The 1978 lawsuit that changed comics retail forever

We are living in a year that is fundamentally changing the business of comic shops, with the end of Diamond Comics Distributors’ near-monopoly on selling periodical comics.

DC Comics initiated the change by dropping Diamond in favor of two upstart distributors that are owned by prominent retailers, likely leaving Diamond weaker and forcing comic shops to adjust to a new reality of extra order forms and higher shipping costs.

The events of the last few months have led some people to reflect on the last time a major publisher upended the comics distribution market, when Marvel had its brief and misguided foray into self-distribution starting in 1994.

But I want to talk about something that happened much earlier that set the table for all of this, back when there was another near-monopoly.

In 1977, Phil Seuling and Jonni Levas were four years into running a company that was the first distributor that specialized in selling comics from major publishers such as Marvel and DC to the country’s small but growing network of comic shops.


The company, which would come to be called Sea Gate Distributors Inc., named after the Brooklyn subdivision where Seuling lived, was an innovator that provided an alternative to newspaper and magazine distributors.

Phil Seuling

Phil Seuling in 1971, photo by Mike Zeck. The photo at the top of this post is of Seuling on the Mike Douglas show in 1977.

Retailers could buy from Sea Gate at a greater discount than they could get for the same comics from news distributors. The big difference was that Sea Gate sold its products on a nonreturnable basis, but there were many other differences that appealed to retailers whose businesses depended on having enough copies of the most popular titles, and having extras to later sell as back issues.

Sea Gate helped to create an ecosystem of shops that had comics sooner and often in better condition than competing outlets like grocery stores and drug stores.

But Sea Gate had some practices that made it a difficult vendor. Retailers needed to pay for orders months in advance, which was a challenge for small businesses that often operated on thin margins. Also, Sea Gate required minimum order levels for individual titles that were more than many retailers wanted to buy. Since Sea Gate was the only distributor of major publishers to the comic shop market, retailers had nowhere else to go.

Seuling was a passionate and aggressive businessman. He looked out for his friends and tended to belittle the people he viewed as adversaries.

And then he ran into a family that wouldn’t take it.

Here’s an excerpt from my 2017 book:

There is little doubt that Phil Seuling saw himself as the hero of his story. So who was his archenemy? There are many candidates, but my vote goes to a pugnacious young man named Hal Schuster. As of 1978, Seuling was the biggest player in comics distribution, with the top accounts and the best terms from publishers. Schuster had a small business in Maryland, distributing comics and other material for his family-owned company, Irjax Enterprises.

Irjax had been started in 1973 by Irwin Schuster and his sons Jack and Hal. The name was combination of Irwin and Jack. Although he wasn’t in the name, Hal gave the impression that he ran things. The business was set up to act as a wholesaler of comics and related materials to comic shops. It also was a publisher of magazines about geeky interests, such as Star Trek fandom.

Irjax grew from its base in Rockville, Maryland, in the Washington, D.C., suburbs. It wanted to be the dominant wholesaler in the state and neighboring states, and then build from there. This put the company on a collision course with Phil Seuling and Sea Gate. Seuling had started with a few accounts in places such as New York, Buffalo, and the Bay Area. By 1977, he had worked out many of his own organizational problems and was in an expansion mode. He was looking to sign up new retail clients, including in Maryland.

He came into Irjax’s backyard and formed an alliance with retailer Mark Feldman, owner of Maryland Funnybook Shop in Silver Spring. Feldman would serve as a subdistributor for Seuling, obtaining products for his store and then acting as a wholesaler for other stores in the area.

Examples of this model had already happened in other metro areas. Seuling found retailers to serve as his middlemen. These coveted roles often went to friends and associates he had met through his conventions. In almost every market, competing retailers found themselves in the awkward position of having to buy from their local rivals if they wanted to have the advantages of Seuling’s services. At that time, several small comics distribution companies were trying to build and sustain regional territories. Some of them, such as Irjax, saw Seuling’s expansion as an existential threat.

Irjax and Seuling started to trash each other in conversations with potential clients. Seuling would say that Irjax was a small-time operator that didn’t know what it was doing. Irjax would say that Seuling was secretly bleeding money and about to go out of business. The comments, made in private, were not unusual for the rough-and-tumble world of comics distribution. Then Seuling kicked it up a notch with this note in his November 1977 newsletter to customers:

A notice I think is probably unnecessary: For a few months, an off-the-wall pseudo “distributor” on the middle of the East Coast has been telling everyone that “Seuling is out. He won’t be able to deliver books any more.” This nut has also suggested returning unsold books (bought from him) through the local distributor as “returns,” a policy which would automatically get you cut off from all supplies from all publishers. Additionally, this sickie made threatening and harassing phone calls, and has used the mails fraudulently. He is inches away from deep (Federal) trouble. And yes, I intend to prosecute.

Hal Schuster saw this and was livid, according to Levas. The part that most incensed Schuster was the use of the word “sickie,” which he took as a reference to his father. Irwin Schuster used a wheelchair, and his sons were sensitive about anything that seemed to be making fun of this.

“That’s certainly not cool to have written that, but that was Phil, impetuous and headstrong,” Levas said. She thinks the newsletter, as much as any business disagreement, is what made the conflict escalate into what would turn into a legal quagmire.

