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BRUNSON COMMUNICATIONS, INC. v. ARBITRON
December 31, 2002
BRUNSON COMMUNICATIONS, INC.
The opinion of the court was delivered by: Baylson, United States District Judge.
Plaintiff Brunson Communications, Inc., owner of Channel 48, WGTW-TV, a
small television station serving the Philadelphia area, alleges that
Defendant, in the business of measuring television viewing by the
public, is liable under several causes of action: Sherman Act antitrust
violations, unfair competition under the Lanham Act, disparagement of
commercial products, tortious interference with prospective contractual
relations, negligence and promissory estoppel. Defendant moves to dismiss
the entirety of the Amended Complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6), for failure to state a claim upon which relief can be
granted. For the reasons which follow, Defendant's Motion will be granted
without leave to amend as to the antitrust and Lanham Act claims, and two
of the common law claims. As to claims for negligence and disparagement,
the Motion will
be granted without prejudice to Plaintiff's right to file
a Second Amended Complaint.
Plaintiff filed its original Complaint on May 24, 2002. After Defendant
moved for dismissal, Plaintiff filed an Amended Complaint with factual
materials attached. Defendant thereafter filed the present Motion to
Dismiss the Amended Complaint and also attached factual materials.
Following oral argument on Defendant's Motion, the Court allowed the
parties a period of limited discovery to ascertain the nature and extent
of Defendant's reports about its measurement of Plaintiff's penetration
of the Philadelphia television market.
The parties then submitted affidavits and other evidentiary materials.
While it appears that the contents of Defendant's surveys, discussed
below, are largely undisputed, it is clear that Plaintiff and Defendant
assert different views as to the nature of certain verbal statements made
by Defendant or its representatives regarding those surveys. See infra
Part III. Because the material submitted by the parties is not
conclusive, it will not be considered in determining the legal
sufficiency of the Amended Complaint.*fn1
II. Jurisdiction and Legal Standards
This Court has jurisdiction over Plaintiff's Sherman Act claims
pursuant to 28 U.S.C. § 1331 and 1337, and over Plaintiff's Lanham Act
claim, which arises under federal law. See 28 U.S.C. § 1331. With
respect to Plaintiff's four common law claims, this Court has
jurisdiction pursuant to 28 U.S.C. § 1332, in that Plaintiff has
alleged diversity of citizenship and an amount in controversy in excess
of $100,000. See Amended Complaint ¶ 1-3; Suber v. Chrysler Corp.,
104 F.3d 578, 583 (3d Cir. 1997) ("Once a good faith pleading of the
amount in controversy vests the district court with diversity
jurisdiction, the court retains jurisdiction even if the plaintiff cannot
ultimately prove all of the counts of the complaint or does not actually
recover damages in excess of [the jurisdictional amount]").
All relevant events alleged in the Amended Complaint occurred in
Pennsylvania. Accordingly, this Court will apply Pennsylvania law in
determining the legal sufficiency of Plaintiff's four common law claims.
See 28 U.S.C. § 1652.
When deciding a motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6), the court may look only to the facts alleged in the
complaint and its attachments. Jordan v. Fox, Rothschild, O'Brien &
Frankel, 20 F.3d 1251, 1261 (3d Cir. 1994). The Court must accept as true
all well pleaded allegations in the complaint and view them in the light
most favorable to the plaintiff. Angelastro v. Prudential-Bache Sec.,
Inc., 764 F.2d 939, 944 (3d Cir. 1985). A Rule 12(b)(6) motion
will be granted only when it is certain that no relief could be granted
under any set of facts that could be proved by the plaintiff.
Ransom v. Marrazzo, 848 F.2d 398, 401
(3d Cir. 1988).
III. Allegations of the Amended Complaint
Plaintiff alleges the following facts, which, for the purpose of
deciding the instant motion, will be viewed in the light most favorable
to Plaintiff. Channel 48, WGTW TV, is a television station owned by
Plaintiff, broadcasting within the Philadelphia area. See Amended
Complaint ¶ 6-7. WGTW is a "small corporation" and "independent of all
networks and cable systems." Id.
