United States v. Greater Buffalo Press, Inc.

PETITIONER:United States
RESPONDENT:Greater Buffalo Press, Inc.
LOCATION:Clarence Williams’ House

DOCKET NO.: 821
DECIDED BY: Burger Court (1970-1971)
LOWER COURT:

CITATION: 402 US 549 (1971)
ARGUED: Apr 19, 1971
DECIDED: Jun 01, 1971

Facts of the case

Question

Audio Transcription for Oral Argument – April 19, 1971 in United States v. Greater Buffalo Press, Inc.

Warren E. Burger:

Mr. Friedman you may proceed whenever you’re ready.

Daniel M. Friedman:

Mr. Chief Justice and may it please the Court.

This case which is here on a direct appeal to the United States District Court for the western district of New York, brings before the Court the validity of a 1955 merger between the two leading firms engaged in the printing of color comic supplements for newspapers.

The appeal presents a group of typical Section 7 questions, the definition of the relevant product market, the question whether the effect of the merger maybe substantially to lessen competition, the question whether the acquired company was a failing company and the question of whether divestiture was a appropriate relief.

There are three principal firms involved in this case which I will describe briefly.The acquiring firm, the appellee Greater Buffalo Press, at the time of the acquisition had a plant in Buffalo and also a plant in Dunkirk, New York.

The second firm is the acquired company, International Color Press.

At the time of the acquisition, it also had two plants, one in Wilkes Barre, Pennsylvania and the other in Peoria, Illinois but the Peoria plant has been closed.

The third principal actor in this story is a firm called King Syndicate, that is a division of the Hearst Corporation.

King itself is not a printer.

It is engaged in syndication of copywrited articles, features, comic scripts, cartoons, two newspapers.

What King does is engages in two forms of activity.

First, it licenses features to the newspapers and secondly, it arranges for the printing of those comic supplements to the newspapers that wish it.

The Government complaint which was filed in 1961 challenged not only the merger that is here before the Court but also alleged that Greater Buffalo, Hearst through King and another syndicate had engaged in a conspiracy to divide costumers, to fix prices and to monopolize the printing of color comic supplements alleged that King and the other newspaper syndicate had also engaged in illegal tying agreements under which the claim was that the licensing of the comic supplements was tied to the dealing with the syndicate for printing.

In 1965, the Government settled a case against Hearst through the entry of a consent judgment under which there were various prohibitions upon Hearst including a prohibition upon engaging in tying agreements although the judgment at that — that judgment does not preclude King from quoting a single price for features and printing for the licensing that is and the printing.

However, that judgment also contains provisions that in the event Greater Buffalo is found to have violated any provision of the antitrust laws, the judgment may then be reopened.

The —

Potter Stewart:

Why does it take so long, 10 years?

Daniel M. Friedman:

10 Years, well, —

Potter Stewart:

Years exactly.

Daniel M. Friedman:

If I may Mr. Justice, I would just like to briefly describe about the chronology of it and explain why.

Warren E. Burger:

Excuse me Mr. Friedman, isn’t it more than 10 years?

Daniel M. Friedman:

Well, it’s 10 years from the time the complaint was filed.

Warren E. Burger:

Yes, but it’s 15 since the — 16 since the merger occurred?

Daniel M. Friedman:

16 since the merger filed, let me — if I may explain just what happened in this case.

The merger took place in 1955, two or three years thereafter, an employee of another firm made a complaint to the Department of Justice that Hearst was engaging in tie-ins.

Following this complaint and some preliminary investigation, there was a grand jury investigation in Buffalo, at the conclusion of the grand jury, the Government decided not to seek an indictment but instead to bring a civil suit.

Now, the original complaint did not relate of course to the merger, the original complaint related to the tie-ins by Hearst and King but in the course of our investigation, we developed other facts including the fact relating to the merger which led us to conclude that there were violations in addition to those that had been brought to our attention.

Now, the 10 years between the time that the complaint was filed and the case comes to this Court as occupied by a series of situations.

First, two or three years were occupied by the Government’s first successful attempt to obtain a preliminary injunction against Greater, the transfer of certain assets in the Wilkes Barre plant of international to a plant that had been built down in Sylacauga, Alabama.

Following that, we had the negotiations over the consent decree which led to the consent decree against Hearst.

Daniel M. Friedman:

The trial actually began in October of 1965 and of course, in the end of all, I might add that after we had gotten the preliminary injunction, then there were further proceedings with more testimony taken on a motion by the appellee to modify the injunction.

