Lorain Journal Company v. United States
96 L. Ed. 2d 162, 72 S. Ct. 181 (1951)
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Rule of Law:
A business with a monopoly in a market violates Section 2 of the Sherman Act when it uses its monopoly power, such as by refusing to deal with customers, with the specific intent to destroy an emerging competitor and maintain that monopoly.
Facts:
- From 1933 to 1948, The Lorain Journal Company published the only daily newspaper in Lorain, Ohio, enjoying a substantial monopoly on local advertising and reaching 99% of the city's families.
- In 1948, the Elyria-Lorain Broadcasting Company was licensed to operate a new radio station, WEOL, which began competing with the Journal for local and national advertising revenue.
- A substantial number of Journal advertisers wished to also use the facilities of WEOL to supplement their newspaper advertising.
- In response to the new competition, the Journal adopted a policy of refusing to accept local advertisements from any Lorain County merchant who also advertised over WEOL.
- To enforce this policy, the Journal monitored WEOL's broadcasts to identify its advertisers and then terminated or refused to renew their advertising contracts with the newspaper.
- This policy was effective, causing numerous merchants to cease or abandon their plans to advertise over WEOL because they considered advertising in the Journal to be essential for their business.
Procedural Posture:
- The United States filed a civil suit against The Lorain Journal Company in the U.S. District Court for the Northern District of Ohio.
- The complaint alleged that the Journal's conduct constituted an attempt to monopolize in violation of Section 2 of the Sherman Antitrust Act.
- The District Court denied the government's motion for a temporary injunction.
- Following a trial on the merits, the District Court found that the Journal was engaging in an attempt to monopolize and issued a permanent injunction against the company.
- The Lorain Journal Company (appellant) appealed the District Court's judgment directly to the Supreme Court of the United States.
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Issue:
Does a newspaper publisher with a dominant local market position engage in an illegal attempt to monopolize interstate commerce in violation of Section 2 of the Sherman Antitrust Act by refusing to accept advertising from local businesses who also advertise with a new, competing radio station?
Opinions:
Majority - Mr. Justice Burton
Yes, a newspaper publisher with a dominant local market position engages in an illegal attempt to monopolize by refusing to deal with customers who patronize a competitor. The Journal's refusals to accept advertisements were not an innocent exercise of its right to choose customers, but rather a purposeful and predatory means of eliminating WEOL as a competitor to maintain its monopoly over the mass dissemination of news and advertising. The Journal used its existing, lawfully acquired monopoly power as leverage to destroy a competitor, which constitutes an illegal attempt to monopolize under Section 2 of the Sherman Act. The right to refuse to deal is not absolute and cannot be used with the intent to create or maintain a monopoly. Because the attainment of the Journal's goal would eliminate WEOL and restore the Journal's monopoly on interstate news and advertising, the conduct sufficiently affected interstate commerce.
Analysis:
This case is a foundational decision in antitrust law regarding exclusionary conduct by a single firm. It establishes that the right to refuse to deal, while generally permissible, is not absolute and is prohibited when used by a monopolist with the specific intent to destroy a competitor. The ruling clarifies that using monopoly power in one market as leverage to foreclose competition is a violation of Section 2 of the Sherman Act. This principle, often called 'monopoly leveraging,' has become a key tool for antitrust enforcers against dominant firms that engage in anticompetitive practices to crush emerging rivals, thereby protecting competition in its incipiency.
