Source Interlink Sues Publishers, Wholesalers Over 'Conspiracy'

Suit seeks to halt alleged plot to run embattled wholesaler out of business.

By Jason Fell
Wednesday, February 11, 2009

Three weeks after threatening publishers with a 7-cents-per-copy price hike, magazine publisher and wholesaler Source Interlink filed a lawsuit on Monday claiming rival wholesalers, as well as publishers, are attempting to force the company out of business.

The suit, filed in New York federal court, seeks emergency court intervention to prohibit the defendants—including publishers Time Inc. and Hachette—from monopolizing the U.S. magazine wholesaler market, a Reuters news report said. In the suit, Source alleges that the defendants “conspired” to force the company to sell its distribution business at a steep discount to rivals Hudson News and News Group.

A Source Interlink spokesperson could not be immediately reached for comment.

Source, along with fellow wholesaler Anderson News, announced 7-cents-per-copy price hikes in January. Publishers largely balked at the surcharge and refused to pay, upset at the wholesalers' sudden and "unilateral" decision to boost costs.

Last week, in a wide-ranging interview with Audience Development, Source president and COO Jim Gillis said the country's biggest publishers, along with national distributors Curtis and Time Warner Retail, are shutting Source and Anderson out of the magazine supply chain in a bid to wrest pricing control away from retailers.

"This is about American Media and Curtis and Bauer and Time Warner trying to control retailer pricing by eliminating magazine wholesalers so they don't have so many they've got to do business with," he said.

On Saturday, Anderson CEO Charlie Anderson announced the company was suspending “normal business activity” but would “continue to hold discussions with publishers and retailers, trying to develop a viable model that allows it to remain in business.”

Other defendants named in Source’s complaint include American Media Inc., Bauer Publishing, Curtis Circulation, Distribution Services Inc., Kable Distribution Services, and Time Warner Retail.

When contacted, a Hachette spokesperson declined to comment. Representatives from Bauer and Time Inc. could not be reached for comment.

Source Interlink Digs In

More Wholesaler Pricing Pressure: Source Interlink Also Raising Rates