Following the completion of the Government’s case in October of 1965, in 1966 there was hearing on whether the Government had established a prima facia case and a year and a half elapsed after that hearing until the defendant’s case came in.

The defendant’s case came in in the summer of 1967.

Briefs were filed about a year thereafter.

Closing arguments were not had until a year thereafter which was in December of 1969.

Now, the reason for all these delays was basically, this is as I understand it, at that time in the latter part of the 1960’s, there was only one judge on the bench in Baltimore, that was judge Henderson of those Buffalo, I’m sorry, Buffalo.

After a successor judge was appointed, the man selected for the post was the United States attorney and as a result, this new judge was not qualified to hear any of the pending criminal cases.

And since criminal cases were given a priority, it meant that judge Henderson was required to spend the major part of his time in this period on trying the criminal cases and just had to work this case in as he could, that this was the reason for the delay.

I don’t think that the delay is attributable to the Government Mr. Chief Justice, I think it’s an unfortunate, I think these delays in these cases are always unfortunate, I’m afraid this was just one of those circumstances, we tried to do everything we could, we dropped a charge of violating Section 2, a monopolization charge for the purpose of trying to expedite the thing, we did everything we could to get the case moving because I think just one of those unfortunate things where the judicial process sometimes moves slowly.

Potter Stewart:

And the only issue that’s here now is the Section 7 issue?

Daniel M. Friedman:

That is correct Mr. Justice, that’s all we have appealed from, is the court’s dismissal of the Section 7.

Is that the reason Mr. Friedman why the monopolization charge was dropped?

Daniel M. Friedman:

We stated explicitly in a motion, in a notice we filed stating that we were dropping the monopolization charges, we were doing so for the purpose of expediting trial of the case.

That is set forth at page 518 and 519 I think of the record, that was the reason.

Now, coming to the facts of the case, most Sunday newspapers in this country have what I have in my hand a typical comic color supplements.

The supplement has two elements to it basically, a newspaper that wants a supplement has to get two things.

These different features are all copyrighted and the newspaper has to get a license for these features.

In addition, the newspaper has to arrange to have the supplement printed and the printing of comic color supplements is a very — requires special skill, it’s not something that can be done, they’re done with four different inks and it takes great techniques to accomplish this.

The licenses for using the comic color comics themselves are controlled by the syndicates and the syndicate’s license to a newspaper as many of these particular comics as they want.

Sometimes, the newspaper will get all of its particular comics from a single syndicate more likely it will be a combination in this one of the Washington Post shows that the different comics come from half a dozen or more syndicates.

Now, approximately one third of all of these color comic supplements are printed by the newspapers themselves, the remaining two thirds are printed by the so-called comic color supplement printers which the two merging companies were the two leading ones.

At the time of the acquisition and even to this day, everyone concedes that Greater Buffalo Press is the leader in the comic supplement field, it is the most skilled one.

It is the firm that can produce the best product.

Both of these firms of course produced the same product.

The end result is identical whether or not it’s produced by Greater Buffalo or International, it’s this comic supplement.

But the two firms follow a different method of distributing their product.

Greater Buffalo sells primarily directly to newspapers.

It sells to a few of the syndicates but basically sells to the newspapers.

International has no business relations at all with the newspapers except that it ships the comics, it deals exclusively with King and it has dealt exclusively with King for almost 30 years.

King under the contracts is obligated to give at least 75% of its printing requirements to International.

Daniel M. Friedman:

The other 25% I might add in passing is because on the west coast, it’s just not economically feasible to print in the east and ship it to the west coast because printing is very expensive.

Now, what happens in the case of King is that King goes out and actually sells the comics to the newspapers.

King sells the comics to the newspapers.

King has his arrangement with International and has had it for many years under which International does the printing and King’s profit of course represents the difference between what it pays International and what it can sell the comics to the newspapers for.

And the newspapers, all of their business dealings are with King, they pay their bills to King and King in turn then pays International.

But of course, the price that King pays to International necessarily determines what kind of an offer King in turn can make to the newspapers and not unexpectedly, as the record in this case shows that over the years, there were constant battles between King on the one hand and International on the other over price.

And King on occasions forced International to cut its prices in order that King could meet a particular competitive situation.

King had something of a club over1210 International in this respect because up to the time of the merger, King had a six month cancellation clause in its contract.

It could cancel for any reason within six months.

At the time of the merger in June of 1965, King and International were negotiating a new printing contract which they wanted to be a long term contract.

