The court is deeply troubled by DOJ's role in this case. Both
of DOJ's key positions, that the Hearst/Chronicle merger created
antitrust concerns and that the Fang transaction resolved those
concerns, are unsupported by legal analysis and inconsistent with
the evidence. DOJ has avoided explaining its apparent departure
from its own approach in earlier JOA investigations, the legal
basis for a burdensome and protracted investigation or the sudden
approval of the Chronicle acquisition after Hearst agreed to
provide a heavily-subsidized Examiner to political allies of the
mayor of San Francisco.
These observations lead the court to the uneasy inference that
the cronyism that fueled the Fang transaction at the local level
also exerted influence over the DOJ investigation. At the very
least, DOJ's sanction of the Fang transaction and the timing of
that sanction, the now-abandoned characterization of the proposed
Fang publication as "fully competitive" and DOJ's unwillingness
to offer a legal analysis in support of its position
significantly erodes the court's confidence in the impartiality
and probity of DOJ's review of the transactions at bar. Hearst
attributes the conduct of DOJ's investigation to lack of
knowledge and inexperience in the newspaper industry of the DOJ
personnel reviewing the transaction. While that explanation is
troubling enough, less forgiving explanations come easily to
mind. The undersigned is astonished and disappointed that DOJ
would allow itself to be put in a position where the inference
can be so easily drawn that its action or inaction in this case
was political favoritism masquerading as law enforcement.
CONCLUSIONS OF LAW
1. The court has jurisdiction over the parties and over the
subject matter of the action.
2. Plaintiff has standing to assert a claim for injury as a
consumer of newspaper news, features and opinion, but lacks
standing to sue for injury as an advertiser or a potential
competitor in the publication of newspapers.
3. The 1965 joint operating agreement between Hearst and CPC
constituted a price fixing, profit pooling and market allocation
agreement in probable violation of the antitrust laws under
then-existing market conditions.
4. The probable violation described above became exempt from
antitrust enforcement with enactment of the Newspaper
Preservation Act of 1970.
5. The NPA does not require publishers who once operate under
the NPA's exemption to continue their separate publications
indefinitely or for the contemplated period of the JOA.
6. Parties to a JOA may lawfully merge and cease publication of
one of the JOA newspapers if that newspaper meets the failing
company standard of Citizen Publishing Co. v. United States,
394 U.S. 131, 89 S.Ct. 927, 22 L.Ed.2d 148 (1969). When that test
is met, the parties to a JOA may discontinue the failing
publication and may dispose of the assets associated with it;
neither the NPA or any other antitrust law requires the parties
to ensure that some other competing publication comes into
existence; nor do JOA participants have a legal obligation to
spin off some of the JOA's assets to a third party for purposes
of establishing a competitor.
7. Merger of Hearst and CPC operations coupled with the closure
of the Examiner would not create a monopoly, substantially lessen
competition or unreasonably restrain trade. Accordingly, the
August 6 contract does not violate sections 1 or 2 of the Sherman
Act or section 7 of the Clayton Act.
8. Closure of the Examiner without a spin off of assets as
contemplated in the March 16 contract would increase allocative
efficiency in that it would afford the same outlet for
advertisers that both the Chronicle and Examiner now provide and
conserve substantial resources, while lessening the content
choice available to newspaper readers only negligibly.
9. The arrangements between Hearst and ExIn contemplated in the
March 16 contract appear inimical to competition and could
constitute a violation of the antitrust laws.
10. Plaintiff does not have standing to challenge this aspect
of the March 16 transaction. Plaintiff's standing is limited to
that of a consumer of newspaper news, features and opinion; his
alleged injury is the loss of an economically viable editorial
voice. With the court's conclusion that closure of the Examiner
may proceed without a sale to the Fang group or any other party
unwilling to pay at least liquidation value for Examiner assets,
such injury does not in this instance exist and plaintiff's cause
of action fails. In order to challenge the March 16 transaction
on the basis of possible anticompetitive effects, a plaintiff
would need standing as an advertiser in or competitor to Hearst
or Fang group publications, or both.
11. Although plaintiff did not prevail in obtaining the relief
he sought, his action has served a useful purpose in bringing to
light problematic conduct of the government and the parties. The
court will entertain a motion to award plaintiff for his fees and
costs of suit pursuant to sections 4 and 16 of the Clayton Act,
15 U.S.C. § 15, 26.
IT IS SO ORDERED.
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