Justice Dept. Attempts to Block Newspaper Sale for the Absurdest of Reasons
Fears of media 'monopolies' over the joining of two chains that have separately declared bankruptcy
Here's how absurd federal antitrust interventions have become: Tribune Publishing Company, owner of the Los Angeles Times and several other newspapers, filed for bankruptcy at the height of the recession in 2008 as a result of a plunge in advertising and high debt. Freedom Communications, owner of the Orange County Register and the Riverside Press-Enterprise in Riverside County, California, has filed for bankruptcy twice, in 2009 and just last year, for similar reasons. It used to be a larger chain, built by noted libertarian R.C. Hoiles, but it has since sold off most of its publications.
Freedom Communications' latest bankruptcy has resulted in the company being auctioned off. Tribune Publishing won the bid with a $56 million offer.
Not so fast, said the Department of Justice. They're filing suit to stop the purchase because—and try not to laugh at this explanation—they're concerned about the creation of a newspaper monopoly in Orange and Riverside counties and the impact on advertising and subscription rates.
In 2016. For real:
According to the department's complaint, filed in federal district court in Los Angeles, the Los Angeles Times and the Register together account for 98 percent of newspaper sales in Orange County and the Los Angeles Times and Freedom's newspapers together account for 81 percent of English-language newspaper sales in Riverside County. Tribune's acquisition of its most significant competitor would give it a monopoly over newspaper sales in each county and allow it to increase subscription prices, raise advertising rates and invest less to maintain the quality of its newspapers.
"If this acquisition is allowed to proceed, newspaper competition will be eliminated and readers and advertisers in Orange and Riverside Counties will suffer," said Assistant Attorney General Bill Baer of the Justice Department's Antitrust Division. "Newspapers continue to play an important role in the dissemination of news and information to readers and remain an important vehicle for advertisers. The Antitrust Division is committed to ensuring that competition in this important industry is protected."
Wherever will advertisers go if newspapers raise their rates? Wherever they've been going since they stopped going to the newspapers over the past 15 years. Here's what the newspaper advertising revenue market looks like:
The Department of Justice is attempting to justify intervening by treating the newspaper market as something separate from the media environment as a whole. This reads like an analysis that came from a mass communications textbook that was published in the 1970s. And that's exactly how the Tribune's spokesperson responded to the L.A. Times:
"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," spokeswoman Dana Meyer said in a statement. "It wasn't competition from the L.A. Times that forced the Register into bankruptcy. It was the Internet and related technology."
The Times also notes that the Justice Department has said that it doesn't have any issues with Freedom Communications being sold to Tribune's own competitors in the region, so the federal government is actively, intentionally or not, threatening the bottom line of a company that has already gone through bankruptcy once. And now they'll probably have to spend additional money fighting the DOJ.
Were Hoiles still around, he's probably be disappointed in the way things played out with his former media empire, but he'd be utterly repulsed at the idea that the federal government would exert the authority to determine who had the "right" to own and operate his newspapers. (Though he might also get a kick out of the generally liberal Times being thwarted by the consequences of government intervention in the economy.)
(Full disclosure: Prior to coming to work for Reason, I edited one of Freedom Communications' smaller California newspapers. It has since been sold off to another media company.)