About a month after the acquisition was consummated, they did sign a long term contract with the same prices they had before but it had no six months cancellation clause.

However, and we think this is quite significant as I will come to in a moment, at the time the merger was taking place, a week before the merger agreement was finally signed, International and King had agreed upon the prices to be charged under that contract.

At the time of the merger, King and International each had sales of about $8,500,000.00.

There’s a dispute between the parties as to what their respective shares of the market was.

The disputes is over whether or not in calculating the market, you include in the market printing that is done by newspapers themselves.

The Government contends that that printing should not be included because we say while the newspaper might give its business to one of this printers, it’s unlikely that any newspaper would be a source of printing for other newspapers.

Under our study of the market as we interpret under our evaluation of it, together, these two firms had roughly 75% of volume of printing done at the time of the acquisition under the –Mr.

Warren E. Burger:

You mean 75% of that two-third portion that you were talking about?

Daniel M. Friedman:

75% of the two-thirds.

Under the defendant’s evaluation, the two firms together had just under 42% of the whole market.

Their 42% is 42% of the whole market, or it is 75% of the two-third.

But under either standard, these two firms simply dwarf the rest of the industry.

Each of these firms was at least five times as large as any of the other four or five independent printers.

Now, the facts relating to the acquisition were relatively simple, the original organizer of internationally acquired company had been dead for many years.

The stock of the company at the time of the acquisition was owned by two of his children who had made no investment in the company, who had nothing to do with the running of the business, they let Mr. Gorman, the President of International run it and the sole interest was in the dividend, as they could get out of the company.

And finally, they tried to sell this plant in 1952 to Hearst and King and Hearst was not interested.

In 1954, in the December of 1954, negotiations began between the President of International and the President of Greater Buffalo.

International’s men indicated the property, thought could be purchased at the book value and that was ultimately done in June of 1955 at a price of $575,000.00.

The record shows that Gorman, the President of International kept King fully informed during the whole course of these negotiations of what was going on.

And three months before the acquisition took place, in March of 1955, the sale’s manager of King, a man named Knight wrote a memo to his superior in which he pointed out the key role that King occupied in connection with this merger.

Daniel M. Friedman:

As he said that although the owners of International are anxious to sell, they can hardly sell without our consent and cooperation.

And he further added that the Greater Buffalo realizes they can hardly continue the purchased plans without our approval.

Now of course, the reason for King’s control over this thing is quite obvious.

Without the arrangements that International had with King, or International had with the printing plant and no costumers.

International did not have any selling organization.

But on the other hand, King also had a very real stake in this thing because King at this time was basically dependent upon International for its printing.

And I will come in a minute now to what the District Court said and explain the significance of why this interrelationship as a practical matter meant that even though the contract between King and International was not signed until a month after merger in fact, at the time of the merger, Greater Buffalo knew that by acquiring International, it was acquiring basically King’s printing presses.

The District Court held against us under Section 7 issue on really two grounds.

First, the District Court said that because of the advantage King has in selling printing as a result of its control over the features, there were two different markets here, one market said the Court was a printing of comic color supplements for sale directly to the newspapers.

And the other market was for sale to the syndicates which then sell them to those newspapers.

And then the Court went on and said this — the effect of this acquisition may not have been substantially to lessen competition because in the first place it said, Greater Buffalo and International not in competition, they’re not in the same markets.

International is selling to one market that is to the syndicates, Greater Buffalo is selling only to the other market to the newspapers themselves, they’re not in the same market so there could be no elimination of competition between them.

Secondly, they said that since at the time of the — Court said since at the time of the acquisition, King had no firm contract with International, Greater Buffalo was not acquiring any share of the printing business.

It was just acquiring an expectation that with its skills, it could pickup some of this business and finally, it said I any event, International was a failing company.

Then at the end of its opinion in the last sentence of the portion dealing with the Section 7 violation, the Court said but even if there were some violations of Section 7 here would not be appropriate to order the divestiture 15 years after the acquisition takes place.

Potter Stewart:

Does the record show anything as to new entry to the markets since 1961 or since —

Daniel M. Friedman:

Well, there is an evidence that there’s one firm developed very rapidly short in the early 1960’s.

There’s a dispute between as there’s to the ease of entry.

The District Court found that there were no substantial barriers to entry.

The claim is that anybody can print, all you need is a printing press, that there’s plenty of surplus capacity in this great ease of entry.

We think that there are real serious barriers to entry in this business for two reasons.

First, this is a very skilled thing, this is not just turning a press on and printing, you’ve got to know what you’re doing.

