U.S. Justice Dept. Files Anti-Trust Lawsuit to Block Tribune Purchase of SoCal Newspapers

Friday, March 18, 2016
Tribune Publishing CEO Justin Dearborn (photo: Tribune)

By Amy Taxin, Associated Press


SANTA ANA, Calif. (AP) — The U.S. Justice Department sued Thursday to block Tribune Publishing Co. from buying the bankrupt Orange County Register and another Southern California newspaper, arguing the $56 million sale would limit competition and harm readers and advertisers in the region.


The move came just hours after Tribune announced it had won a bid to buy the Register and Press-Enterprise of Riverside, both owned by Freedom Communications. The Tribune already operates the Los Angeles Times and San Diego Union-Tribune, which it purchased last year.


The sale, which still needs a federal bankruptcy court judge's approval, would give Tribune control over the four largest daily newspapers in Southern California, covering a vast stretch from Los Angeles to the Mexican border that is home to 18 million people.


The four combined newsrooms would have as many as 1,000 journalists. However, if the deal ultimately goes through, job cuts are a virtual certainty.


"Tribune's dominant position in both Orange County and Riverside County would allow it to, among other harmful effects, increase subscription prices and advertising rates to businesses targeting readers in those areas," the Justice Department's lawsuit said.


Tribune spokeswoman Dana Meyer criticized the move by the Justice Department's Antitrust Division.


"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," Meyer said in a statement given to the Times.


The newspaper industry has struggled since the advent of the Internet and has been contracting and consolidating for years as readers turned away from printed pages. Establishing a network of major dailies in Southern California would provide huge leverage to attract advertisers and allow for efficiencies in news production.


Tribune faces a challenge because there is no online substitute as effective as a newspaper at reaching local customers, said Tom Campbell, a law professor at Chapman University.


"Look at the advertising, the auto dealers, the real estate brokers, the sorts of ads you see in newspapers — you don't see anywhere else," said Campbell, who teaches antitrust law. "Will a monopoly be able to charge a higher price to advertisers than a competitor? The answer is yes."


Gabriel Kahn, a professor at University of Southern California's journalism school, said the lawsuit would make the purchase more expensive for Tribune but he didn't believe newspapers struggling to retain readers and advertisers would constitute a monopoly.


"A monopoly on newspaper sales is not that much different than a monopoly on horse-drawn buggy rides," he said.


Ken Doctor, a former newspaper editor and executive who now analyzes media, worried about local coverage suffering if the sale goes through.


"Communities benefit by having different groups of editors looking out for them," he said. "When you essentially only have one newsroom leadership deciding what is news for Los Angeles County, Orange County, Riverside County, San Diego County, that is unprecedented."


A federal bankruptcy judge has scheduled a hearing for Monday on the prospective sale to Tribune. Doctor said he thought the judge would be reluctant to approve the deal because of the lawsuit.


If it is approved, Tribune would control 98 percent of daily English-language newspaper sales in Orange County and 81 percent in Riverside County, the Justice Department estimated.


It would also likely bring job cuts, especially in newspaper production and distribution, experts said.


Freedom Communications filed for bankruptcy protection in November. It followed a series of layoffs and buyouts after an aggressive expansion of print journalism that included starting daily papers in Los Angeles and Long Beach and buying the Press-Enterprise for $27 million.


Tribune was competing for Freedom's newspapers against Digital First Media, which owns nine Southern California papers and websites, including the Los Angeles Daily News, and an investor group led by Freedom's current managers.


Digital First made a $45.5 million "stalking horse bid" for the papers, while Freedom's managers pulled out of bidding.


Their proposal would have retained local control over the 110-year-old newspaper that serves an affluent county that is home to Disneyland. It received support from a coalition of business and community leaders.


The Associated Press is among the creditors in Freedom's bankruptcy proceedings.


To Learn More:

L.A. Times' Parent Company Is Buying U-T San Diego; Let the Layoffs Begin (by Ken Broder, AllGov California)

Tribune Unveils Newest Plan for Draining Assets from Los Angeles Times (by Ken Broder, AllGov California)

Media Giants Covertly Skirt FCC Oversight to Buy Up Local TV Stations Across U.S. (by Noel Brinkerhoff, AllGov)

FCC Prepares to Open Top 20 Media Markets to Cross-Ownership of TV, Newspapers and Radio (by Noel Brinkerhoff, AllGov)

Battered Tribune Can Exit Bankruptcy, but More Bludgeoning Looms (by Ken Broder, AllGov California)       

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