Judge issues preliminary injunction against anti-trust
By Julia Cheever, Bay City News Service
December 20, 2006
SAN FRANCISCO (BCN) - A federal judge today barred the
owner of 10 Bay Area newspapers and the parent company of the
San Francisco Chronicle from combining, for now, their local distribution
operations and national advertising sales.
The preliminary injunction issued by U.S. District Judge Susan
Illston was requested by San Francisco businessman Clint Reilly
as part of his antitrust lawsuit against MediaNewsGroup Inc. and
the Hearst Corp.
The judge's order remains in effect at least until an April 30
trial on the lawsuit, set for Illston's courtroom in San Francisco.
New York-based Hearst owns the Chronicle and Denver-based MediaNews
owns 10 Bay Area papers including the San Jose Mercury News, Oakland
Tribune and Contra Costa Times.
Lawyers for the two companies had argued the injunction was unnecessary
because the papers' publishers had signaled their intention to
wait until after the trial before pursuing any cooperative agreements.
But the judge said that ruling in the newspapers' favor might
make them change their mind and begin consolidation actions before
"The court therefore wants to leave no confusion as to its
expectation that defendants will comply with their stated intent
not to pursue any of the agreements at issue," Judge Illston
wrote in a two-page ruling. "The only way to do so definitively
is to issue the preliminary injunction."
According to court documents, Hearst and MediaNews agreed earlier
this year 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 said in a Nov. 28 ruling on the case that the agreement
and other evidence increases "the likelihood that the transactions
at issue here were anticompetitive and illegal."
MediaNews took over 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 contends the deal will reduce competition in violation
of federal antitrust laws and thereby decrease newspaper quality
and choice for Bay Area residents. His attorney, Joseph M. Alioto,
said of the injunction, "It's a harbinger of things to come."
Alioto said, "The evidence is getting to be very, very strong
that the Chronicle will not be a strong competitor" with
the MediaNews papers in the Bay Area.
Hearst spokesman Paul Luthringer said, "The (preliminary
injunction) order is consistent with the representations made
in the papers we recently filed in court."
A spokesman for MediaNews was not immediately available for comment.
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