And the fact of the matter is that a large number of newspapers have found it financially advantageous to them to ship their printing business from their own printing facilities to one of these printers.

In addition, once you have a firm which has 75% of the printing market available, that is for the purpose who don’t print their own, it seems to me this itself as has been recognized creates a substantial barrier to entry and I can say I know of no new firms that have gone into the business.

In fact, in 1965, I’m sorry, 1955 shortly after this acquisition, another independent color printer went out of business, that was a firm called Buffalo Color Press, a smaller printer which Greater Buffalo also acquired it was doing printing for another one of the syndicates in this case.

Now, we start it seems to me with a self evident proposition which is basically Greater Buffalo and International are in the same business, they’re both printing this thing.

And of course, an essential element of the printing of this thing is getting it distributed to its costumers, to the ultimate costumers the newspapers.

And it seems to us it doesn’t make any difference that a particular distributor such as King may have had some advantages in distribution, it’s still the same product.

It doesn’t seize to be a differ — it doesn’t become a different product merely because one firm is distributing it through King and the other firm is distributing directly.

And therefore, under the decisions of this Court, we think that the business of printing and selling color comic supplements was a relevant market.

Daniel M. Friedman:

I stress the word “a” because it may well be that printing for syndicates is also an independent relevant market but certainly, this is a relevant market.

Potter Stewart:

International did two-thirds or three quarters of King’s printing?

Daniel M. Friedman:

International, three quarters.

Potter Stewart:

Three quarters of King’s printing.

But now as all of International — was a 100% of International’s printing done for King?

Daniel M. Friedman:

All of it, all of it.

International printed only for King.

International had no contacts, no contracts, no printing itself for any respective direct —

Potter Stewart:

With any other company —

Daniel M. Friedman:

That is right and that’s the way International had done business and I think when it started in 1925, it had two small customers and for almost 30-years, it was printing exclusively for King.

Potter Stewart:

Okay.

Daniel M. Friedman:

Now, within this broader line of commerce which we think is the relevant market that is sale and printing, we think that it would be no doubt that the effect of this acquisition may have been substantially to lessen competition.

The District Court found and no one disputes it that Greater Buffalo and King were engaged in active competition for the business of printing color comic supplements.

And this competition between them and selling the printing necessarily reflected and was dependent upon the competition between Greater Buffalo and International in printing because only if International kept its prices low enough, would King be in a position to compete effectively with Greater Buffalo and I think the realities of this were recognized in 1954 in a letter that Mr. Gorman, the President of International wrote to the unions when he was complaining that the unions were putting very owner’s conditions upon but he couldn’t be with them because his complaint.

He said, he referred to Greater Buffalo repeatedly as his competitor and he was complaining that Greater Buffalo was taking business away from him because of the owner’s burdens.

Potter Stewart:

International claimed that Greater Buffalo was taking the business away from it?

Daniel M. Friedman:

From it, yes.

What International said, this is exhibit P9 at 785 of the record.

That’s a rather long letter and he keeps complaining for the unions, he says “I’m losing business to my competitors and the demands you’re making for me in the way of labor conditions are unfair for that reason.”

Potter Stewart:

Now, was Greater Buffalo doing any printing for King?

Daniel M. Friedman:

Greater Buffalo was doing a little printing for King back in the mid 1950’s and those evidence that on one occasion, it began that Mr. Knight of King was distressed because he didn’t think he was getting a good enough deal from International.

So he transferred some business to Greater Buffalo and as a rather revealing quotation in which he said and this is at page 1428 of the record, he said he had shifted business to Greater Buffalo at a lower rate and that Gorman, the President of International understands, he is likely to lose other business because of inability to meet the rates I’ve been able to obtain from Greater Buffalo?

Potter Stewart:

Now, is this contemporaneous with the letter to which you just referred?

Daniel M. Friedman:

This was about —

Potter Stewart:

The letter to the union?

Daniel M. Friedman:

Yes, this was within a few months or two of each other, both of these were 1954.

Now, the effect of this merger was very drastically to change the structure of the market.

Previous to the merger, what you had was two very large firms, each with roughly 35% to 40% of the market competing with each other in four and five smaller firms.

After the merger, you had one major firm that really stood like a colossus over this market, had roughly 75% of the business.

The competition that previously had existed between International and Greater Buffalo in printing in keeping prices down and approving service necessarily was basically eliminated.

Daniel M. Friedman:

And while my opponent will tell the court as he had in brief that despite all of these facts, there was plenty of competition in the industry, the significant thing it seems to me for Section 7 purpose is whether or not this merger significantly lessened competition, and on that issue we think the record abundantly shows that it did.