Defendant Arbitron, Inc. is in the business of "constructing and
operating measurement systems that monitor listeners and viewers for usage
by radio, cable and more recently television stations, and purchasers of
advertising time from television stations." Id. ¶ 9. Defendant has
developed a new technology for measuring television viewership, known as
the personal people meter ("PPM"). Id. ¶ 10. This PPM technology
operates by embedding an inaudible signal in the
transmitter of the various stations. It then places a
receiving device on the person of individuals to
detect and record when he is watching television sets
tuned to only those stations whose signals which [sic]
have been imbedded by Arbitron.
Id. Plaintiff asserts that Arbitron's PPM technology "hereinafter will
supplant any other system because of its superior accuracy and
reliability." Id. ¶ 49.
According to the Amended Complaint, prior to Defendant's development of
PPM, another entity, Nielsen Media Research ("Nielsen"), had the only
television viewership measurement system. Id. ¶ 11. Plaintiff
alleges that Nielsen and Arbitron have "entered into a corporate
financial relationship by which Nielsen and Arbitron are related in
regard to the new system, the details of which are not known to
plaintiff." Id. Plaintiff claims that Nielsen is an owner or joint
venturer in the PPM project. Id. Without specifying any details of the
alleged relationship between Arbitron and Nielsen, Plaintiff asserts that
together the two companies enjoy a monopoly in the TV viewership
measurement market. Id. at ¶ 12.
Sometime in 2001, Arbitron began a "test" program to introduce its PPM
technology into the Philadelphia market. Id. at ¶ 14-15. Plaintiff
alleges that Defendant embedded its PPM signal only in the transmitters
of Plaintiff's competitors — the larger networks and cable systems
— omitting Plaintiff's station from the PPM survey data. Id. at
¶ 17. According to Plaintiff, Arbitron then began to release periodic
PPM survey data to advertising agencies, advertisers, television stations
and other media sources. Id. at ¶ 25. At the time of its PPM test,
in the fourth quarter of 2001, Defendant "announced" that the PPM data
would "accurately and creditably measure the performance of the entire
market." Id. at ¶ 15. Moreover, according to the Amended Complaint,
on May 20, 2002, at a meeting of the Pennsylvania Association of
Broadcasters, Kevin Smith, a Senior Vice President of Arbitron,
represented that the PPM survey was fair, accurate and complete. Id. at
¶ 32. Plaintiff suggests that these statements were false and
malicious. Id. at ¶ 17, 32.
The Amended Complaint asserts that Arbitron had "many meetings" with
the larger stations "while designing and pre-testing the system," without
inviting Plaintiff. ¶ 34. As a result, Arbitron failed to inform
Plaintiff, prior to the test, that inclusion in the survey required the
embedding of a signal into WGTW's transmitter. Id. at ¶ 21.
Allegedly, Defendant only informed Plaintiff's competitors of this
requirement, causing Plaintiff to believe that no action on its part was
necessary. Id. Plaintiff did not learn of the embedding requirement until
April 2002, at which time Arbitron visited WGTW to install a PPM encoder.
Id. ¶ 23, 68. By then the initial PPM survey was substantially
completed. Id. Plaintiff suggests that, despite its full knowledge of the
detrimental effects the omission would have on WGTW, Arbitron refused to
reconstruct the PPM survey to include WGTW. Id. at ¶ 29. Nor would
Arbitron "prominently" inform the public that WGTW had improperly been
omitted. Id. at ¶ 34. Plaintiff claims that Defendant's motive in
omitting Plaintiff was
to obtain the benefits of working with the larger
networks, plaintiffs competitors, who have most of the
outlets in the markets. Therefore its pursuit of
profits caused it to knowingly give preferential
treatment to plaintiffs competitors and exclude an
independent non-network station that did not have the
market power of the competitors.
Id. at ¶ 35. Though a PPM signal was eventually embedded in WGTW's
transmitter in April 2002, id. at ¶ 24, the Amended Complaint
asserts that Defendant "intentionally and/or negligently" caused
defective encoding of the signal. Id. at ¶ 36. This resulted in the
continued omission of WGTW from the PPM surveys until at least June
2002, and further injured Plaintiff's ability to compete. Id.
