Full opinion text
MEMORANDUM OF OPINION RENFREW, District Judge. Plaintiffs in this antitrust action are independent dealers who purchase, distribute and resell daily newspapers, The Argus and The Daily Review, in various areas located in Alameda County. Defendants are two corporations and several individuals. The Daily Review, Inc. (“DRI”) is a California corporation organized on November 10, 1953, with its principal place of business at Hayward, California. DRI publishes The Argus, The Daily Review, and The Daily Review Showing News, a weekly free shopper. Bay Area Publishing Co. (“BAPCO”) is a California corporation organized on June 8, 1960, with its principal place of business in San Francisco, California. BAPCO conducts most of its business at Livermore, California, where it publishes the Tri-Valley Herald (“Herald”) and the Tri-Valley News (“News”). BAPCO is a wholly owned subsidiary of DRI. None of .the plaintiffs herein has any relationship, contractual or otherwise, with BAPCO. Floyd L. Sparks is the controlling shareholder of DRI, the president of DRI and BAPCO, and publisher of The Argus, The Daily Review, the Herald, and the News. William Chilcote is the business manager of DRI. Dallas Cleland is the director of circulation of The Argus, The Daily Review, the Herald and .the News. John Clark is the assistant circulation manager of The Daily Review and promotion manager of The Daily Review, The Argus, the Herald, and the News. Carl Felder, doing business as Felder Enterprises, is an independent contractor engaged in the solicitation of subscribers for newspapers, including those involved in this case. Plaintiffs have alleged four separate claims for relief, all of which arise under the Sherman Act. First, plaintiffs claim that the provision in their written dealership agreements with the publisher (“Dealer’s Agreement”), in effect between December 1, 1969, and September 1, 1973, which requires the dealer to sell the newspaper to the individual subscriber at a price fixed by the publisher (in effect, the resale-resale price) constitutes a vertical price fixing agreement in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Second, they allege that the unilateral termination provisions of the Dealer’s Agreement as well as the other restraints on plaintiffs’ ability to sell their businesses and the actual termination of plaintiffs and all other home delivery dealers as of September 1, 1973 amount to unreasonable restraints of trade in violation of Sherman Act § 1. Third, plaintiffs claim that the territorial restraints imposed upon them in the Dealer’s Agreement are unlawful under Sherman Act § 1. Fourth, plaintiffs allege that defendants have attempted and conspired to monopolize the publication of community daily newspapers in the southern Alameda County area in violation of § 2 of the Sherman Act, 15 U.S. C. § 2. The complaint prays for preliminary and permanent injunctive relief under § 16 of the Clayton Act, 15 U.S.C. § 26, and for treble damages, costs and attorney’s fees under § 4 of the Clayton Act, 15 U.S.C. § 15. The parties have stipulated and the Court finds that the business involved in this case is either in or substantially affects interstate commerce. The requisite interstate commerce being present, this Court has jurisdiction under 15 U.S.C. §§ 15 and 26. I. THE NEWSPAPERS The Daily Review is published daily, in the afternoon Monday .through Saturday, and in the morning on Sunday. It circulates in Hayward, San Leandro, Fremont, Newark, Livermore and elsewhere in southern Alameda County. Approximately seventy-five percent of its average paid circulation is within the “City Zone”, which as defined by the Audit Bureau of Circulations (“ABC”) consists of the corporate limits of Hayward and Union City plus the balance of the Hayward Census Division, Castro Valley Division, and San Leandro Division including that part of San Leandro City comprising Census Tracts 33, 34, 35, 42, 43 and 44. Along with other newspapers, The Daily Review is legally adjudicated to carry advertising required by law for transactions within the cities of Hayward and San Leandro, and it is the only newspaper adjudicated to carry legal advertising originating with the political entities of the cities of Hayward and San Leandro. Printed in Hayward, The Daily Review has twenty-eight full-time and ten part-time reporters and sixteen advertising salesmen. The Argus is a morning seven-day daily newspaper circulated in Fremont, Newark, Union City, and elsewhere in southern Alameda County. Approximately ninety percent of its average paid circulation, as reported by ABC, is located within the cities of Fremont and Newark. It is legally adjudicated along with other newspapers to carry legal advertising for transactions within Fremont and Newark, and it is the only paper adjudicated to carry legal advertising originating with the political entities of the cities of Fremont and Newark. The Argus is printed in Livermore and employs fifteen full-time reporters and eight advertising salesmen. The Herald (formerly the Livermore Herald & News) and the News (formerly the Village Pioneer) both circulate in the Livermore Valley. The Herald is a seven-day morning daily while the News is a three-day per week, controlled circulation afternoon paper. Approximately ninety-five percent of the average paid circulation of these papers is within the Primary Market Area consisting essentially of Livermore, Pleasanton, and Dublin, all in Alameda County, and the community of San Ramon in Contra Costa County. The Herald and the News share with other papers the adjudication for legal advertising within the cities of Livermore and Pleasanton, but they are the only newspapers adjudicated to carry legal advertising originating with the political entities of those two cities. These two papers are printed . in Livermore and employ fourteen full-time reporters, five part-time reporters, and eight advertising salesmen. The following portions of The Daily Review, The Argus, the Herald, and the News are identical: sports page, financial page, editorial page except for one editorial on two days during the week, T.V. log, “Night and Day Around the Bay,” and substantial amounts of news and advertising. All of the composition work for .these publications is done in Hayward. II. THE INDEPENDENT DEALER SYSTEM This ease focuses on the independent dealer system used by the Sparks’ publications and the publisher’s attempt to change from that distribution system .to one composed of employee dealers (“district managers”) and independent carriers. In approximately 1950 Sparks adopted the independent dealer system for distribution of The Daily Review. Thereafter this system was used for distribution of each daily newspaper acquired by Sparks or DRI so that in May, 1973, all daily newspapers published by companies owned or controlled by Sparks were distributed to home-delivery subscribers through independent dealers and independent carriers. Under this distribution system each dealer, including plaintiffs here, purchased his copies of The Argus or The Daily Review from DRI and resold them for his own account to independent carriers — boys and girls under the age of 18. These carriers, in turn, resold the newspapers to home-delivery subscribers. Each dealer was engaged as an independent contractor pursuant to the terms of a written dealership agreement, not as an employee of DRI. Upon purchase of the newspapers