Federal judge bars MediaNews and Chronicle distribution
By Julia Cheever, Bay City News Service
November 29, 2006
SAN FRANCISCO (BCN) - A federal judge Tuesday temporarily
barred the owner of 10 Bay Area newspapers and the proprietor
of the San Francisco Chronicle from going ahead with plans to
combine local distribution operations and national advertising
U.S. District Judge Susan Illston said new evidence of agreements
between MediaNews Group Inc. and Chronicle owner Hearst Corp.
increases "the likelihood that the transactions at issue
here were anticompetitive and illegal."
The judge wrote, "The court is not convinced that an agreement
between the only two competitors in a market to share distribution
networks does not raise serious competitive questions."
Illston issued the temporary restraining order in an antitrust
lawsuit filed in July by San Francisco businessman Clint Reilly.
A full trial on the case is slated to begin before Illston in
San Francisco on April 30.
The temporary order will remain in effect until Illston decides
at a Dec. 6 hearing whether to extend it into a preliminary injunction
that would last until the trial.
But Illston turned down Reilly's bid for an additional temporary
order blocking Denver based MediaNews from any further consolidation
of operations of its Bay Area newspapers, including the San Jose
Mercury News, Contra Costa Times and Oakland Tribune.
The judge wrote that the Mercury News and Contra Costa Times
"continue to exist despite recent events" and that if
Reilly wins the antitrust lawsuit, the two publications can be
divested by MediaNews at a later date.
MediaNews acquired the Mercury News, Contra Costa Times and two
other newspapers from Sacramento-based McClatchy Co. last summer
in a complex $1 billion deal in which Hearst provided $263 million
in financing. MediaNews already owned the Tribune and seven other
Bay Area papers.
Reilly's lawsuit contends the deal will reduce competition in
violation of federal antitrust laws and thereby decrease newspaper
quality and choice for Bay Area residents.
The new evidence provided by Reilly's lawyers and cited by Illston
includes an April 26, 2006, letter signed by Hearst Corp. Senior
Vice President James Asher and MediaNews President Joseph Lodovic.
The two companies agree in the letter to negotiate pacts to offer
national and Internet advertising sales for their Bay Area newspapers
on a joint basis and to consolidate the papers' distribution networks.
Illston wrote, "The April 26 letter suggests, at the very
least, that Hearst's investment was specifically tied to an agreement
by MediaNews to limit its competition with Hearst in certain ways."
Reilly's attorney, Joseph M. Alioto, said the agreement "is
the knot tying the whole transaction together" and explains
why Hearst was willing to help a competitor with financing.
Alioto contended, "This was not simply a smoking gun. This
was a picture of the bullet coming out of the nozzle."
Hearst Corp. spokesman Paul Luthringer said the New York-based
company "declines comment."
A spokesman for MediaNews could not be reached for comment. MediaNews
and Hearst attorneys argued before Illston that the agreements
discussed in the letter had not yet been carried out, would not
reduce competition and were not illegal.
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