the court dis-

missed the action. Homefinders of America, Inc. v. Provi-

dence Journal Co., D.R.I., 1979, 471 F.Supp. 416. We affirm.

Walker’s business consisted of selling to individual cus-

tomers, for an advance fee, listings of properties available for

rent in his area, and in any requested areas where plaintiff

had other franchises. Plaintiff agreed to furnish such listings

and to provide Walker with assistance, information, and ad-

vice in return for a percentage of his gross receipts. Walker’s

own lists were comprised of properties listed with him by

prospective landlords, plus others of which more will be said

later. No fee was charged to the landlords. Walker did not

participate in any rental negotiations, nor did he receive any

of lists. His advertisements, however, were ostensibly of indi-

vidual but insuffi jently identified properties, seemingly no

different from the usual classified advertisement relating

only to the property mentioned. A reader responding to

Walker’s advertisement was apt to learn, however, that the

property was not availabie, and, in any event, that he would

have to pay a fee for further information. The court found,

A56

“In mildest terms, the nature of Plaintiff's advertising

is misleading. It sought to notify the public, not of the

qualities and virtues of its service, but of the alleged

availability of particular properties. At first blush, this

seems to be inconsistent with Plaintiff's own interest,

since the commodity which it had for sale was informa-

tion concerning the availability of certain properties

which would be disclosed only upon the payment to

Plaintiff of its fee. In fact, the purpose of this advertising

eminently served Plaintiff's purpose. It inserted adver-

tisements which were calculated to attract an unusual

degree of attention, indicating that properties were

available for rent under circumstances that were, to say

the least, unusual. For example, its advertisements

stated that children and pets were welcome, utilities

were paid and automobile parking was available. Com-

plaints concerning this type of advertising establish

without doubt that it is what has been called ‘bait’ adver-

tising. When the prospective tenant called the listed tele-

phone number, it turned out to be Plaintiff's telephone

and the exuberant prospective tenant was told that the

property advertised was no longer available but if the

prospective tenant would merely come to Homefinder’s

Office and pay the fee of $20, other listings would be

made available. In some instances, it is admitted, proper-

ties were advertised by Plaintiff without the knowledge

or consent of the owner, ard in terms quite different

from those which the owner had in mind.

“Plaintiff in oral argument contends that the purpose

of this type of advertising was to notify the public that it

had listings of properties in particular areas. This ex-

Seen ee ae Paes ante, at

hte bale plaintiff makes two responses.

A57

“The District Court’s reference to ‘bait’ advertising

suggests an illegal practice when in fact it is a common

advertising technique, particularly for employment

agencies. The District Court makes it appear all of

Walker’s advertising were fictitious when there is no

such evidence in the record.”

What percentage was fictitious is irrelevant. The testimony

of the manager of defendant’s classified advertising depart-

ment was that the continual complaints, including some from

the Better Business Bureau, were so numerous that they had

to be specially channelled to him.

The general truth of defendant’s objections plaintiff con-

cedes.

“Plaintiff ... on this appeal will not attempt to refute

or even defend allegations that it has engaged in decep-

tive or misleading practices. Plaintiffs will even concede,

for purposes of this appeal, that the conduct of plaintiff's

former franchise may have been one motivating factor in

the adoption of defendant's rental referral policy.”

Plaintiff apparently felt comfortable in this concession

because of the general principle that an antitrust violator

cannot set himself up as a regulator and justify his own con-

duct by asserting improper behavior by the injured party.

See, ¢.g., Perma Life Mufflers, Inc. v. International Parts

Corp., 1968, 392 U.S. 134, 138-40, 88 S.Ct. 1981, 20 L.Ed.2d

982; Fashion Originators’ Guild of America, Inc. v. Federal

Trade Comm’n, 1941, 312 U.S. 457, 467-68, 61 S.Ct. 703, 85

L.Ed. 949. We do not question this principle, but plaintiff

over-applies it. Defendant is not permitted to act as a pro-

tector of the public, but it may protect its own property from

direct injury. In this sense plaintiff's concession is suicidz|.**

** Plaintiff attempts to back away from this concession in its

meee nits meg ane nage gpa png pa

one trip to this court, see Walker, ante, and an extensive opin-

ion by the such of

Le

A58

[1] To disregard the many trees in the briefs of both parties

and look at the forest, plaintiff is demanding that a news-

paper, whose First Amendment rights in this area are not to

be ignored, see post, publish advertisements whose mislead-

ing nature has drawn the justified criticism oi its readers.

The court found that the establishment of defendant’s policy

was motivated by customer complaints. The depth of that

motivation establishes its relevancy. Although the district

court findings erroneously dwelt in part on the propriety of

defendant’s conduct in protecting the public, the court also

found that defendant’s reasons for refusing the advertise-

ments were to avoid being charged with participation in

deceptive acts or practices, and ‘“‘to maintain a quality adver-

tising section for its readers.” Homefinders, ante, 471

F.Supp. at 423. We could not label such findings plainly

wrong; indeed, they seem plainly right.

The fact that defendant may have a monopolistic position

does not mean that competitors, assuming plaintiff to be

such, can require it to immolate itself. Monopoly or no, the

Sherman Act is not aimed at reasonable conduct, and it is not

unreasonable for a newspaper to refuse misleading advertis-

ing that offends its readers and could turn them away from

its classified columns altogether. The quality of Walker’s

advertisments was even more directly damaging to defend-

ant’s reputation than is likely in the customary dilution case.

