February 10, 2009 / 2:00 AM / 11 years ago

Source Interlink sues rivals over alleged plot

LOS ANGELES, Feb 9 (Reuters) - Magazine wholesaler and publisher Source Interlink Co Inc SORC.O on Monday asked a New York federal court to stop rivals from trying to drive it out of business, according to court papers.

Source Interlink, controlled by billionaire Ron Burkle, said it needs emergency court intervention to stop the defendants, including publishers Time Inc and Hachette Filipacchi, distributors, and rival wholesalers from monopolizing the U.S. wholesale magazine distribution market.

Source accused the defendants of cutting off its access to People, Sports Illustrated, Entertainment Weekly, Time and other magazines, and spreading “disparaging rumors” about its financial condition to its retailer clients, the filing said.

Source said the scheme arises from its efforts to charge a 7 cent per copy distribution fee to recoup costs of retrieving unsold inventory from retailers, tabulating and destroying it.

Source tried to impose the fee in January but had to rescind it when publishers and distributors resisted, the filing said.

A short time later, the magazines “cut Source off from its supply of magazines” and told its customers that it was in “deep financial trouble”, the filing said.

The “conspirators” wanted to force Source to sell its distribution infrastructure at a steep discount to rivals Hudson and News Group, which were colluding to take over Source’s west coast, mid-Atlantic and midwestern territories, the filing said.

Source accused its rivals of charging retailers higher prices for the same products as the competitive market shrinks, the filing showed.

The defendants named in the case were American Media Inc, Bauer Publishing Co, Curtis Circulation Co, Distribution Services Inc, Hachette Filipacchi Media U.S., Hudson News Co, Kable Distribution Services Inc, the News Group LP, Time Warner Inc’s TWX.N Time Inc and Time/Warner Retail Sales & Marketing Inc.

Representatives for Bauer and Kable had no immediate comment. The remaining defendants could not be reached for comment after hours. (Reporting by Gina Keating; editing by Richard Chang)

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