each dealer had complete ownership of, possession of, and dominion over the papers. DRI did not reimburse a dealer for unsold copies, and the dealers had to sustain all losses from carrier defalcations. Each dealer owned such equipment as was necessary for the distribution of the newspapers to the carriers. No dealer under contract to DRI ever paid anything of value to obtain his dealership or carrier organization. These independent dealers derived their profit and paid their expenses from the difference between the price at which they sold the newspapers to their carriers and the price at which they purchased the papers from DRI. Rather than being uniform, however, the base rate charged by DRI for the papers varied among the dealers so that each dealer’s income would be commensurate with the size, density and difficulty of delivery of his territory. By this means it was intended that each dealer would be able to earn an income which would fairly compensate him for his time and effort expended. This dealer income figure was reached jointly by the dealer and the publisher and then used, along with the set subscription price, the carrier’s income (e. g., 57 cents per subscriber per month after October 1, 1969, for The Daily Review) and the number of subscribers, to calculate the base rate for the newspaper for each dealer. Prior to December 1, 1969, DRI used a standard form of dealer’s agreement which provided that the dealer would sell newspapers to the subscribers within his route or territory at a fixed subscription price and that the subscription price, the price paid to the publisher by the dealer, and the size and boundaries of the territory were subject to change by the publisher in his sole discretion. The dealer could not assign, transfer or hypothecate rights arising under the agreement without the prior written consent of the publisher. A dispute arose whether under the terms of this agreement certain Herald and News dealers were independent contractors or employees of the publisher. As a result of this dispute, DRI, with the assistance of the Western Newspaper Industrial Relations Bureau, adopted a new Dealer’s Agreement which went into effect on December 1, 1969, and governed the relations between DRI and BAPCO on the one hand and Daily Review, Argus, Herald, and News dealers on the other until September 1, 1973. That agreement provided in pertinent part: “That the Company will sell to the Dealer such quantities of Daily Review [Argus, etc.] as he shall order * * * to supply the needs of his territory or route * * *. * * * * “That the Dealer will sell the Daily Review [Argus, etc.] at the current subscription rate to his individual subscribers and cause same to be delivered to them each date of publication in a manner consistent with the best interests of both parties to this agreement. That the rate at which the Dealer sells to accounts for resale will be set by himself or through negotiations between himself and the account. -X- -X- -X- -X- “That should the Dealer decide to transfer his rights under this agreement to another party, he will duly advise the Company of his intent sixty (60) days prior to transfer. The Dealer agrees, however, that he will first ascertain that prospective transferee is bondable, has the qualifications and ability necessary to perform all responsibilities under this agreement, to the satisfaction of the Company. The Dealer agrees not to turn territory over to successor until he is fully trained and able to assume responsibilities to the satisfaction of the Company, accounts have been properly audited to permit an orderly transfer with mutual financial protection for parties concerned, and a contract has been executed with the new Dealer. “That either party hereto may terminate this agreement in its entirety upon the giving of thirty (30) days advance notice to the other party or less if mutually agreeable.” During the life of this agreement, all of the independent dealers, including plaintiffs, complied with its terms without any actual or threatened coercive action by the publisher. Prior to September 1, 1973, the Daily Review dealers uniformly sold the paper, through their carriers, to subscribers at the publisher’s suggested home delivery subscription rate of $2.75 per month, the rate which was in effect between October 1, 1969, and February 1, 1974, when the suggested subscription price was increased to $3.25 per month. Sales to subscribers by Argus dealers were also at the publisher’s suggested price. Moreover, when the publisher announced an increase in the Argus monthly home delivery rate, effective March 1, 1973, from $2.50 to $3.00, all of the dealers acquiesced in this change and uniformly charged the higher rate. On five occasions during the last four years the boundaries of four dealers’ territories were realigned, or “split.” Again these dealers voluntarily acquiesced in these realignments. At no time prior to May 14, 1973, did any dealer request defendants’ consent to transfer, assign or sell his dealership nor has any dealer, including plaintiffs, before or after September 1, 1973, either purchased or sold a dealership of any of the newspapers involved in this litigation. III. TERMINATION OF THE INDEPENDENT DEALER SYSTEM AND SUBSEQUENT EVENTS On May 14, 1973, counsel for plaintiffs wrote a letter to Sparks which alleged that certain provisions of the Dealer’s Agreement then in force constituted anti-competitive trade practices and impinged on plaintiffs’ status as independent contractors. Specifically, the letter alleged that the following practices established by the Agreement were anticompetitive: resale price maintenance under which the publisher set the rate at which the carrier sold the paper to the subscribing public; the existence of non-uniform rates at which plaintiffs purchased the newspapers from the publisher; territorial restrictions on the dealers; and potential confiscation of the dealer’s property rights in his business by means of the thirty-day cancellation provision. This letter suggested that plaintiffs were willing to negotiate a settlement rather than engage in litigation. No response to the merits of these charges was made either by the defendants or their counsel who represented them at that time nor was a reply ever made to plaintiffs’ counsel’s second letter on this subject dated July 12, 1973. In a letter dated July 25, 1973, defendants DRI and BAPCO notified all of their respective independent newspaper dealers of the termination of their Dealer’s Agreements effective at the close of business on August 31, 1973. The letter indicated that the entire distribution system was being changed from the use of independent dealers to distribution “through the medium of our employees.” In the letter Sparks explained that “[t]his action is necessary to obtain closer supervision over our circulation, and in particular over efforts to increase such circulation. In our area we face intense competition from such larger paid circulation newspapers as the Oakland Tribune, the San Francisco Chronicle, and the San Jose Mercury-News and additional competition from free distribution newspapers. Any loss in circulation to these or other competitors would adversely affect our advertising revenue.” (Exh. 1 — C.) The termination letter offered employment as a salaried district manager to each terminated dealer. The letter indicated that as employees the district managers would be covered by such