E.g., Tiffany & Co. v. Boston Club, Inc., D.Mass., 1964, 231

F.Supp. 836, 845-44; Bulova Watch Co. v. Stolzberg, D. Mass.,

1947, 69 F.Supp. 543. Defendant was free to refuse to deal

with a party who so lowered the standards of its advertising.

See Byars v. Bluff City News Co., 6 Cir., 1979, 609 F.2d 843,

862-63; Gamceo, Inc. v. Providence Fruit & Produce Bldg.,

Ine., 1 Cir., 1952, 194 F.2d 484, 487-88, cert. denied, 344 U.S.

817, 73 S.Ct. 11, 97 L.Ed. 636 (“possibly low business or

ethical standards”); America’s Best Cinema Corp. v. Fort

A59

Wayne Newspapers, Inc., N.D.Ind., 1972, 347 F.Supp. 328,

333-34. Plaintiff fails to distinguish between illegally

attempting to maintain a monopoly position and protecting

one’s assets. Otter Tail Power Co. v. United States, 1973, 410

U.S. 366, 380-82, 93 S.Ct. 1022, 1030, 35 L.Ed.2d 359,

Byars, ante, 609 F.2d at 863 & n.55; International Railways

- of Central America v. United Brands Co., 2 Cir., 1976, 532

F.2d 231, 239-40. The point at which per se conspiracy princi-

ples might overtake concerted prophylaxis is not before us;

there is no merit in plaintiff's criticism of the court’s finding

that defendant’s actions were unilateral.

In this circumstance plaintiff claims that defendant’s policy

would result in the rejection of advertising by anyone who re-

quired the prospective tenant to pay a fee in order to obtain

rental information, even if that fact were disclosed. If that is

so, it is irrelevant. While ultimately Walker may have been

willing to state that the tenant would have to pay a fee, he did

not correct the other misleading aspects which engendered

readers’ complaints. Prior to defendant’s ultimate decision of

February 1973, defendant had already once suspended the

publication of Walker’s advertisements because of readers’

complaints. When defendant permitted resumption, Walker

continued as before. Plaintiff’s present claim is that defend-

ant should have policed Walker’s advertisements, ‘‘edit/ed]

advertising copy and/or place{d| advertisements in the news-

paper in such a way as to insure truthful disclosures.”’ Even

apart from the manifest expense to defendant of such a

procedure, this suggestion is little short of absurd—the

advertiser should do his own policing. Pleintiff's contention,

moreover, is peculiarly inaj propriate with regard to its own

situation. In In the Matter of Rentex, Inc. T/A Homefinders of

America, 87 F.T.C. 1340 (1976), the Federal Trade Commis-

sion, impressed by the misleading character of plaintiff's ad-

vertising elsewhere, filed a complaint charging practices

A60

asserted in the present case. Following a consent order that

there should be no such conduct in the future, other than

what might occur accidentally and non-negligently—as to

which plaintiff was required to police itself constantly—plain-

tiff elected to abandon the referral] business altogether. Plain-

tiff was not interested in a cleaned-up act. Counsel’s conten-

tions bear little relation to the facts.

{2] Nor are we moved by plaintiff's attempt to piggy-back

on the rights of other parties—none of whom complained—al-

legedly faced with a policy not to publish even those adver-

tisements which involved no misleading. Plaintiff argues that

as the “victim of the anti-competitive policy imposed by the

defendant Journal he (sic) can sue those who have combined

to effectuate the restraint not only to vindicate his (sic) own

interest but as s surrogate attorney to vindicate the public

wrong.” Piaintiff was not victimized by a restrictive advertis-

ing policy. It cannot proceed entirely vicariously, see

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 1977, 429 U.S.

477, 96 S.Ct. 1101, 47 L.Ed.2d 311; GAF Corp. v. Circle

Floor Co., 2 Cir., 1972, 463 F.2d 752, cert. denied, 413 U.S.

901, 93 S.Ct. 3058, 37 L.Ed.2d 1045, particularly when no

supposed beneficiary of its endeavors is present in the case.

We add that plaintiff’s continued pressing for an injunction in

spite of the well supported finding that it has no bona fide in-

tent to resume doing business in Rhode Island requires no

comment.

In conclusion, we observe that for anyone who charges for

rental information but advertises without disclosing the

hook, it is not only easy, but highly tempting to use artificial

bait. Such bait can be made more attractive; furthermore, the

fish cannot steal it. Even when it might lack proof of actual

fraud, we would hesitate long before holding that a newspa-

per, monopoly or not, armed with both the First Amendment

and a reasonable business justification, can be ordered to

A61

publish advertising against its will. See Associates & Aldrich

Co. v. Times Mirror Co., 9 Cir., 1971, 440 F.2d 133, 135-36;

J. J. Gordon, Inc. v. Worcester Telegram Publishing Co.,

1961, 343 Mass. 142, 177 N.E.2d 586; ef. Miami Herald Pub-

lishing Co. v. Tornillo, 1974, 418 U.S. 241, 258, 94 S.Ct.

2831, 2839, 41 L.Ed.2d 730. In the present case we see no

question. “The antitrust laws are not a shield for deceptive

advertising.” Staff Research Assocs., Inc. v. Tribune Co., 7

Cir., 1965, 346 F.2d 372, 374.

Affirmed.