IV. Counts I and II of the Amended Complaint Do Not State a Claim under
the Antitrust Laws upon which Relief Can Be Granted
A. Count I — Sherman Act. Section One
Plaintiffs Amended Complaint substantially expanded upon the original
Complaint. Not only did Plaintiff add to its Amended Complaint new counts
of negligence and promissory estoppel, but Plaintiff also broadened its
antitrust allegations. Whereas the original Complaint contained only a
single antitrust count under Sherman Act Sections One and Two, the
Amended Complaint broke down the two Sherman Act sections into two
separate counts, and substantially expanded the antitrust claim.
The two antitrust counts of the Amended Complaint contain a panoply of
antitrust theories that are so broadly described, as to make it difficult
to understand how Plaintiff has been injured by anything forbidden by the
antitrust laws. Plaintiff has made allegations of monopolization, refusal
to deal, group boycott, "combining and coordinating" and exclusion of
Plaintiff The breadth of the Section One charging paragraphs with some
factual content about Plaintiff or Defendant can be seen from these
43. Defendant Arbitron has and has utilized its
monopoly power, in and with an agreement and financial
participation of Nielsen over the data markets, and on
information and belief, marketing participation of
Nielsen and in concert with
plaintiffs competitors, in
the sales of time market [sic] in Philadelphia, to
promote and effect the exclusion of plaintiff from the
advertising sales or broadcasting viewing in the
Philadelphia SMSA listener market, through a refusal
to deal with plaintiff, by conducting, providing and
promoting its survey, with plaintiff excluded, in
restraint of trade in interstate commerce, in
violation of the Sherman Act Section 1.
45. Arbitron (with Nielsen) enjoys monopoly powers in
the providing of viewer measurement in the relevant
market, i.e, Philadelphia area television viewing
market, which is a well recognized market for
television viewers and advertisers. It is defined by
the reach of signals of stations, and the service
areas of the cable systems. It includes a radius of
about sixty miles from City Hall, Philadelphia.
48. Through their monopoly over viewer measurement, in
the Philadelphia market, Arbitron/Nielsen exercise
market control over competitors in the viewing
49. Though [sic] its proprietary imbedded system which
herein after will supplant any other system because of
its superior accuracy and reliability (when employed
fairly) Arbitron has monopoly power over the
Philadelphia viewer measurement market.
50. By combining and coordinating with plaintiffs
competitors to exclude plaintiff from the survey, and
through falsely representing it as complete defendant
sponsored, and practiced a group boycott, and
participated with plaintiffs competitors in a program
to exclude plaintiff from the Philadelphia television
advertising sales market, injuring competition for the
sale of advertising and delivery of programming,
contrary to Section 1, antitrust injury. [sic]
Section One of the Sherman Act, prohibits "every contract, combination
in the form of trust or otherwise, or conspiracy, in restraint of trade
or commerce." 15 U.S.C. § 1.*fn2 Defendant asserts that Count I must
be dismissed because Plaintiff fails to sufficiently allege a
conspiracy, a plausible market, a cognizable antitrust injury, or a
factual basis to support its claim of an antitrust violation by
The "very essence" of a Section 1 claim is "the existence of an
agreement." Alvord-Polk, Inc. v. F. Schumacher & Co., 37 F.3d 996,
999 (3d Cir. 1994). Unilateral activity by a single person or entity will
not suffice. See Fisher v. Berkeley, 475 U.S. 260, 266 (1986). The
Supreme Court has explained that even if a single company's conduct has
"the same economic effect as concerted action might have, there can be no
liability under Section One in the absence of agreement." Id.
The Third Circuit has long held that a Section 1 plaintiff "must plead
the facts constituting the conspiracy, its object and accomplishment."
Black & Yates v. Mahogany Ass'n, 129 F.2d 227, 231 (3d Cir. 1942).
Moreover, a "general allegation of conspiracy without a statement of the
facts is an allegation of a legal conclusion and insufficient of itself
to constitute a cause of action." Id. Accordingly, only "allegations of
conspiracy which are particularized. . . will be deemed sufficient."