I would like if I may to reserve the balance of my time.

Warren E. Burger:

Very well Mr. Friedman.

Mr. Raichle?

Frank G. Raichle:

Mr. Chief Justice, may it please the Court.

This is an unusual antitrust case. Its Genesis is this, a man by the name of Hornaday who worked for King which is a division of Hearst, so when counsel refers to King, he is referring to Hearst, Hearst Newspaper.

Hornaday left King for Hearst and went to work for another smaller syndicate selling color comic supplement printing, and while he had a little initial success he soon encountered the effects of the tie-ins of Hearst with its features and its printing.

Hearst would tell him to come up, you aren’t going to have your printing done through us, while you have to pay more for your features, typical violation.

So, Hornaday began to complain about Hearst.

In fact, he complained about the things he used to do while he was with Hearst.

And so the Government got busy, and started investigation of the industry at the instance of Hornaday who had not complained about us in any way and in the course of events, there was a grand jury investigation which resulted in the no bills, I recall it, and subsequently, the commencement of this suit in the year 1961.

And a strange course of events at least to me a strange course of events ensued.

The original argument trial counsel for the Government told the Court that the action was brought primarily against Hearst to stop Hearst from its tie end practices.

Indeed, it was brought for our protection and find that off repeated in the record, a strange kind of protection in the light of the relief by way of divestiture of our Sylacauga plant that sought in the complaint.

Well, in any event, Greater Buffalo if I might take just a minute to describe it, had a very inauspicious and amble beginning back in 1926, the Kessler family, Walter Kessler who was a reporter on the newspaper went into business for himself but members of his family assisting him with an investment of a $1000 to $3,000.00, they put up a little printing press right in their own home.

Members of the family worked and they printed a little neighborhood newspaper.

And I guess they were helped by the depression in the 30’s because it began to print these mortgage foreclosures and happenings, and legal notices in connection with bankruptcies and so forth.

And they began to print a few adds for the local stores and started to print colored adds, and sometime in the 30’s, one of the Buffalo papers suggested to him that they might be able to print a comic section.

Furnish them with an old press, they started to print.

From that the start they to print for the 2927 newspaper and then from that Chicago paper and the thing grew, that’s one of the typical American success stories of its kind.

So, as the year 1950, 51, 52, 53 year all around, Buffalo Press by some innovations of Walter Kessler, its president, some ingenuity on the part of all of the hard work on the part of the whole family had succeeded in developing quite a business in this color comic supplement field.

And they began to feel the effects of the King tie-in.

King had the major features, not only comic features but the syndication of the columnist popular of the day.

And the competition between Greater Buffalo and Hearst as I put it, King if you please, was intense, there’s no question about it.

We didn’t conceive it, we were competing with International which printed exclusively for Hearst.

Strange thing about it to me has always been, and I’ll say more about that when we talk about the absence of barriers to entry in this field.

International never printed for the Hearst papers, they always printed their own, whole country.

The Hearst papers print their own comics.

While in any event, in 1951, 52, 53, Red Buffalo press build a plant on Lufkin, Texas to accommodate the self to the transportation charges more beneficial to its costumers in that area and began the plant, in fact, at an earlier date began to plan for a plant in Sylacauga, Alabama and it’s that plant with which we’re particularly concerned and there’s more or less unmentioned by my opponents.

I’ll have to get to that in a few minutes.

Frank G. Raichle:

By then, in any event, the owners of the International, a golden family by name who lived, I think one of them lived in Cuba and one of them in Alabama and refused to make any investment in the company after the original investment and were contempt to let this man Gorman, a very competent operator who run the plant for him.

And now I don’t suppose, I could say with candor to the Court that by 1955, International squared with your decisions, definitions of a failing company but if it wasn’t a failing company then, it was destined to become one whatever artificial difference -– making that observation.

Its working capital was impaired, its machinery was obsolete and getting worst, its only costumer King was threatening to take the business away and put it somewhere else and in an answer to the inquiry from the bench, the first business of the King that Greater Buffalo got was in the year 1954, when the run from Youngstown Toledo and I think Erie Pennsylvania was transferred to it by Knight and of Hearst.

In the extreme, as in which International found itself, it sought to sell the plant, the business if you could call that to Hearst.

The opportunities were made, insistent opportunities were made to Hearst to buy it and the answer was Hearst wasn’t interested in it at any price and refused to.

