The ruling came in a contentious antitrust lawsuit filed by Taylor Publishing Co. against Jostens Inc., the market leader among yearbook publishers. Last year, a federal jury in Sherman, Texas, ruled in favor of Taylor, finding that Jostens had engaged in sham and predatory pricing, raided Taylor's sales force, and interfered with its contracts. The jurors awarded Taylor $8 million in damages, which under antitrust law was tripled to $24 million.
But on January 14, U.S. District Judge Paul Brown granted Jostens' motion to set aside the jury verdict and damage award. The judge ruled that as a legal matter, there was not enough evidence to prove that Jostens was out to monopolize the school yearbook market.
Despite the decision, the case made public some intriguing details about the sales tactics of yearbook publishers. Taylor, a unit of the Columbus, Ohio-based Insilco Holding Co., had fiscal 1997 sales of $98.2 million. Jostens, based in Minneapolis, had 1997 sales of $632 million in its school-products division. About 37 percent, or $234 million, of that came from yearbook publishing, according to the company's annual report. Jostens also sells class rings, graduation and prom products, and business-recognition products.
A central charge in Taylor's lawsuit was that Jostens used "sham pricing" to win customers. The company, the lawsuit argued, would quote one price to win a school contract but charge more for the finished product. Judge Brown said that such a practice might amount to fraud or misrepresentation, but he ruled that Taylor had "failed to prove that defendant's actions constituted predatory, anticompetitive conduct."
Brown's opinion referred to a legal brief filed by Jostens that defended the practice of charging customers more for finished yearbooks. The company calls the practice "upgrading," and it involves selling yearbook advisers and students on additional features that boost the final price. Jostens, Judge Brown wrote, "argues that upgrading is an ordinary and integral part of the yearbook business that allows yearbook companies to sell additional features to customers and, therefore, does not constitute predatory conduct."
Taylor's predatory-pricing allegations failed to pass muster, Judge Brown said, because over three years, Jostens undercut Taylor in just 66 instances out of some 7,000 schools served by Taylor. "This evidence amounts to a customer loss of less than 1 percent of plaintiff's annual sales," the judge wrote. "The court finds that with an impact of less than 1 percent, defendant's below-cost pricing was not capable . . . of driving its competitors from the market."
Similarly, the judge said that the allegations that Jostens raided Taylor's sales force did not amount to conduct that could lead to a monopoly. Jostens hired away only three of Taylor's representatives, which "had a negligible impact upon plaintiff's competitive position," Brown wrote.
Ken Koch, general counsel for Insilco, said the company would appeal the ruling. "We obviously think the judge's decision was erroneous," he said. "He rejected the jury verdict on factual determinations that Jostens has engaged in predatory conduct."
Kevin Whalen, a spokesman for Jostens, said many of the allegations centered on actions of its independent sales representatives. "Were people doing some weird things out there in the past? Yes," he said. "But we are policing our practices more aggressively. By and large, our reps' hearts are in the right place."
Vol. 10, Issue 6, Page 18Published in Print: March 1, 1999, as Book Wars