Justice Dept. Files Lawsuit to Block California Newspaper Monopoly

March 17th, 2016 8:17 PM

Just one day after the sale of the Orange County Register and nearby Riverside County's largest newspaper -- the Press-Enterprise -- to their chief rival, the Tribune Publishing Company, the Department of Justice filed a civil antitrust lawsuit on Thursday in an effort to prevent the purchase and halt a potential monopoly of newspapers in southern California.

Tribune's acquisition of its most significant competitors, when it already owns the Los Angeles Times and this past year bought out the San Diego Union-Tribune, "poses a serious risk of harming newspaper readers and advertisers in Orange County and Riverside County," noted Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.

According to an article posted at LAObserved.com by Kevin Roderick, the founder, editor and publisher of the website devoted to Los Angeles news, media and politics, the department's complaint stated that the Times and the Register “together account for 98 percent of newspaper sales in Orange County, and the Times and the Press-Enterprise account for 81 percent of English-language newspaper sales in Riverside County.”

A news release from the Department of Justice on the conflict stated:

Tribune was selected as purchaser of Freedom Communications’ newspapers following a bankruptcy auction and will seek bankruptcy court approval of its acquisition on March 21. The department is seeking a temporary restraining order to prevent the sale to Tribune from proceeding.

Newspapers continue to play an important role in the dissemination of news and information to readers and remain an important vehicle for advertisers. The Antitrust Division is committed to ensuring that competition in this important industry is protected.

The department's complaint, which was filed in federal district court in Los Angeles, was also the subject of a news article published in the Times, which indicated that Tribune Publishing will oppose the antitrust action and defend the legality of the sale.

Tribune Publishing spokeswoman Dana Meyer had harsh words regarding the action taken by the government:

The division is living in a time capsule, with a framework that predates the arrival of iPhones, Google, Facebook and modern media outlets that are killing the traditional newspaper industry.

It wasn’t competition from the L.A. Times that forced the Register into bankruptcy. It was the Internet and related technology.

Roderick also quoted Daniel Lazaroff, professor emeritus at Loyola Law School in Los Angeles, who said the Justice Department's argument is harder to make today than decades ago because consumers and advertisers have more choices, including websites and cable news stations.

“If this was 25, 30 years ago, the anti-competitive potential would be much greater,” he stated.

New Tribune Publishing boss Michael Ferro bid $56 million to acquire the company, outbidding rivals Digital First Media and a group of Freedom Communications executives, Roderick reported.

“The auction process itself sounded raucous, not getting started until after 7 p.m. following back-and-forth negotiations,” he continued.

Roderick asserted that the three-way bankruptcy auction “turned into a major legal tussle on Wednesday, with an investor group led by Freedom Communications CEO Rich Mirman leaving the bidding after all-day negotiations stalled the auction’s start.”

Mirman’s group had made a bid in the pre-auction process that was calculated in bankruptcy terms to be worth $45 million, said the group’s attorney, Leonard Shulman of Shulman, Hodges & Bastian. Mirman’s group was below the Tribune’s $46.5 million bid valuation but above Digital First’s $43.3 million.

“As the bidding was to start -- after lengthy delays -- Mirman’s investor group was told it had to add $5 million in cash for creditors to waive the right to sue the group’s principal players -- Mirman, Freedom Chairman Eric Spitz and Santa Ana developer Michael Harrah,” Roderick stated.

“It was an irregular and unreasonable request over bogus claims,” Shulman said.

Soon after, Justin Dearborn, CEO of Tribune Publishing, issued a press release on the result of the auction:

The successful bid for the business of Freedom Communications will allow the Orange County Register and the Press-Enterprise to continue providing a distinct local voice in their communities and deliver premium news and information to consumers across southern California.

The struggle over ownership of the two county newspapers is expected to be resolved during the next several months in court proceedings.

The Tribune Publishing Company is a Delaware corporation headquartered in Chicago. It publishes 11 major daily newspapers across California, Illinois, Florida, Maryland, Connecticut, Virginia and Pennsylvania.