Mr. Gorman testified on the trial that he knew of no other purchaser so he offered it to Mr. Kessler of Greater Buffalo Press, Kessler bought it for $575,000.00 back in 1955.

Along was antitrust litigation that is ensued since.

Now, at the time of the purchase, International was engaged in negotiations looking toward a long term contract.

Those negotiations had not ripened into a contract and at the time that Greater Buffalo bought it on June 25, 1955, it had no contract assurance of business and it took a calculated business risk.

But was the equivalent of some obsolete machinery which it hoped to modernize with its own techniques and make efficient.

Well, there is an element to the case which I don’t think from which I think I should talk about for just a moment.

After Greater Buffalo build its Lufkin plant or the Lufkin plant became a reality and Knight learned of it and about the time, the purchase of the International plant, Knight began to put pressure on Kessler, so as tie-ins.

In other words, that he wanted to become or wanted Hearst to become the exclusive sales agent for Greater Buffalo Press and that Greater Buffalo Press should print only for International and there’s extensive correspondence on that subject in the record.

And I would characterize it as a flirtation on the part of the parties looking toward a lineup where and whereby Hearst would be the seller, King would be the seller and Greater Buffalo would be the printer.

And it went on over a period two or three years and accounts for some of the documents in the record which had first flushed somewhat embarrassing, I think the King and Greater Buffalo.

But in the course of events, Kessler was advised and Knight was advised that any such arrangement — as Knight was proposing would be a clear violation of the antitrust law, that was abandoned.

No dispute about the fact that the abandonment of their plant.

Well, Greater Buffalo went ahead and build the Sylacauga plant, five years after this acquisition and that’s what they wanted divested.

Now, I don’t care at the moment and for the purpose of this discussion whether you take the relevant market as that which the Court found or the relevant market as counsel contends that it should be considered.

The fact remains that there are no barriers, the interesting thing, people — newspapers for whom we have printed and whom we thought we have so that because of our wanted efficiency have gone back to printing their own.

I think I can say without fear of serious dispute, certainly not effective dispute, that most any newspaper in this country can print its own and that there is great access capacity in this country for the printing of these comic color supplements.

Your Honors know from your daily reading, most evening paper you pick up prints colored ads for stores or automobile companies, dress designers and whatever and it takes very little adaptation to put those presses to work, to print the colored comic supplement.

Now, we cited in our brief and the governance exhibit show that certain newspapers print for others, that’s other newspapers.

Exhibit — I think on page 1823 of the record is something that’s printed at page 14 of my brief, the red one.

It shows that Hearst, the Hearst papers in Chicago prints for two non-Hearst papers, one in Chicago and one in Pittsburg.

The same exhibit shows that Hearst plants have a surplus capacity for the printing of 12,504 page sections incidentally, that’s the unit of production, I was talking about.

Warren E. Burger:

What page was that Mr. Raichle?

Frank G. Raichle:

Its page 14 of our brief and its page 1823 of the record.

Thurgood Marshall:

1823?

Frank G. Raichle:

1823 Your Honor, of the appendix, as of the record, I mean the appendix of course.

Frank G. Raichle:

Now then, I say that the competitive effects, if any were minimal and immediately dispelled long since dissipated.

I don’t have time but let me cite one example.

The principal competitor of Greater Buffalo Press runs head on to Greater Buffalo Press and at Sylacauga plant, the southern colored print.

It’s an undisputed fact clear as a (Inaudible) in the records that between the time that we acquired International and the time of the trial that southern color which incidentally is Hornadey’s company, the man who started all of this stuff has gone from 477,714 four page sections per week to 3,400,000 per week.

That during the same period of time translated in the dollars, it’s gone from a $600,000.00 volume to $3,300,000.00.

It’s an established fact that every printing company that is a factor in this industry or was a factor in 1955 at that time of our acquisition has an increase in its business and it is an undisputed fact that most of the increase of the business came from us and that we took no compensating business from them.

Now, let me get to the divestiture and introduce Your Honors to that subject and I know that this historic courtroom, this Court has heard many strange contentions that I have asked this one or I call attention to one advance by my friends as one of the strangest that I’ve ever heard and perhaps if you — now they say that this violation, this purchase of this old machinery back in 1955 took with it the planning which International had for a plant at Sylacauga, Alabama.

And at page 37 of their brief they say effective relief in this case which would create a viable independent color comic supplement printer capable of providing King with an ultimate source of printing from Greater Buffalo requires divestiture of all the assets owned by International at the time of the acquisition and the Sylacauga, Alabama plant planned by International but constructed and operated after the acquisition by Dixie color printing company and the Buffalo subsidiary, Dixie color is the company who owns a title to the building which we built.