federal and state programs as workmen’s compensation, Social Security, unemployment insurance, unemployment compensation disability insurance, and any other programs or benefits required by law. In addition, the employment offer included Blue Cross health insurance, paid vacations and holidays, and a profit sharing plan. Potential district managers were offered a salary of $265 per week (approximately $13,780 annually) and reimbursement for the use of their motor vehicles at the rate of 130 per mile. On August 6, 1973, plaintiffs filed this action and a hearing on plaintiffs’ motion for preliminary injunction was set for August 14, 1973. The parties sought and obtained a continuance of the hearing on that motion on several occasions. The motion was finally withdrawn when the parties agreed to a bifurcated trial on the merits with the liability portion of the trial to begin on November 13, 1973. During this period defendants agreed to continue selling newspapers to plaintiffs at the prevailing rate and* to hold open the offer of employment pending the Court’s decision. After the trial on liability began as scheduled, the parties agreed to a stipulated “temporary injunction” on December 13, 1973. Defendants were thereby enjoined from refusing to sell The Daily Review or The Argus to any of the plaintiffs at his present rate, from communicating except in a specified manner with any of plaintiffs’ carriers or subscribers about the lawsuit or plaintiffs’ prices, and from insulting, harassing or intimidating any of the plaintiffs, their carriers or subscribers until the end of the month in which the court rendered its decision on the liability issues. Plaintiffs were enjoined for the same period of time from insulting, harassing or intimidating any of defendants, their employees or agents, from refusing to provide normal and reasonable distribution service including timely delivery of newspapers and inserts, and from permitting minor children of plaintiffs from entering defendants’ plant or premises except for business. It was further agreed and ordered on that date that defendants’ offer of employment would remain open until the end of the month in which the Court decided the liability issues, that the defendant newspapers could refuse to hire any plaintiff solely on the grounds of a failure properly to perform his duties, that such refusals could be referred to a designated arbitrator, and that no dealer would be denied employment based on his vigorous participation in the lawsuit. The trial continued until February, 1974. The parties thereafter filed proposed Findings of Fact and Conclusions of Law. Final argument in the liability phase was’ heard on March 11 and 12, 1974. The Court announced its decision orally and in open court on the last day of argument finding defendants liable under the first claim. The trial on impact and damages began on April 16, 1974, and continued on April 17-19 and 22-25, 1974. The parties then filed proposed Findings of Fact, Conclusions of Law, and post trial memoranda. Final argument was heard on June 17, 1974. The stipulated “temporary injunction” remained in effect throughout the damage phase of the litigation. Since September 1, 1973, defendants have had a mixed distribution system. On that date sixteen districts of The Daily Review were converted from an independent contractor dealer/independent carrier operation to an employee/independent carrier system under which the carriers contract directly with the publisher. In all of these districts as well as those in which Argus, Herald, and News dealers became employees, the independent carriers have continued to charge the advertised subscription price for the newspaper at all times to date. Plaintiffs have continued as independent dealers pursuant to defendants’ agreement and subsequently pursuant to the stipulated temporary injunction. Between September 1, 1973, and November 1,1973, seven plaintiffs increased their prices of The Daily Review to their carriers and pursuant to their suggestion their carriers raised the subscription price above that advertised by the publisher. When each such price increase occurred, all professional solicitation for new customers in that district ceased although such solicitation continued in the districts of the employee dealers (district managers). While defendants attempted to persuade these independent solicitors to solicit new subscriptions within the plaintiffs’ districts at the new prices specified by the dealer, these solicitors were reluctant to solicit at different prices and when they attempted to do so experienced some confusion and disruption among their staff of solicitors. Defendants encouraged solicitation in plaintiffs’ districts because about one third of the total circulation of The Daily Review is located within those districts, but defendants were careful to instruct the solicitors to solicit only at the dealer’s price in order to avoid any accusation that defendants were trying to coerce the dealers’ pricing policy or injure their businesses. To that end Cleland prepared a list of streets located within the districts of price-raising dealers and told the professional solicitors that if they were going to solicit in those areas it had to be at the dealer’s suggested price. Defendants did not attempt to prevent their professional solicitors from soliciting at the dealer’s price within the price-raising dealer’s districts nor have defendants attempted to interfere in any way with plaintiffs’ dealerships during the pendency of this action. IV. THE ALLEGED ANTITRUST VIOLATIONS A. Vertical Price Fixing Plaintiffs’ first claim for relief asserts a per se violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Citing Albrecht v. Herald Co., 390 U.S. 145, 88 S.Ct. 869, 19 L.Ed.2d 998, rehearing denied, 390 U.S. 1018, 88 S.Ct. 1258, 20 L.Ed.2d 169 (1968), plaintiffs contend that the Dealer’s Agreement provision which requires them (through their independent carriers) to sell the newspapers at “the current subscription rate,” which is set by the publisher, amounts to a vertical price fixing agreement. Defendants concede that this contract provision is an agreement to maintain the resale price of the newspaper, but they contend that in the absence of actual coercion of the dealers by the publisher, such agreements to maintain resale prices do not constitute vertical price fixing agreements and therefore should be judged under the rule of reason rather than by the per se standards applied generally in price fixing eases. While defendants do not cite any cases which specifically require coercion as an element in an illegal vertical price fixing arrangement, they argue that actual coercive conduct has been found and relied upon in those cases which hold such vertical price fixing arrangements to be per se illegal. Defendants contend that since there is no evidence of coercive conduct by any of the defendants in this case, the holdings of these per se cases do not control the outcome here. It is true that in finding liability in Albrecht the Supreme Court did refer to the strong evidence of coercive conduct by the publisher in that case. Albrecht v. Herald Co., supra at 149-150, 88 S.Ct. 869, 19 L.Ed.2d 998. Similarly, in Dahl v. Hearst Corp., 1973 Trade Cas., ¶ 74,322 (C.D.Cal.1972), the court concluded that the defendant publisher’s actions in response to plaintiff’s resale price increase amounted to “coercive tactics and threats