Clint Reilly wins a big one against Hearst and Singleton. Fighting to keep one newspaper towns from becoming a one newspaper region.

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By Bruce B. Brugmann

On April 26, 2006, the McClatchy newspapers and the Chronicle/Hearst and MediaNews/Singleton publicly announced a complex series of transactions that resulted in Singleton owning three major Bay Area dailies (Contra Costa Times, San Jose Mercury News, and the Monterey Herald) that had been previously owned by Knight-Ridder and then McClatchy.

On the same day, April 26, 2006, Hearst and Singleton secretly signed a key centerpiece deal that set up a secret arrangement between Hearst and Singleton that in effect would allow them to join forces, destroy daily competition in the Bay Area, and establish a regional monopoly for the duration.

The key point: the two big publishing chains from New York and Denver lied in effect about the monopolizing features of their deal, and in effect concealed key evidence in the Clint Reilly antitrust case, according to Federal Judge Susan Illston. And then the two chains, who love to holler about freedom of the press and government suppression of documents, moved to keep the documents under seal, including the incriminating letter outlining the monopoly agreement. Their coverage amounts largely to rummy little business stories buried deep in their papers.

Illston neatly skewered the Hearst/Singleton lie that their deal was harmless and would not interfere with vigorous competition between the two companies. Illston quoted the April 26 letter, which she pointed out was not disclosed in the first hearing on a request for a temporary restraining order. (Alioto got the letter in discovery. It is an even bigger bombshell than his charge in the first Reilly trial that Hearst was "horesetrading" favorable coverage for political favors with then Mayor Willie Brown and others to get political help on its moves to create a morning monopoly.)

The letter of agreement was from Hearst Corporation Vice President James Asher to Joseph Lodovic, president of MediaNews. She quoted "in pertiment part" these statements: "The Hearst Corporation and Media News Group agree that they shall negotiate in good faith agreements to offer national advertising and internet advertising sales for their San Francisco Bay Area newspapers on a joint basis, and to consolidate the San Francisco Bay area distribution networks of such newspapers, all on mutually satisfactory terms and conditions, and in each case subject to any limitations required to ensure compliance with applicable law.

"In addition, Hearst and MediaNews agree that, with respect to the newspapers owned by each of them on the date of this letter, they shall work together in good faith to become affiliated with the networks operated by Career Builder...and Classified Ventures) on the same terms, and each of Hearst and MediaNews further agrees that neither of them shall enter into any agreement, arrangement, or understanding to participate in Career Builder or
Classified Ventures or their respective networks with respect to such newspapers unless the other party is offered the opportunity to participate on identical terms..."

Illston quoted extensively from the "secret" letter, but the Guardian and nobody else can see the letter, oor the supporting documents and depositions, that would further flesh out monopoly deal. That is a terrible position, let me emphasize, for big daily chains to be taking in federal court these days.

Illston said the letter "casts serious doubt on several key findings underlying" her previous order denying a temporary restraining order. She said that she had previously accepted Hearst arguments that "Hearst's involvement in the transactions was solely that of a passive investor." But she continued, "Though (Hearst and Singleton) offered no explanation why Hearst was willing to finance an acquisition that would only make competition stronger, the Court did not understand that Hearst expected, or would receive, any quid pro quo. However, the April 26 letter suggests, at the very least, that Hearst's involvement was specifically tied to an agreement by MediaNews to limit its competition with Hearst in certain ways."

This "cooperation" between Hearst and Singleton, she said, was "in fact, quid pro quo for Hearst's assistance to MediaNews in acquiring two of the Bay Area papers." (The quid pro quo was also a $300 million Hearst investment in Singleton, which I think might evaporate should Illston ultimately nix or water down the deal.) Illston also said the letter indicated that the Chronicle may not continue to be "strong competition" for the other Bay Area papers.

Had the letter been disclosed to the court, she said, it would have "affected the court's analysis of the McClatchy-MediaNews-Hearst transactions in this case." Summing up, she stated that "such agreements, the mere existence of the letter, and the cooperation between Hearst and MediaNews they reflect, increase the likelihood that the transactions at issue here were anti-competitive and illegal."

And so she granted a temporary restraining order in part and temporarily restrained and enjoined Hearst and Singleton from entering into any agreements "of the nature described in the April 26 letter, including agreements to offer national advertising sales for their San Francisco Bay Area newspapers on a joint basis, and consolidation of the Bay Area distribution networks for their papers." She ordered Hearst and Singleton to show cause at a Dec. 6 hearing why she should not impose a preliminary injunction. Quite an opinion.

As an antitrust attorney told us after reading the opinion, "How the hell does Joe Jr. keep getting the Hearst people to lie under oath, then cough up the documents that prove it? Haven't they figured out that judges don't react well to that little character flaw?"

Implicit in all of this is Brugmann's Law of Journalism: where there is no economic competition, there is no news or editorial competition. Suddenly,for the first time ever by the terms of the proposed deal, daily competition would be eliminated and one of the most liberal and civilized areas of the world would be firmly under the monopoly thumb of conservative billionaires from New York and Denver. The result would give ad rates a monopoly boost, gut and centralize editorial staffs, make editorials and endorsements ever more uniform and conservative, and send all profits out of town on a conveyor belt to headquarters to buy more properties. The carnage is well underway (note our stories and those carried on ChainLinks, the newspaper guild publication)

Illston should disclose the letter and other documents in open court. And the U.S. Justice Department and California Attorney General should awake from their long naps and jump into this case and stop this secretive march to regional monopoly. Meanwhile, thank the Lord for Reilly and Alioto. Keep on rolling. B3, celebrating San Francisco values since l966

P.S. We are running lots of material on this story, including the judge's order, because it amounts to a "censored" story in the mainstream media. Each year, as the local part of our Project Censored package, we cite the monopolization of the press story. We will follow the current version along in the Guardian and the Bruce blog. Send us your comments and evidence of Eurekas or Censored material. (See previous blogs)

The morning after by G.W. Schulz
While drunk on big newspaper purchases, Dean Singleton promised competitive papers and no layoffs. Now he's swinging the ax, cutting deals with Hearst, and decimating local news coverage

Judge slams daily-paper chains by Tim Redmond
With a federal court ruling exposing a secret plan by Hearst and Singleton to join forces and end competition, the federal and state Justice Departments should intervene - and all records in the case should now be open

More on Singleton by G.W. Schulz

Read the judge's decision
Judge Susan Illston's ruling on Hearst-MediaNews collaboration