THE FEDERAL GOVERNMENT has approved the merger between New Times and Village Voice Media, paving the way for the creation of a 17-paper alternative weekly chain with greater reach in its marketplace than even the biggest of the daily newspaper chains have in theirs. That means the future of media consolidation in the alternative press is now in the hands of state regulators in California, Ohio, and New York, who can and must now move to block the deal.

News of the US Justice Department and Federal Trade Commission approval was posted the day before Thanksgiving on the FTC Web site and first broken by the Seattle Weekly. The Weekly also published the gist of a Nov. 28 memo from Village Voice CEO David Schneiderman confirming the approval and advising staffers, "We expect to close in about a month or so. The work on integrating the two companies will accelerate, but we will still be functioning as separate entities until the closing."

The two companies have discussed merging for several years now, and have tried to keep a veil of secrecy over the talks. We obtained copies of draft merger agreements in August 2005, and our Aug. 31 story "Merger on the March" forced the deal into the open. The two parties formally announced merger plans Oct. 24.

The merger of the two predatory chains required federal approval under the Hart-Scott-Rodino Act, which mandates Justice Department review of any business deal that could thwart competition. But that's just one small part of the picture.

The two chains have been cited by the US attorney general and the attorneys general of California and Ohio for direct and willful violations of antitrust laws in a deal under which the chains effectively traded monopoly markets, closing competing papers in Los Angeles and Cleveland so each could dominate the alternative weekly market in one city. The consent decree that all parties signed in 2003 bars New Times and VVM from doing any more business deals without the approval of both federal and state regulators.

There's plenty of reason for concern: As we reported Oct. 26 (see "Losing a Voice"), the combined New Times-VVM company would reach between 22 and 25 percent of the total circulation of the 126 members of the Association of Alternative Newsweeklies, according to AAN figures. Gannett, the largest of the daily operations, claims a circulation of 7.6 million, which is just 13.8 percent of the 55 million paid daily circulation in the nation.

For Bill Lockyer, the California attorney general, the case against the merger is particularly compelling: Four of the markets that would be most directly affected – San Francisco, the East Bay, Los Angeles, and Orange County – are in California. New Times operates SF Weekly and the East Bay Express, and VVM owns the LA Weekly and the OC Weekly in Orange County. New Times also has business interests in the San Jose and San Diego markets: The alt-weeklies there are members of the Ruxton Group, the national advertising sales outfit owned by New Times.

In fact, the merged company would reach 29 percent of all alt-weekly readers in California. That's more market dominance than San Jose-based Knight-Ridder has; it reaches roughly 27 percent of all daily readers.

And, of course, this comes at a time when Knight-Ridder's largest institutional stockholders are pushing executives to put the chain up for sale, almost certainly to an out-of-state operation. With the Los Angeles Times run out of Chicago, the Alameda Newspaper Group run out of Denver, and the San Francisco Chronicle owned by New York's Hearst Corp., Knight-Ridder is the last big California newspaper operation still headquartered in the state, and its loss to an outside operation would be another blow for the state's media.

Lockyer could very well have a case, Steve Barnett, a retired Boalt Hall law professor and widely known national expert on antitrust law, told us. The US Justice Department has already ruled that the alternative weekly market can be considered a distinct market for antitrust concerns – and in that market, the New Times-VVM deal would lead to what could be considered an unacceptable level of market control in California.

"I think if Lockyer went into court, he could get a temporary restraining order or preliminary injunction to block it, temporarily anyway," Barnett said.

The New York attorney general, Eliot Spitzer, who has long been a champion of big-business regulation, also has a potential case here: Handing the Village Voice over to a predatory chain could hurt the competitive market in New York City (in part by damaging the only competitive alt-weekly, the New York Press), and the Voice unions and other concerned New Yorkers ought to call on Spitzer at least to investigate.

If the deal goes through and closes next month, the damage will be immediate and long-term. There's no reason for Lockyer to allow it to happen on New Times' schedule. He should use his authority under the consent decree to immediately announce that he wants a full and detailed public review and that he won't approve the merger until all the facts have been heard. And if New Times tries to jam it through anyway, he needs to go into court to block it.

PS: The secret merger documents: The records we've obtained make some critical points. l. The new company will be controlled by New Times, which will have five of the nine board seats and 62 percent of the stock. (A big chunk of that stock is owned by Alta Communications, a venture capital firm in Boston, and much of the remaining stock will be controlled by Weiss, Peck, and Greer; Trimaran Capital Partners; and Goldman, Sachs and Co., all VVM investors. So the real driving force here will be the financial needs of venture capitalists.) 2. The SF Weekly, East Bay Express, and Cleveland Scene could be sold off, consolidated, or closed if they continue to hemorrhage cash (the documents show that the three papers in 2004 racked up losses of $4 million, and New Times has no plan to turn them around). 3. The new company could be sold in as few as three years – most likely to an even bigger chain such as Gannett or to some high-tech company like Google or Microsoft or eBay. And so VVM CEO David Schneiderman goes down in journalism history as the guy who gave the Village Voice (and its sister papers in Seattle, Los Angeles, Orange County, Minneapolis, and Nashville) the worst possible 50th-anniversary present: a sale to the New Times of Phoenix, Ariz., and its brand of neocon desert libertarianism. That means the VVM papers, as New Times executive editor Mike Lacey has stated, will operate under the New Times editorial philosophy: No editorials, no political endorsements, and most likely, no real editorial pressure against the Iraq War, the Bush administration, and other critical public policy issues. Alas. Alas. For his work in selling out the VVM papers, Schneiderman gets a $500,000 bonus, a nifty job as head of the VVM online operation, and a new car to drive around in Seattle, where he will operate for the duration, according to the merger documents and sources close to the deal. Good going, David.