Publishers v. Trustbusters

Up before the members of the American Newspaper Publishers Association meeting in Manhattan last week stepped Elisha Hanson, the A.N.P.A.'s general counsel. "I have the unpleasant duty to inform you," he said, "that the Department of Justice is about to initiate an antitrust action against the A.N.P.A., charging it with having conspired not only with other trade-association groups but with its own members . . . unreasonably to restrain trade in advertising."

Hanson explained that the Justice Department's complaint was not only against the A.N.P.A. but against advertising practices in the U.S. newspaper-and magazine-publishing industry as carried on by their trade associations. Charged Hanson: "The result [if the case is successful&#], will place the entire business of . . . advertising in printed form in a straitjacket of judicial control, policed by . . . the Government."

Recognized. The announcement produced immediate results. Shortly after, under questioning from reporters at his press conference in Washington, Attorney General Herbert Brownell revealed that his antitrust division plans to file a complaint, on civil charges, against the A.N.P.A., American Association of Advertising Agencies and several other trade associations. They have been under investigation since last year for fixing commissions on ad rates in interstate commerce. Newspaper and magazine trade associations have violated the Sherman Antitrust Act, charged Brownell, by fixing 15% of the price of an ad as the standard fee for agencies for placing an ad. Agencies must all charge the 15% commission, said he, cannot sell their services for less. Furthermore, ad agencies have difficulty buying space in publications unless they are "recognized" and placed on a special list by the trade associations. Said Brownell: "The point is whether the maintenance of the compulsory ad rate and operation of this 'recognition system' do not constitute a combination in restraint of trade."

The whole issue had once been considered settled by the industry. In 1930 the Federal Trade Commission closed a six-year-long legal battle with the same groups by deciding that advertising was not really interstate commerce, therefore was not subject to federal regulation. But later U.S. Supreme Court decisions in insurance and real-estate brokerage cases, said Brownell, have established the principle that a service on which commissions are paid is as much a commodity in interstate commerce as tangible goods.

Squared Off. With the Justice Department threatening suit, the A.N.P.A. members and representatives of other trade associations* showed little inclination to come to terms with the Government to head off a court trial. They argued that the 15% commission and the recognition system were not only well-established practices but the fairest method of doing business. If agencies were allowed to vary their commission rates, the business would be thrown into "chaos." Agencies compete on the quality of the service they offer, rather than by price-cutting. Furthermore, publishers argued, the recognition system is primarily a credit rating. Last week the A.N.P.A.'s members unanimously resolved to stand behind their officers in the battle with the Justice Department.

* TIME Inc. publications do not belong to the associations.

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