Department of Justice opens antitrust inquiry about potential sale of Mercury News and Contra Costa Times to MediaNews.

Legal scholars doubt feds will intervene

By John McManus
Posted Mar. 29, 2006

The Antitrust Division of the U.S. Department of Justice has begun a series of interviews this week to determine whether the potential sale of Knight Ridder papers in the Bay Area to Dean Singleton's MediaNews Group might lead to higher prices for advertisers and less competition.

Were Denver-based MediaNews, which already owns the Marin Independent-Journal, Times-Herald in Vallejo, Reporter in Vacaville, Oakland Tribune, Alameda Times-Star, Daily Review in Hayward, Fremont Argus, Tri-Valley Herald and San Mateo County Times along with weeklies in other Bay Area cities, to add the Contra Costa Newspapers, the San Jose Mercury News, the Silicon Valley Community Newspapers and the Daily News chain on the Peninsula, it would complete a semi-circle around San Francisco with a combined circulation upwards of 800,000.

The only remaining print competitor of any size if McClatchy Newspapers were to sell the Knight Ridder titles to Mr. Singleton would be the Hearst-owned San Francisco Chronicle.

The Los Angeles Times reported this morning that Media News is among three bidders for one or more of the twelve Knight Ridder newspapers McClatchy plans to sell. Knight Ridder accepted an offer from McClatchy earlier this month to purchase all 32 of its metro daily newspapers.

I was interviewed this morning by an attorney from the Department of Justice who expressed interest in whether a purchase of Bay Area Knight Ridder papers by MediaNews might raise the rates businesses pay to advertise. The attorney asked not to be named and referred questions to the Department's public relations office. That phone number, however, led only to a recorded message that the voicemail for the press office was full.

Samuel Young, a paralegal for the Department of Justice, contacted Grade the News earlier this week to set up an interview. He characterized the inquiry as "routine," saying "We're trying to get an idea of what the landscape looks like now and after the sale.

"When there's a large acquisition," he added, "the Antitrust Division checks into it."

The DOJ attorney conducting the interview asked about the impact of a MediaNews buyout on advertisers, rather than on consumer prices or news quality. But he was willing to listen to concerns about concentration of ownership on the news product.

Law Professor Emeritus Stephen Barnett at the University of California, Berkeley said he expected little to come of a Justice Department investigation: "The likelihood is, based on its track record, that the Department of Justice wouldn't find a problem.

"There are certainly theoretical grounds," he explained. If the Mercury News and Contra Costa Newspapers were sold to MediaNews, "it would be legally vulnerable if it was a merger that damaged competition in a relevant market. It depends on how you define the relevant market"

"Merger law is really simple," said Wayne State University Law Professor Stephen Calkins. "You tell me after a merger is it likely that prices will go up and output will go down, and I'll tell you whether it's a lawful merger.

"There have been some times in history when people in the world of anti-trust have said 'let's not talk just about price and output, but editorial diversity.' Too much dominance in newspapers would have been troublesome under the Clinton administration. The current Justice Department would not say something like that."

While the Justice Department has been concerned with newspaper mergers within the same city, Mr. Calkins said, they have not objected to monopolies in the suburbs ringing the city.

The Justice Department did not object, he said, when the nation's largest newspaper chain, the Gannett Co., recently bought the suburban papers surrounding Detroit while owning the largest newspaper in the city, the Detroit Free Press, and participating in a joint operating agreement with Media News at the Detroit News, the city's second largest daily.