Commonwealth of Pa. ex rel. Zimmerman v. PepsiCo, Inc., 836 F.2d 173, 181
(3d Cir. 1988). See cases collected in ABA Section of Antitrust Law,
Antitrust Law Developments (5th Ed. 2002), Vol. 1, p. 3, n. 14.
To adequately allege the element of concerted activity, a plaintiff
must do more than insert the word "conspiracy" into his pleading. As the
Third Circuit has stated, the "allegation of unspecified contracts with
unnamed other entities to achieve unidentified anticompetitive effects
does not meet the minimum standards for pleading a conspiracy in
violation of the Sherman Act." Garshman v. Universal Resources Holding
Inc., 824 F.2d 223, 230 (3d Cir. 1987).
In Garshman, plaintiffs were partners in an entity engaged in oil and
gas exploration. Defendant Universal Resources Holding, Inc. was a
producer of natural gas. Plaintiffs and Universal had entered into an
agreement whereby plaintiffs would drill wells in return for payment and
assignment of certain rights. The drilling was to take place on land
owned by Columbia Gas Transmission Corporation ("Transmission").
Transmission had also contracted to purchase, through Universal, 75
percent of the gas produced from the wells.
Subsequently the demand for natural gas declined. As a result,
Transmission found itself contractually obligated to purchase more gas
through Universal than it could resell. Under pressure to renegotiate,
Universal agreed to change the price provisions in its contracts with
Transmission. This resulted in a decreased return from the wells, harming
plaintiffs' economic interests under the drilling contract. See Garshman,
824 F.2d at 225-27.
Plaintiffs sued on antitrust, tort and contract grounds. Universal
filed a crossclaim against Transmission and its parent corporation,
Columbia Gas System ("System"), also raising antitrust grounds. In its
Sherman Act, Section One claim, Universal alleged that System and
Transmission had "entered into one or more agreements, contracts or
conspiracies, and have engaged in concerted action with other entities,
which agreements are in restraint of trade and are unreasonable, to
achieve the anti-competitive and unlawful actions and effects as alleged
in this crossclaim." Id. at 230. The district court dismissed Universal's
Section One count for failure to state a claim.
The Court of Appeals affirmed, observing that Universal had identified
neither the "contracts," nor the "other entities," nor the
"anti-competitive and unlawful actions and effects" involved. Id. The
court held that the "allegation of unspecified contracts with unnamed
other entities to achieve unidentified anticompetitive effects does not
meet the minimum standards for pleading a conspiracy in violation of the
Sherman Act." Id. Moreover, the price-renegotiation contracts undertaken
by Transmission did not result in price increases to consumers or in the
market generally. Universal's allegations failed to suggest an adverse
effect upon competition in any relevant market. Therefore the claim was
properly dismissed. See Garshman, 824 F.2d at 231.
The Circuit's affirmation of the dismissal of the antitrust claims in
Garshman (without leave to amend) is precedent for the dismissal here.
The Section 1 claim in this case is similarly deficient of the necessary
using a coding identification system to trace and
monitor soft drink sales; fining bottlers when their
product is shipped out of their territory; refusing to
deal with resellers who engage in transshipping;
refusing to deal with resellers who buy from or sell
to other resellers; threatening termination of
resellers who engage in such sales; and limiting sales
to resellers to the amount the reseller needs solely
for its own retail sales, in order to prevent that
reseller from wholesaling.
Id. The district court dismissed the Section One count for failure to
state a claim, and the Third Circuit affirmed.
The Court of Appeals noted that under the Soft Drink Interbrand
Competition Act, because only a horizontal conspiracy was actionable, the
state's pleading burden was higher than in a typical antitrust case. Id.
at 181. As to the sufficiency of the amended complaint, the court first
observed that the state's allegations "consistently refer to conduct by
"defendants and their co-conspirators' — not otherwise identified."