designed to force Dahl to require his carriers to sell the Herald-Examiner at the resale prices fixed by defendants in violation of Section 1 of the Sherman Act.” Dahl v. Hearst Corp., supra at p. 93,488. In both of those cases the dealers had actually increased their resale price, and the publishers had responded by taking action to force the recalcitrant dealer into line or out of business. In the instant case there has been no such coercion; in fact, plaintiffs and all other dealers acquiesced in the fixed retail price throughout the life of the Dealer’s Agreement in question. While the coercion found in Albrecht and Dahl does not exist here, both of those cases lacked a significant element which is clearly present in this case, namely, an agreement in the form of a written contract which on its face places control of the resale price in the hands of the publisher. Sherman Act § 1 prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade * * 15 U.S.C. § 1. The courts in Albrecht and Dahl relied upon the coercive conduct of the publisher in order to find an illegal “combination” to fix retail prices between the publisher and those who complied with or acquiesced in his wishes. Albrecht v. Herald Co., supra, 390 U.S. at 149-150, 88 S.Ct. 869; Dahl v. Hearst Corp., supra at 93,488. This same reasoning underlies the result in United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960). In that case a pharmaceutical products manufacturer announced a resale price maintenance policy in its wholesalers’ and retailers’ catalogues. No actual contract fixing the resale price was entered into by the wholesalers or retailers. When several retailers advertised and sold Parke Davis vitamin products substantially below the suggested minimum retail prices, Parke Davis instituted a program to obtain compliance with its suggested prices. As part of that program Parke Davis advised the wholesalers that not only would it refuse to sell any Parke Davis products to wholesalers who did not observe the catalogue prices but also that it would refuse to sell to wholesalers who sold Parke Davis products to retailers who did not follow the suggested minimum prices. The wholesalers expressed their willingness to comply. All the retailers were similarly advised, but when several retailers continued to sell at below minimum prices, their names were supplied by the manufacturer to the wholesalers who then refused to fill those retailers’ orders. When charged with a violation of the Sherman Act, Parke Davis argued that the facts showed nothing more than a unilateral announcement of policy regarding resale prices followed by a simple refusal to deal with those who disregarded that policy, conduct which is lawful under United States v. Colgate & Co., 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919). The Court disagreed: “In thus involving the wholesalers to stop the flow of Parke Davis products to the retailers, thereby inducing retailers’ adherence to its suggested retail prices, Parke Davis created a combination with the retailers and the wholesalers to maintain retail prices and violated the Sherman Act.” United States v. Parke, Davis & Co., supra at 45, 80 S.Ct. at 512. Where, as here, there is an express or implied agreement which places control of the resale price in the hands of the manufacturer or publisher, a search for such combinations by coercive conduct becomes irrelevant. Where, in the context of such vertical relationships, title, dominion and risk with respect to the goods in question have passed to the dealer, the price fixing agreement, whether express, tacit, or implied, is itself illegal. Dr. Miles Medical Co. v. Park & Sons Co., 220 U.S. 373, 398-400, 407-408, 31 S.Ct. 376, 55 L.Ed. 502 (1911); United States v. Parke, Davis & Co., supra, 362 U.S. at 45 n. 6, 80 S.Ct. 503; United States v. Bausch & Lomb Co., 321 U.S. 707, 721, 64 S.Ct. 805, 88 L.Ed. 1024 (1944). “[T]he long-accepted rule in § 1 cases [is] that resale price fixing is a per se violation of the law whether done by agreement or combination.” Albrecht v. Herald Co., supra, 390 U.S. at 151, 88 S.Ct. at 872 (footnote omitted). Here there is such an agreement in the form of a written contract, and it is a per se violation of § 1 even though it fixes the maximum rather than the minimum resale price, ibid, at 152-153, 88 S.Ct. 869; Kiefer-Stewart Co. v. Seagram & Sons, 340 U.S. 211, 213, 71 S.Ct. 259, 95 L.Ed. 219, rehearing denied, 340 U.S. 939, 71 S.Ct. 487, 95 L.Ed. 678 (1951) and even though the agreement is between a single supplier and his many dealers. Albrecht v. Herald Co., supra, 399 U.S. at 152 n. 8, 88 S.Ct. 869. B. The Terminations In their second claim for relief plaintiffs contend that DRI and BAPCO have combined and conspired to deprive plaintiffs of their contract right to transfer and sell their newspaper distribution businesses and to appropriate and convert these businesses, including the distribution organizations, subscribers and good will of each business, to defendants’ own use without just compensation. This deprivation and appropriation allegedly occurred when, pursuant to the thirty-day termination clause in the Dealer’s Agreement, defendants terminated their entire independent dealer system for home delivery thereby preventing plaintiffs from realizing the asserted value of these businesses by sale or transfer either to the publisher or to a third party who desired to enter the distribution business as an independent contractor. Plaintiffs assert that this combination or conspiracy had both an anticompetitive purpose, namely to increase the publisher’s control over the subscription price of his newspapers, and the anticompetitive effects of depriving the public of an independent competitive level in the distribution of these newspapers and depriving plaintiffs of the market value of their business. Relying on Industrial Bldg. Materials, Inc. v. Interchemical Corp., 437 F.2d 1336, 1342 (9th Cir. 1971), plaintiffs argue that because of these anticompetitive effects and purpose, the combination or conspiracy which l'esulted in their terminations is an unreasonable restraint of trade in violation of § 1 of the Sherman Act. In their complaint plaintiffs apparently advance the additional contention that the termination and transfer provisions of the Dealer’s Agreement were themselves so restrictive that on their face these provisions unreasonably restrained the transfer of dealerships in violation of § 1 of the Sherman Act. This assertion was not stressed at trial, however; nevertheless the Court will address this contention briefly below. Defendants’ response is twofold. First they take the position that there can be no combination or conspiracy here between DRI and BAPCO since the decisions to terminate about which plaintiffs complain were made by only one individual, Sparks, the common president and controlling owner of these two corporations, who made independent decisions for each corporation. At worst, defendants contend, the proof demonstrates nothing more than conscious parallelism which by itself does not establish an illegal combination or conspiracy. Theatre Enterprises v. Paramount, 346 U.S. 537, 540-541, 74 S.Ct. 257, 98 L.Ed. 273 (1954); Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71, 84-85 (9th Cir. 1969), cert. denied, 396 U.S. 1062, 90 S.Ct. 752, 24 L.Ed.2d 755, rehearing denied, 397 U.S. 1003, 90 S.Ct. 1113, 25 L.Ed.2d 415 (1970); Independent Iron