Magazine Wholesaler’s Collusion Case Felled By Twombly

Judge Paul Crotty of the U.S. District Court for the Southern District of New York dismissed with prejudice an antitrust suit brought by bankrupt magazine wholesaler Anderson News LLC against a host of single-issue magazine publishers. 

Crotty ruled that Anderson’s allegations of a broad industry-wide conspiracy did not meet the plausibility standards set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), saying that it was implausible that magazine publishers would conspire to deny retailers access to their own products. 

Anderson had proposed a small surcharge on magazines in January 2009 with the goal of improving efficiency by giving suppliers a financial incentive to not ship extra copies, but Anderson claimed that in response the suppliers collectively pulled out of deals with Anderson, eliminating 80 percent of its business and its most popular titles, including People, Time and Sports Illustrated. 

Anderson ceased business operations in February 2009, and sued in March 2009 accusing the publishers of conspiring to monopolize the U.S. wholesale single-copy magazine distribution market.  The defendants included American Media Inc., Bauer Publishing, Curtis Circulation, Distribution Services, Hachette Filipacchi, Kable News, Rodale Publishing, Time Inc. and Time Warner Retail. 

This is yet another antitrust case felled by the new plausibility standard set forth in Twombly which requires plaintiffs to state a plausible (not merely possible or conceivable) claim for relief in order to survive a motion to dismiss. 

Update: On August 17, 2010, Anderson News asked Judge Crotty to reconsider his decision dismissing the lawsuit.

Anderson argues that Judge Crotty erred in concluding that the publishing companies had an economic self-interest in more wholesalers, not less.  Anderson claims that, to the contrary, the publishers had a powerful incentive to engage in their conspiracy, namely, to control the single-copy magazine distribution system so as to shift the increasing costs in the distribution system to retailers and consumers, and away from the defendant publishers and their national distributors.

The case is Anderson News LLC et al. v. American Media Inc. et al., case number 1:09-cv-02227 (S.D.N.Y.).