Id. The court continued:
Equally significant is the fact that Pennsylvania did
not allege any meetings between [the defendant
bottlers], any communications between them, or any
other means by which their alleged conspiracy came
about. This notwithstanding that in this circuit,
"[o]nly allegations of conspiracy which are
particularized. . . will be deemed sufficient."
Garshman v. Universal Resources Holding, Inc.,
641 F. Supp. 1359, 1370 (D.N.J. 1986), aff;d 824 F.2d 223
(3d Cir. 1987) (quoting Kalmanovitz v. C. Heileman
Brewing Co., 595 F. Supp. 1385, 1400 (D.Del. 1984),
aff'd, 769 F.2d 152 (3d Cir. 1985)). Instead, all that
appellant was apparently prepared to plead was a naked
conclusion dropped into the amended complaint,
reciting a bare-bones assertion that there had been a
The PepsiCo court found that the Commonwealth's allegations "did not
come close to adequately pleading conduct amounting to" a price fixing
agreement, a horizontal*fn3 restraint of trade, or a group boycott.*fn4
The court therefore affirmed the dismissal with prejudice in that the
Commonwealth had already amended its complaint once, with leave of
court. See id. at 180.
Although Plaintiff does allege a group boycott, here again the
conclusory allegation is devoid of details. A horizontal group boycott
involves entities at the same level of the market structure conspiring
amongst themselves, with "a purpose
either to exclude a person or group
from the market, or to accomplish some other anti-competitive objective,
or both." PepsiCo Inc., supra 836 F.2d at 183 (quoting DeFilippo v. Ford
Motor Co., 516 F.2d 1313, 1318 (3d Cir. 1975)). Group boycott cases
usually involve joint efforts at persuading suppliers or customers to
refuse to deal with a certain competitor. See, e.g., Northwest Wholesale
Stationers Inc. v. Pacific Stationery and Printing Co., 472 U.S. 284, 294
(1985). Aside from the conclusory phrase "group boycott," the Court
concludes that Plaintiff has not adequately plead Defendant participated
in an illegal group boycott.
Courts have refused to find a horizontal conspiracy, where a single
entity or person engages in separate vertical conspiracies with multiple
parties, who do not conspire amongst themselves horizontally. See, e.g.,
Dickson v. Microsoft Corp., 309 F.3d 193, 2002 U.S. App. LEXIS 22466, at
*17-24 (4th Cir. 2002); Lomar Wholesale Grocery, Inc. v. Dieter's Gourmet
Foods, Inc., 824 F.2d 582, 590 (8th Cir. 1987). Cf. Kotteakos v. United
States, 328 U.S. 750, 752, 769 (1946) (holding, in non-antitrust criminal
conspiracy case, that jury instruction should have explained "vital
difference" between one conspiracy, in which all defendants conspired
amongst each other, and numerous separate conspiracies between each
defendant and one "common key figure"). Courts analyze such
"hub-and-spoke" scenarios under the rule of reason. See Dickson, 2002
U.S. App. LEXIS 22466, at *17-24 (finding plaintiff alleged merely
"separate vertical conspiracies" or "a wheel without a rim," rather than
single horizontal conspiracy; applying rule of reason because
anticompetitive effect "not obvious"); Lomar, 824 F.2d at 590 (refusing
to apply per se rule where plaintiff did not allege suppliers conspired
"among themselves," but rather that one distributor "separately coerced
each of the suppliers into boycotting" plaintiff, thus forming "a
rimless, spoked wheel"). Plaintiff's allegations that Arbitron met with
and agreed with most of the larger television stations to exclude
Plaintiff from its viewer measurement studies more resembles a
"hub-and-spoke" style of conspiracy than a horizontal group boycott. As
noted in Antitrust Law Developments, supra, pp. 24-5:
Some conspiracies have elements of both horizontal and
vertical agreements. An example of such a hybrid is
the "hub-and-spoke" conspiracy.
Although some of the earlier hub-and-spoke cases have
suggested at least the theoretical possibility that an
actionable conspiracy might be found where there were
hub and spokes but no rim, more recent cases require
that a plaintiff must present evidence sufficient to
allow the inference of an agreement constituting the
rim of the conspiracy. (Footnotes omitted).