Works, Inc. v. United States Steel Corp., 322 F.2d 656, 661 (9th Cir.), cert. denied, 375 U.S. 922, 84 S.Ct. 267, 11 L.Ed.2d 165 (1963). Second, defendants contend that the change in the distribution system was effected for the valid business reason of avoiding any antitrust violation which might have existed in the Dealer’s Agreement while maintaining as much influence over the subscription price as the law would allow. Given the interrelationship of subscription price, circulation, and advertising revenues, defendants assert that the change in distribution system and the attendant terminations were reasonable actions. The Court finds that since Sparks alone made the decision to change distribution systems and terminate all independent dealers for both DRI and BAPCO, there was no combination or conspiracy between DRI and BAPCO to restrict plaintiffs’ transfer rights and appropriate plaintiffs’ businesses. The Court also finds that even if there had been the requisite combination or conspiracy, plaintiffs have not established by a preponderance of the evidence that defendants’ change of distribution system which resulted in the termination of plaintiffs’ independent businesses was, in the circumstances of this case, an unreasonable restraint of trade. Nor have plaintiffs proved that the transfer and termination provisions of the Agreement themselves unreasonably restrained trade. In their effort to establish the combination or conspiracy required as the basis of a Sherman Act § 1 violation, plaintiffs contend that any time the common owner or any responsible common executive of more than one corporation makes the same decision at the same time for each of those corporations, that decision-making act establishes the necessary concerted action. As authority for this proposition, plaintiffs cited during final argument United States v. Yellow Cab Co., 332 U.S. 218, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947); Timken Co. v. United States, 341 U.S. 593, 71 S.Ct. 971, 95 L.Ed. 1199 (1951); KieferStewart Co. v. Seagram & Sons, 340 U. S. 211, 71 S.Ct. 259, 95 L.Ed. 219, rehearing denied, 340 U.S. 939, 71 S.Ct. 487, 95 L.Ed. 678 (1951); and Perma Mufflers v. Int’l Parts Corp., 392 U.S. 134, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968). With respect to the issue of common ownership, these cases merely hold that common ownership and control do not immunize corporations from the impact of the antitrust laws in cases where a contract, combination or conspiracy has already been or could be established on other grounds, such as the actual agreements in Timken, the statements and conferences indicating the common design and understanding in Kiefer-Stewart, or the allegations of actual conspiracy taken as true on the motion to dismiss in Yellow Cab. None of these cases is support for the proposition that common ownership alone establishes the existence of the requisite combination or conspiracy. The better rule, and the one which this Court adopts, is that relied upon in Windsor Theatre Co. v. Walbrook Amusement Co., 94 F.Supp. 388, 396 (D.Md.1950), aff’d, 189 F.2d 797 (4th Cir. 1951), where the district court held that since there was “no evidence that the activities of the two defendant corporations were directed or caused by any one other than Thomas Goldberg who was the president and chief executive of both corporations”, there could be no “meeting of two or more minds” and therefore no conspiracy between the two corporations. Plaintiffs here have presented no evidence other than Sparks’ decision, such as the active participation of other corporate officers or agents in this decision, which would support a finding that DRI and BAP CO combined or conspired to violate § 1, and therefore, plaintiffs’ second claim for relief fails to satisfy one of the essential elements of Sherman Act § 1. Assuming arguendo that a combination or conspiracy did exist, plaintiffs have nonetheless failed to prove by a preponderance of the evidence that either the transfer and termination clauses in the Dealer’s Agreement or the actual terminations under the circumstances of this case were unreasonable restraints of trade. Plaintiffs rely heavily on Industrial Bldg. Materials, Inc. v. Interchemical Corp., 437 F.2d 1336 (9th Cir. 1971), which is, they contend, “[t]he leading case” on the question of conversion from independent dealer to direct distribution and “closely analogous to the instant case * * Plaintiffs’ Trial Brief, p. 22. That reliance, however, is not well placed. In Industrial, defendant Interchemical Corporation’s Presstite Division (Presstite) bypassed its formerly exclusive distributor, Industrial, and distributed its sealing products directly to Industrial’s customers thereby competing with and eventually eliminating Industrial as a distributor. The case is replete with allegations of price discrimination and unfair practices used by Presstite to lure customers away from Industrial. In framing the precise issue to be decided, the court noted that “[i]n this case * * * there is an allegation that Presstite, instead of merely refusing to deal with Industrial, sought to drive it out of business by unlawful means.” Industrial Bldg. Materials, Inc. v. Interchemical Corp., supra at 1341. Presstite had competed directly with its own distributor, and the court relied on that fact to distinguish those cases which held that a manufacturer is free to agree with others to replace a distributor: “In each of those cases, however, the manufacturer did not enter into competition with the distributor, and there was no removal of a competitor of the manufacturer from the market.” Ibid, at 1342. Unlike Presstite, defendants here engaged in no predatory conduct directed against the dealers and never intended to compete against their own dealers by .instituting a mixed system for home delivery circulation involving both independent dealers and employee district managers. The court in Industrial was also concerned about the allegation that Presstite had monopoly power over the industrial sealant industry. This allegation was, in the court’s view, at least sufficient to raise the likelihood of a restraint on trade in Presstite products. Yet plaintiffs here have not established nor have they attempted to establish with precision either the relevant market or defendants’ position in that market. As a result, the Court cannot rely here on the inferential anticompetitive effects of dominant market power as did the court in Industrial. Thus plaintiffs have failed to establish in this case any of the three factors —unfair tactics, direct competition by the manufacturer with his distributor, or dominant market power — on which the court in Industrial relied when it reversed the summary judgment which had been entered in defendant’s favor on the § 1 claim. Moreover, that court specifically reserved the precise question before this court, namely, whether the antitrust laws preclude “a manufacturer from ever replacing a system of independent distributors with its own system of direct sales and of soliciting customers on its own.” Industrial Bldg. Materials, Inc. v. Interchemical Corp., supra 437 F.2d at 1343. The authorities cited by defendants persuade the Court that a manufacturer does not violate the antitrust laws simply by discontinuing his dealings with a particular distributor. “Thus, a manufacturer may discontinue a relationship, or refuse to open a new relationship for business reasons which are sufficient to the manufacturer, and adverse effect on the business of the distributor is immaterial in the absence of any arrangement restraining trade or competition.” Ricchetti v. Meister Brau, Inc., 431 F.2d 1211, 1214 (9th Cir. 1970), cert. denied, 401 U.S. 939, 91 S.Ct. 934, 28 L.Ed.2d 219 (1971). A manufacturer can lawfully agree with a third party to give him an exclusive distributorship even if this means cutting off another distributor. Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., supra 416 F.2d at 76. To hold otherwise would be to saddle forever a manufacturer or supplier with the services of a particular distributor. Cartrade, Inc. v. Ford Dealers Adv. Ass'n, 446 F.2d 289, 294 (9th Cir. 1971), cert. denied, 405 U.S. 997, 92 S.Ct. 1249, 31 L.Ed.2d 465 (1972). Nor is a manufacturer forever bound to use the same system of distribution when sound business considerations suggest that a different method be used. Thus, a manufacturer can lawfully terminate an independent distributor and thereafter sell exclusively through its own outlets. Bushie v. Stenocord Corp., 460 F.2d 116 (9th Cir. 1972); Ark Dental Supply Co. v. Cavitron Corp., 461 F.2d 1093 (3d Cir. 1972) (decision of defendants, a parent and its subsidiary, to sell their products, only through the parent’s sale division, thereby excluding sales by independents such as plaintiffs, did not violate § 1 of the Sherman Act). The defendants sought to make just such a change in their distribution system, and they merely exercised their contractual right to terminate the dealers to effect that change. Nevertheless Bushie v. Stenocord Corp., supra, and the other authorities which permit terminations are not dispositive of the instant case since each one permits such terminations only so long as there is present no anticompetitive intent or no resultant effect which unreasonably restrains trade. Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., supra 416 F.2d at 76-80; Bushie v. Stenocord Corp., supra 460 F. 2d at 119-120; Alpha Distrib. Co., Inc. v. Jack Daniel Distillery, 454 F.2d 442, 452 (9th Cir. 1972) ; Cartrade, Inc. v. Ford Dealers Adv. Ass’n., supra 446 F.2d at 293; Ricchetti v. Meister Brau, Inc., supra 431 F.2d at 1214. See also Chisholm Brothers Farm Equipment Co. v. International Harvester Co., 498 F.2d 1137, 1143 (9th Cir. 1974). Therefore the Court must look to the particular facts of this case to determine whether or not the instant contract provisions or the terminations of plaintiffs which occurred pursuant to DRI’s decision to change its entire distribution system were unreasonable restraints of trade either because defendants had an anti-competitive purpose or because the actions themselves had unreasonable anti-competitive effects. This analysis of the reasonableness of the particular restraint in question, “includes consideration of the facts peculiar to the business in which the restraint is applied, the nature of the restraint and its effects, and the history of the restraint and the reasons for its adoption.” United States v. Topeo Associates, 405 U.S. 596, 607, 92 S.Ct. 1126, 1133, 31 L.Ed.2d 515 (1972); Chicago Board of Trade v. United States, 246 U.S. 231, 238, 38 S.Ct. 242, 62 L.Ed. 683 (1918). Turning first to the contract provisions themselves, plaintiffs have failed to prove that the transfer and termination provisions were based on an anticompetitive purpose or had actual anticompetitive effects. Although interstate commerce is affected by the publication, distribution, and sale of the newspapers in question, it is not clear that the transfer of a local newspaper dealership from one individual to another within the same locality has any effect, much less a “ ‘not insubstantial effect’ ”, on interstate commerce. Cf. Cartrade, Inc. v. Ford Dealers Adv. Ass’n., supra 446 F.2d at 292-294. Even if such an effect is assumed, the evidence in this case does not support a finding that these provisions violate § 1. These clauses are actually less restrictive than those contained in the Dealer’s Agreement in effect prior to December 1, 1969. Rather than resulting from an anticompetitive intent, the change to the new language was made to insure the dealer’s rights to transfer his contractual interest and thus to confirm the dealer’s status as an independent contractor. Given the publisher’s legitimate concern for the quality and speed of service provided by his dealers, the restrictions on transfer which enable the publisher to verify the character and financial responsibility of the transferee, and the termination provision which enables either party to extricate himself from an unsatisfactory situation cannot be said on the basis of the record in this case to have had such anticompetitive effects that they constitute unreasonable restraints of trade. Plaintiffs’ more substantial allegation is that the actual terminations of their dealerships violated § 1 because they were motivated by an anticompetitive purpose and because they had the following anticompetitive effects: (1) elimination of distributors who are independent of the publisher; (2) appropriation of the fair market value of plaintiffs’ businesses without compensation which leaves plaintiffs without the financial ability to continue in business as distributors of other newspapers; and (3) further strengthening of defendants’ already dominant market position. The Court finds, however, that plaintiffs have failed to prove by a preponderance of the evidence that-defendants had such a purpose or that the changeover had such anticompetitive effects. On the basis of the entire record in this case the Court finds that the wholesale distribution system of defendants' newspapers was not changed for the anticompetitive purpose of maintaining or extending unlawful control by defendants over the subscription price of their newspapers. Sparks testified that the new system was adopted to eliminate the practices which had been claimed to be unlawful to enable the publisher to remain competitive by maintaining as much flexibility in his operations as possible and as much influence over the circulation of the newspapers as the law would pfermit. (November 16, 1973, Tr., pp. 139-141, 146. Having observed Sparks during the trial and after careful evaluation of his credibility, the Court is satisfied that his decision to convert the distribution system was an honest effort to adopt a distribution plan which would be commercially sound and which would comply with the antitrust laws. This conclusion is reinforced by the fact that defendants sought to convert all of their home-delivery dealers to employees; defendants did not merely terminate a few errant dealers as punishment for their failure to adhere to defendant’s pricing policy. Cf. Albrecht v. Herald Co., supra; Dahl v. Hearst Corp., supra. Defendants’ newspapers derive their revenues both from the sale of newspapers and from the sale of advertising. Generally, revenues from advertising are more significant than those from newspaper sales, and newspaper owners, in developing an over-all business strategy, are much more interested in the profitable flow of advertising revenue than in circulation revenue. Defendants’ newspapers clearly conform to this pattern since they derive approximately 88% of their revenues from advertising and approximately 12% from circulation. The advertising revenues of a newspaper are, of course, a function of the quantity