Now, that’s cumulative to the effect that intended beneficiary of the requested divestiture is Hearst.

Now, in our early days of this case I repeat, we were described as the victim and Hearst was described as the predator.

This is the first time, I ever heard a Government counsel seek the divestiture from the victim for the benefit of the predator.

Now, let me give you the history of the building of the Sylacauga plant.

Right it, two or three people hid upon Sylacauga, might sound like a strange coincidence, not at all.

There’s something called the Coosa River paper company down there and as early as 1950, Coosa River paper company had called the Greater Buffalo to see if they could build a plant for us if we would take their product and use it in our printing.

Well, at that time, we were engrossed in going forth with Lufkin and we didn’t pursue it seriously, although we made some investigation.

Indeed, that’s five years before the acquisition, back in 1947 which was eight years before the acquisition, we had planned a plant in the Deep South.

And in 1950, we had in writing which is a exhibit in this record, committed ourselves to Atlanta Paper, I forgot the name of it to build the plant.

We did specify at Sylacauga but we said in the Deep South probably in Alabama.

Well, it seems that the District Coosa river contacting printers generally to see if they could get someone to build a plant, also contacted International.

And that International had at least in the minds of Gorman, that operating head had planned to pursue the subject on its own.

Well, he went to Hearst, Hearst wouldn’t give them a long term contract at the price that will permit the investment and a new plant Hearst as I said wouldn’t buy the International plant.

Hearst wouldn’t do a thing to promote the development of a plant in Sylacauga.

Now, after — not before but after the acquisition, we built the plant, completed it five years later.

Well, this I say in all confidence.

The Government’s brief says that we changed some details and furnished some things, details, but we built the plant in accordance with the same plans which we have used some years before in Lufkin.

It is a reproduction of our Lufkin plant.

We went to Baltimore and bought a press.

I heard the competitor bought the other available press from the same Newspaper.

I forgot the name of the Baltimore Newspaper.

The press was worked on transiently — and the International employees.

Frank G. Raichle:

This was after the acquisition.

But we reimbursed them for all the work.

The plant was built to install the press.

The press was installed.

No equipment of consequence came from Wilkes Barre.

The only equipment that did come was a little office furniture and I think one color duplicator or something.

We have the inventories in evidence as worth less than $350.00 in the aggregate and the plant cost us 3 million dollars.

Now he says, or the brief says, that for some reason or other we should divest that plant so that Hearst could buy it.

Preposterous, I say Your Honors.

Now in continuing because that’s what the case is all about apparently.

Did we build a plant for any business form Hearst?

No.

74% of the Color Comic supplement printing which is done in that plant is by contracts made with Greater Buffalo and not International directly with newspaper.

They didn’t afford to print it their own.

Now, 30% of the business down there is what we call commercial printing subject to which we have not alluded.

That means advertising for a chain stores, Sears Roebuck, Montgomery Ward, Safeway stores and all that sort of thing.

That constitutes 30% of the printing being done in that plant.

And if you give up in fact to 30%, then 84% of the printing down there is ours.

And I think some — that is from contracts of ours and minimal amount came from Wilkes Barre or from International.

Now, one or more things.

This attempt on the part of the Government to make a printer out of Hearst or out of King, is so in Congress because time and again, the evidence showed and it’s undisputed that is a matter of policy Hearst would not enter the printing.

Option saving a statement by Hearst Senior Officer that I get it right.

This sums up the case from Hearst point of view what the Government is trying to point it.

Mr. Green who is Mr. Knight Sr. said that Hearst would never be interested in printing.

Then he cites the fact that (Inaudible) sold 50 million gum drafts a year and never made one and made money not withstanding.

Now, I just don’t know, I respectfully submit to you that under all the cases, as under any case on this subject, there cannot be a divestiture for equitable reasons, let alone those associated with the due process.

Now if he wants to talk about a divestiture of the old machinery, we bought 15 years ago up in Wilkes Barre, that at the moment is idle.

I think all the arguments I am advanced, those showing that there were no anti-competitive effects, if indeed there was any technical violation, easy access to the market, the passage of time, the development and the growth of competition.

Just one more thing is probably it is the least important.

Merely days of the case, the unions were appearing, amicus here, whatever you want to call them, urging that we don’t take things out of Wilkes Barre predicting dire consequences to the economy if we did.

