Federal Appeals Court Upholds Anti-Trust Ruling Regarding Wholesale Distribution of Magazines and Newspapers in Maine

Hudson News Company and Portland News Company Further Vindicated by Appeals Court Ruling

The U.S. Court of Appeals has upheld a lower court decision dismissing an anti-trust claim against Maine's largest wholesale distributor of magazines, newspapers and other periodicals. The original ruling concluded that consumers and retailers are not harmed by the distribution system.

The federal appeals court decision, announced Tuesday, further vindicates Hudson News Company and Portland News Company, whose lawyers from Bernstein, Shur, Sawyer & Nelson had argued that its distribution of magazines to large retail chains throughout the state was healthy and legal.

"This is an important anti-trust decision because it clarifies the law as it applies to wholesale distributors," said John M.R. Paterson, a top litigator in the state and a longtime shareholder at Bernstein, Shur. "And in the end, it's a victory for consumers."

In January, U.S. District Court Judge Gene Carter upheld a magistrate's decision to dismiss an anti-trust suit filed by Augusta News Company in 1999 against Hudson News Company and Portland News Company, who have since merged. Augusta News Company claimed it was unfairly driven out of business in the mid-1990s during a "regionalization" of the system of distribution to retail chains such as Wal-mart, Hannaford, Shaw's, Rite Aid and Cumberland Farms.

Paterson contended his clients acted appropriately and lawfully at the time in responding to market needs by creating efficiencies that competitors could not provide. Prior to the consolidation, large retailers with stores located in several areas were forced to purchase magazines and periodicals from numerous local distributors such as the Augusta News Company, regardless of the quality of service and the retailers' desire to reduce the number of distributors servicing the chain.

The appeals court ruling "protects a system of distribution that ensures Maine retailers and consumers are provided with the magazines and newspapers that they want," Paterson said.

The court case also raised the newly-debated legal issue of "slotting fees" or up-front fees that wholesalers often pay retailers for shelf space. In this case, the court determined that payment of those fees was not illegal as Augusta News Company claimed.

"Slotting fees create efficiencies by allowing retailers to manage their products and remain competitive, which in turn benefits consumers," said attorney Ronald W. Schneider Jr., who assisted Paterson with the case. "Supermarkets and other retailers in Maine are not unresponsive to local demand, but there are a multitude of products out there and just so much shelf space. In this case, however, no magazines were ever kept off the shelves as a result of the payment of so-called "slotting fees."

U.S. Magistrate Judge Margaret J. Kravchuk considered arguments in the case in November 2000 and sided with the defendants. U.S. District Judge Gene Carter's ruling upheld the magistrate judge's decision.

Hudson News Company and Portland News Company were separate companies during the time period in question, but have since merged.

A resident of Freeport, Paterson joined Bernstein, Shur, Sawyer & Nelson in 1981. He is chair of the Professional Ethics Commission at the Maine State Bar and practices in the areas of business litigation, administrative and regulatory law, antitrust, media, communications, First Amendment and health care law. He is a 1966 graduate of Bowdoin College in Brunswick, and received his law degree from New York University School of Law in 1969. In addition to the Board of Bar Overseers, he is also a member of the Maine State and American Bar Associations, the American Trial Lawyers Association, and is the Maine chair of the Association of Defense Trial Attorneys. Paterson is listed in the "Best Lawyers of America" for his First Amendment practice.

Schneider, also a member of the Litigation Department at Bernstein, Shur, is a resident of Wells and a 1996 graduate of the University of Maine School of Law in Portland and a 1988 graduate of Bates College in Lewiston. He is a member of the American Bar Association, the Maritime Law Association, the Maine and New Hampshire Bar Associations, a director on the University of Maine Alumni Association's Board as well as a director of USM Corporate Partners.

Bernstein, Shur, Sawyer & Nelson is one of northern New England's largest law firms, with more than 70 attorneys in offices in Portland and Augusta. The firm provides legal services in all major subject areas, including corporate and commercial law, litigation and trials, municipal and governmental affairs, and tax and estate planning. Bernstein, Shur also has an active practice in bankruptcy, health law, environmental law, technology and commerce, employment law, legislative law, intellectual property, public utilities and other regulated industries. For more information, visit the Bernstein, Shur web site at http://www.mainelaw.com.

# # #