of advertising space purchased by advertisers which in turn is influenced by the following factors among others: (a) price of advertising, (b) circulation, (c) quality of newspaper product, (d) availability of run of press color, and (e) level of advertising selling effort. The first two of these factors, price of advertising and circulation, are the most important since advertisers are chiefly concerned with the cost to them per relevant exposure to potential buyers. Advertisers have access to statistics in the form of audit reports, surveys and representations from certain media concerning the percentage of households in given areas reached or claimed to be reached by each newspaper, television or radio station, and magazine. This rate of penetration, determined largely on the basis of circulation within a specific geographic area in the case of newspapers, along with the per inch cost of advertising space is of paramount importance to advertisers in their purchasing decisions. Circulation, and hence the newspaper’s rate of penetration, may vary with the subscription price of the newspaper. Circulation generally will decrease after an increase in the subscription price unless the publisher or someone else reallocates his resources in order to influence or control such a result, for example, by increasing expenditures for the solicitation of new subscriptions or increasing the quality of the product. Assuming that such a reallocation cannot be profitably undertaken or that it is ineffective, circulation will decline when the subscription price increases and advertising demand will therefore decline resulting in a reduction of the advertising space carried by the newspaper. This reduction will make the newspaper less desirable to subscribers which in turn will decrease circulation and lead to a further loss of advertising demand. Dr. Rosse, a well-qualified expert in the field of newspaper economics testified that as a result of this process, a publisher, such as defendants here, whose revenues are derived approximately 88% from advertising and 12% from circulation could expect a loss of total revenue in the vicinity of 40% if the subscription price for 100% of his circulation were increased by 10%. (February 12, 1974, Afternoon Tr., pp. 27-30.) While the court does not adopt the precise figures contained in this testimony, it does find that there is an interrelationship between loss of circulation and advertising revenue. The precise effect on total revenue of any particular increase in the subscription price will depend on the amount of the increase and the percentage of the circulation which is selling at the increased price. For these reasons the publisher is vitally concerned with the subscription price because of its integral relationship to the whole revenue structure and ultimate profitability of the newspaper. The publisher is also interested in having a uniform subscription price since that uniformity facilitates the promotion of circulation and avoids hostility toward the newspaper from subscribers who are paying more for the paper than are other subscribers. The profits of independent dealers are derived, on the other hand, solely from circulation. They have no direct financial interest in the advertising revenue received by the publisher and derive no income from such advertising payments. These independent contractors have little, if any, knowledge about or interest in the overall revenue structure of the newspaper or the effects which an increase in the subscription price will have on the other operations of the newspaper, such as advertising space, editorial quality of the paper or quantity of news and features. While they are, no doubt, concerned about the general economic welfare of the newspaper, the independent dealer’s paramount interest is in maximizing his own profits which are derived exclusively from circulation. Thus an increase in the subscription price may ultimately reduce the publisher’s profits, even though such an increase may increase an individual dealer’s revenue and profits. Even if circulation declined, the resulting reduction in a dealer’s overhead might enable him to maintain a steady profit with less effort on his own part. Thus the publisher’s and the dealer’s attitudes toward the subscription price are not parallel and under some circumstances may be directly in conflict. Moreover, since the additional revenues generated by dealer-initiated price increases are retained by the dealer, the publisher has no additional revenue for financing his efforts to intensify promotional activities in order to maintain his circulation and advertising revenue at a constant level. In the San Francisco Bay Area, the defendant newspapers are properly categorized as suburban newspapers. However, since the Bay Area is a metropolis which includes a major city, two so-called satellite cities, Oakland and San Jose, each with its own metropolitan newspaper, and many suburban communities, defendant newspapers compete with metropolitan newspapers, satellite city newspapers, and neighboring suburban newspapers. Defendant newspapers compete for circulation and advertising with the Oakland Tribune, San Francisco Chronicle, San Francisco Examiner, San Jose Mercury-News (Argus only), Contra Costa Times, Valley Times, Pleasanton Times, Valley Pioneer, Alameda County Observer, The Friday Observer, The Dollar Saver, preprints, circulars, and direct mail advertising printed and distributed by advertisers and potential advertisers within the areas of circulation of defendants’ newspapers. Defendant newspapers may also be competitive for both public attention and advertising dollars, with a number of commercial and noncommercial television and radio stations and many national, regional and local magazines. All of these media and others penetrate defendant newspapers’ area of circulation. Defendants Sparks and Cleland testified that there appears to be no economically feasible alternative to home delivery of daily newspapers containing current news, entertainment, and advertising features in urban areas other than by independent contractor carriers, who receive considerably less than the minimum wages the law would require if such carriers were employees. In their opinion carrier-delivery is essential to the maintenance of home delivery. In light of these circumstances, Sparks’ decision, made on or about July 15, 1973, for both DRI and BAPCO, to terminate all independent contractor wholesale dealers and transfer their functions to company employees cannot be said to have been made for the anti-competitive purpose alleged by plaintiffs. The Court finds credible Sparks’ testimony that his decision was made to ensure that his businesses were in full compliance with the law and to maintain simultaneously the greatest degree of influence which the law would allow over all aspects of the circulation of the newspapers, including not only influence over the subscription price but also over the frequency of publication, method of payment, type of distribution (paid, controlled or free), etc. Sparks desired influence in these areas in order to meet the competition to and preserve the financial integrity of the newspapers. The fact that the new system was based, in part, on defendants’ belief that adolescent carriers would be less likely to deviate from the publisher’s suggested price does not constitute sufficient proof of an intent to continue a resale