On October 2, 1978, Irjax Enterprises filed suit in Maryland federal court against Seuling and just about every major comics publisher, accusing them of violating antitrust laws. At its heart, the case was about how Seuling and Sea Gate had more favorable terms with publishers than Irjax did. The most glaring example may have been the way Seuling could get his customers’ orders collated and shipped directly from the printer, which meant his clients received items sooner than his competitors’ clients did.

What Irjax was doing was audacious. The company was a small business, and it was suing some corporate giants. Among the nine defendants were Warner Communications Inc., the parent company of DC, and Cadence Industries Corp., the parent of Marvel. Other retailers and distributors had to take the risk to its finances and reputation.

In the lawsuit, Irjax claimed that the defendants “have engaged in an unlawful combination and conspiracy in restraint of interstate trade and commerce” and have “endeavored to force Irjax out of business of whole-sale distribution of comics books and related items.”

Along with the antitrust claim, Irjax also made a libel claim against Seuling for the comments in the newsletter. The court filing says Seuling’s letter had been mailed to many of Irjax’s customers, contained statements that Seuling knew were untrue, and was “clearly intended to, and did, hold plain-tiffs up to contempt and ridicule.”

Two months later, in an amended complaint, Irjax provided some additional details about how all the defendants fit into the larger comics business. The filing said that Marvel accounted for 70 percent to 75 percent of sales to comic shops; DC was 20 percent to 25 percent of sales; and Warren Publishing, known for Vampirella and other horror titles, had 4 percent. Marvel was dominating the industry, while DC, the former industry leader, was struggling. Warren would go out of business a few years later.

Seuling was not the type to walk away from a fight. He responded to the lawsuit by denying the allegations and then making claims of his own against Irjax and the publishers. He also added a claim against Big Rapids Distribution of Detroit, a company that had not been named in the Irjax lawsuit but was a competitor of Seuling’s. His argument, in essence, was that Irjax and Big Rapids were the ones getting favorable terms of service from the publishers.

From there, many lawyers expended many billable hours. Filings piled up at U.S. District Court in Baltimore. Beyond the nuts and bolts of the case itself, the publishers came to the realization that distribution to comic shops was becoming a big business, and it needed to be handled in a more organized way. No more handshake deals. From then on, Marvel and DC would seek to have uniform terms of service.

By the summer of 1979, less than a year after the Irjax complaint had been filed, the major issues had been resolved in a series of settlements. The upshot for Seuling was that he would no longer receive terms of service that were different from what other distributors got. His time as king of the business was waning. Meanwhile, the number of comic shops continued to grow. Irjax, Big Rapids, and others had a wide-open playing field in which to sign up customers, leading to the next era, one marked by chaotic competition, rapid rises, and even more rapid falls.

 
Hal Schuster

Hal Schuster, photo by Alan Light

Here is a link is a link to a PDF of the complaint that the Schuster family filed in court, which includes a copy of Seuling’s November 1977 order form. I got this from the National Archives, and I want to share it here for the benefit of other researchers.

Irjax1

The lawsuit and its resulting settlements forced comics publishers to change their practices for dealing with distributors, and move away from Sea Gate’s dominance of the business.

I’ve heard several people suggest the federal investigators were looking into whether Sea Gate was an illegal monopoly, and that this, along with Schusters’ lawsuit, forced the publishers to act. I’ve never seen evidence from an official source that there was such an investigation, but I wouldn’t be surprised if there was.

I’m posting this today for a few reasons, one of which is to tell the story of another near-monopoly reaching its end, a moment that led to dynamic growth and competition in the industry. The market was ripe with opportunity and a new generation of entrepreneurs was arriving, including Milton Griepp and John Davis who would soon found Capital City Distribution, and Steve Geppi would would soon start Diamond Comics Distributors by buying assets from Irjax/New Media.

Another reason for this post is to make an overdue correction.

Here it is: In working on this book, I found two spellings for the Schuster family’s name in documents from the era, with and without the “h.” I needed to figure out which one was correct, and ended up making the wrong choice.

In hindsight, the correct spelling — Schuster — was right in front of me, in court documents and in the way the family spelled its name in its own publications. The misspellings that steered me wrong were in other sources, including an obituary.

For a reporter, misspelling a name is an especially embarrassing mistake. We’ve all done it, but we know to be careful to avoid it. This error appears on five pages in the book, not counting the index and endnotes.

I alerted my publisher about the error, and they are correcting the spelling in the electronic edition, which should eventually solve the problem of the wrong spelling showing up in Google searches. I can’t go out and mark the correction in all the copies that have been sold, but I’d like to.

***

Before I go, I want to point you to a great story on the site formerly known as Newsarama. Jim McLauchlin has put together an oral history of Carol Kalish’s work in the comics industry.

Jim Hanley, the retailer behind Jim Hanley’s Universe, once told me that Kalish “was the patron of the art of comic retailing.”

To find out who she was, and why someone would speak of her in such terms, check out the story.

Some other things that are worth your time:

First, the great Comic Book Historians podcast interviewed Steve Geppi of Diamond Comics and Geppi speaks about his career, including how he bought the some of the wreckage of Irjax/New Media to start Diamond.

 

Next, Comic Book News had an interview with another luminary in the history of comics retail, Milton Griepp. Check it out:

And here’s a recent article by Milton about his early days in the business.