As explained above, under any theory, Plaintiff has not alleged the
essential statutory element of concerted activity.
With these precedents as guideposts, we review the antitrust
allegations in the Amended Complaint. In the instant case, Plaintiff has
identified none of the entities which allegedly conspired with
Defendant. While Plaintiff need not necessarily supply names of all
alleged conspirators, the cases cited above require an antitrust
plaintiff to supply more detail to make out a Section One claim. The facts
alleged in the Amended Complaint are extremely vague and do not
sufficiently describe any contract, combination or conspiracy between
Arbitron and the larger TV stations.
The Amended Complaint never answers the common-sense question as to why
Plaintiff's competitors, who allegedly already dominate the market, would
seek the exclusion of a single, small, independently-owned station from
Arbitron's test-runs of the new PPM technology. Further, though the
Amended Complaint alleges a "boycott imposed at the request of plaintiffs
competitors," id. ¶ 19, Plaintiff has not provided a single detail
as to when, why, or how the conspirators decided upon this alleged
boycott. The most that Plaintiff alleges is that Arbitron had "many
meetings" with the larger stations "while designing and pre-testing the
system." Id. ¶ 34. Thus, while Plaintiff's Amended Complaint is
extremely broad in charging Section One antitrust liability, it falls far
short on the facts.
Aside from the dearth of specific allegations, the Court also concludes
that the Amended Complaint fails to sufficiently allege concerted
activity for the simple reason that the supposed conspiracy "makes no
economic sense." Matsushita Elec. Indus. Co., Ltd v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986). The Supreme Court has found that "antitrust law
limits the range of permissible inferences from ambiguous evidence in a
Section One case." Id. at 588. Where a defendant had no rational motive
to join a conspiracy, and defendant's conduct is as consistent with
permissible competition as with illegal conspiracy, the plaintiffs
unspecific allegations do not support an inference of antitrust
conspiracy. See Antitrust Law Developments, supra, p. 8. Thus, as the
court in Matsushita explained, if the defendants "had no rational
economic motive to conspire, and if their conduct is consistent with
other, equally plausible explanations, the conduct does not give rise to
an inference of conspiracy." 475 U.S. at 596-97. In such a case, where an
inference of conspiracy is "implausible," the court should dispose of the
Section One claim without submitting the conspiracy issue to a jury. Id.
at 594. Accordingly, in Matsushita, upon finding that the alleged
conspiracy would have been "economically senseless," the Court found
summary judgment proper. Id. at 598.
Though Matsushita was decided in the context of a motion for summary
judgment, its reasoning, nevertheless, has been used to decide motions to
dismiss and suggests that Plaintiff's Section One claim should be
dismissed.*fn5 The sparse facts
set forth in the Amended Complaint are
not sufficient to support an inference that defendants acted
conspiratorially. Accepting all of the facts of the Amended Complaint as
true, the conspiracy theorized by Plaintiff is, for several reasons,
economically implausible. Plaintiff, a television station, suggests no
logical reason why Defendant, which is allegedly dominant in the viewer
measurement market, would conspire with Plaintiff's competitors, the
larger stations, in order to exclude Plaintiff from Defendant's PPM
tests. if Defendant is, in fact, dominant in the viewer measurement
market, to exclude Plaintiff's data would absolutely contradict
Defendant's business purpose and jeopardize the credibility of its
measurements. At oral argument, Plaintiff's counsel suggested that
Arbitron's motive in excluding WGTW was "to accommodate [WGTW's]
competitors." Transcript of Motion to Dismiss Hearing (Oct. 8, 2002) at
35. Counsel added that WGTW is "small potatoes in th[e] market. We are
the classic kind of competitor who the standard competitors would just as
soon not have in the market." Id. at 36. Plaintiffs argument makes a
gigantic leap from omission of Plaintiff's data in a market survey, to
exclusion of Plaintiff from the television market. However, the other
deficiencies in Plaintiff's Amended Complaint do not require the Court to
decide whether Plaintiff's allegation that merely omitting Plaintiff's
data from Defendant's viewer measurement reports could result in
liability under the ...