Frank G. Raichle:

Why the economy has grown largely through what we have done up there if I might boast about it.

All our fears have gone away.

Senator Sparkman was coming up to complain that if we didn’t bring things down to Sylacauga after we started.

And I think we brought prosperity to that part of the country, would buy the newsprint.

We employ people, we do a wholesome business and I think it’s wholesome at this little family business and the tradition of the free enterprise could flourish as it has and do so well and violate no law.

Thank you.

Potter Stewart:

Mr. Raichle, what do you say about the District Court’s view of the relevant market?

Thurgood Marshall:

Well of course I agree with what the —

Potter Stewart:

You agree with him?

Thurgood Marshall:

Yes I do.

Potter Stewart:

Well suppose you want to disagree to that, or as the case go to that?

Thurgood Marshall:

I still say there is no violation if it raises and I’m kind of tyeing some of your decisions.

If it raises any inference or a presumption that there was a violation, that anti-competitive effect, then I think the presumption has been completely overcome by evidence.

Some of which I alluded to in the rest of the brief.

Warren E. Burger:

Thank you Mr. Raichle.

Mr. Friedman you have got about four minutes left.

Daniel M. Friedman:

Thank you.

Mr. Chief Justice and may it please the Court.

The Government is seeking the divestiture of the Sylacauga plant not to aid the wrong doer Hearst.

But because we think that under normal principles governing divestiture, what you have to have is plant, the entity to be divested must be capable at functioning as a strong effective competitive factor in the market.

Now, the way this market is now structured, what it means is for International to take up the kind — to become the kind of plant that is necessary to provide competition to Greater Buffalo, it’s got to have a facility in the south.

Because the newspaper customers down there now are used to a sudden plant.

They save substantial money as a result of the saving of transportation costs.

We’re not of course suggesting –- as Mr. Raichle somehow suggested that we’re trying to put Hearst into the printing business.

Well of course, we’re not saying that the plant has to be divested to Hearst.

All that we are saying is when you divest International and of course I just mentioned in passing divestiture is the normal remedy, when you have a — has stock out position that violates the act.

When you divest it, you got to divest it in a way that makes it into a strong competitive force in the market.

And that requires, we think Sylacauga Plant be included.

Now —

Potter Stewart:

What do you think about the equities or divestiture, 15 years after the event in the face (Inaudible)

Daniel M. Friedman:

Well, I think Mr. Justice that the equities relating for the situation of the individual firms in this situation must be bounced against the demands of the public interest in restoring effective competition here and I think that in this situation, it is appropriate to divest.

I’d like to add if I may just one thing on how this Sylacauga plant was developed for a year before the acquisition, International was playing a very active role in working out its own plants.

Many of its people had made lengthy trips to Sylacauga to investigate the situation.

International was under constant pressure for King to build a southern plant.

And indeed, they had written in the Spring of 1955.

International had twice informed the Chamber of Commerce of Sylacauga that it had definitely decided to move to Sylacauga, to build a plant in Sylacauga.

And it’s true that at that point, it did not have the financing available but it seems in the light of the pressures that were coming upon International from King and in the light of all these extensive plants, it’s certainly most reasonable and most likely that it — there hasn’t been a situation, International somehow would have found a way to build the plant.

Now it’s quite true the plant was actually built by Greater Buffalo and Greater Buffalo paid for it.

But it seems at least in inception and spirit of the thing, that this was enough of an International plant that it would be appropriate to require that it be divested in order to establish the kind of a strong company that is necessary to restore competition in this industry.

Warren E. Burger:

There is nothing very remarkable though about this rule into the Deep South by expanding industry, is there?

Daniel M. Friedman:

There’s nothing remarkable about but with this exception Mr. Chief Justice, this move into the Deep South was not the typical move where a firm finds that this is an attractive area for various reasons to develop a new factory.

This move into the Deep South was because of the — basically because of the transportation situation, that is the newspapers located in the Deep South would be much better-off financially if they had a nearby plant.

And it’s the newspapers I should mention, it’s the newspapers not the printers that pay the cost of transporting the supplements form the printing plant to the newspaper plant.

And I think, this is what’s involved in this case.

It is an attempt, it is, they moved in there because they needed the plant and I think is a realistic matter if you divest International.

If you divest International without this plant down south, it’s going to be very difficult for there to be any really effective competition created by International.

And that it seems to us is the basic purpose of relief in this case.

Warren E. Burger:

Thank you Mr. Friedman.

Thank you Mr. Raichle.

The case is submitted.