price-fixing policy. Instead it supports defendants’ position that the new system would be viable without resort to price fixing or coercion. First, the subscription price is less important to the young carriers who do not depend for their entire livelihood on their paper routes, and, second, the magnitude of the impact upon circulation resulting from a deviation by an individual carrier with his relatively small number of papers would be far smaller than that caused by an independent dealer’s price increase. The new contracts in effect between the carriers and the newspapers contain no reference to the subscription price, and there is no credible evidence that since September 1, 1973, defendants have done anything more than suggest a subscription price to the carriers. On the basis of the evidence herein the Court finds that the change in distribution system was not motivated by an anticompetitive purpose but rather was implemented for the purpose of terminating the previous system whose legality had been challenged. The existence of a sound business reason however is not enough to avoid an antitrust violation. “The antitrust outcome does not turn merely on the presence of sound business reason or motive * * * [O]ur inquiry cannot stop at that point. Our inquiry is whether, assuming nonpredatory motives and business purposes and the incentive of profit and volume considerations, the effect upon competition in the market place is substantially adverse. The promotion of self-interest alone does not invoke the rule of reason to immunize otherwise illegal conduct. It is only if the conduct is not unlawful in its impact in the marketplace or if the self-interest coincides with the statutory concern with the preservation and promotion of competition that protection is achieved.” United States v. Arnold, Schwinn & Co., 388 U.S. 365, 375, 87 S.Ct. 1856, 1863-1864, 18 L.Ed.2d 1249 (1967); Anderson v. American Automobile Association, 454 F.2d 1240, 1246 (9th Cir. 1972). Plaintiffs’ allegations of anticompetitive impact, or effect on the marketplace, however, have not been established by a preponderance of the evidence. Plaintiffs have failed to prove that there was, in fact, actual intrabrand competition among the independent dealers as to price or service. On the contrary, the parties have stipulated that at no time prior to September 1, 1973, did any of plaintiffs’ carriers charge more for home delivery than the subscription price advertised by the publisher. More significantly, even after September 1, 1973, there has been no competition among plaintiffs with respect to price or territory except for a few isolated instances where one dealer placed a vending machine in the territory of another dealer. Even without the independent wholesale dealers, subscribers are protected from overreaching by the publisher by the fierce competition for advertising revenues which are based upon circulation. Thus in order for the publisher to maximize his circulation he must keep the subscription price as low and the delivery service as good as possible. There is also active competition for circulation from other newspapers and other news media. While counsel argued that independent dealers can be used to distribute competitive newspapers, plaintiffs have never demonstrated a willingness or desire to provide such distribution. Plaintiffs Williams and Berthiaume were contacted by the managing editor of The Friday Observer who sought to utilize their distribution organizations for his weekly paper, but neither plaintiff undertook the distribution of this competing newspaper. Nor have plaintiffs proved that the start-up costs of a distribution business are such that, if they do not accept employment with DEI, they could not undertake the distribution of another newspaper. No covenant not to compete after termination was contained in the Dealer’s Agreement. The alleged appropriation of the value of plaintiffs’ businesses has not been proved to have had such an adverse effect that the change of system would constitute an unreasonable restraint of trade. Given the generous offer of employment which accompanied the termination notice and the speculative value of these businesses, plaintiffs have failed to prove that the terminations were unreasonable within the purview of § 1. In Noble v. McClatchy Newspapers, 1972 Trade Cas. ¶ 73,957 (N.D.Cal.1972), the court submitted to the jury the question of whether the refusal of a publisher to permit its dealer to sell his dealership, after being notified of his termination, was the result of a contract, combination or conspiracy in unreasonable restraint of trade. In light of all the circumstances in that case, which unlike the instant case did not include a complete conversion of the distribution system and termination of all dealers, the jury found that the termination was lawful but that the refusal to permit a sale was a violation of § 1 of the Sherman Act. In this case, however, the Court has decided the latter issue adversely to plaintiffs. Plaintiffs’ proof on their third alleged anticompetitive effect is also inadequate. To prove that a particular action is unreasonable because it tends to strengthen an already dominant market position, one must first establish that dominance by defining the relevant product and geographic markets and defendants’ precise position in those markets. In Industrial Bldg. Materials, Inc. v. Interchemical Corp., supra on which plaintiffs rely, there were allegations that Presstite had monopoly power in the industrial sealant industry or at least a dominant position in that market. In reversing the summary judgment granted in Presstite’s favor, the Court of Appeals gave plaintiff the opportunity to prove those allegations to support its claim that its termination was unlawful. Plaintiffs here have had that opportunity, but they have not adequately defined the relevant market by identifying those news and advertising sources which are reasonably interchangeable with defendants’ newspapers. In light of the competition in the dissemination of news and advertising which does exist between Bay Area newspapers — large and small —and which may also exist among newspapers, radio, television and direct advertising by mail and handouts, plaintiffs have failed to prove that the suburban newspaper market, in which defendants by definition have a dominant position, is indeed the relevant market or submarket. Cf. Bowen v. New York News, Inc., 366 F.Supp. 651, 675-676 (S.D.N.Y.1973). The terminations complained of here were determined necessary by the publisher to change the system of distribution of his newspapers in order to avoid the antitrust violations alleged to exist in his old system while at the same time maintaining as much influence over the circulation of his papers as the law would allow, an influence necessitated by the economic realities of the newspaper business. Cf. Instant Delivery Corp. v. City Stores Co. (Lit Bros. Div.), 284 F.Supp. 941, 947 (E.D.Pa.1968); Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., supra 416 F.2d at 79. In the particular circumstances of this case, the record does not permit a finding that the change in distribution system and the resulting terminations of plaintiffs had either the anticompetitive purpose or effects necessary to render those actions unreasonable restraints of trade in violation of § 1 of the Sherman Act. The decision herein must not be interpreted, however,