Judge stalls local newspaper deal

A U.S. District Court judge ruled Tuesday that the region’s two largest newspaper companies, MediaNews Group Inc. and the Hearst Corp., may not collaborate on advertising or distribution pending an April 2007 antitrust trial.

The move was seen as a stepping-stone victory by Clint Reilly, the San Francisco businessman who alleges the deal between the two firms amounts to a monopoly of every major newspaper in the Bay Area, hurting both readers and advertisers. Hearst Corp. owns the San Francisco Chronicle, while MediaNews owns the Bay Area Newspaper Group, which publishes the Oakland Tribune, San Jose Mercury News, the San Mateo County Times, the Marin Independent Journal and other suburban papers.

In June, MediaNews purchased the Contra Costa Times and the Mercury News from McClatchy Co., in a $1 billion deal partially financed by Hearst. McClatchy acquired those papers when it bought Knight Ridder Inc.

Reilly sued to block the sale, and his case will go to court next spring. Meanwhile, he charged that a recently uncovered letter dated April 26 shows that Hearst and MediaNews planned joint sales of newspaper and print advertising, as well as distribution collaboration. In her Tuesday injunction, Judge Susan Illston said no such cooperation could take place, despite Hearst and MediaNews’ assertions they did not intend to go through with those agreements mentioned in the letter. The defendants’ attorneys did not return calls by press time.

“The court does not doubt the sincerity of the defendants’ representations. However, the court is concerned that denying the preliminary injunction may leave defendants unsure of whether they are free to immediately pursue such agreements,” Illston wrote. “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.”

The injunction does not mention Hearst Corp.’s plan to purchase and then sell to MediaNews the Torrance Daily Breeze and affiliated Southern California papers from The Copley Press Inc. Hearst and MediaNews announced they would close that deal last week.

Media consolidation critic and author Ben Bagdikian said he did not think the Hearst and

MediaNews agreement would have been approved by federal regulators in past decades. The U.S. Justice Department approved the McClatchy/MediaNews newspaper sales in June.

“It is inevitable in my mind, when [Hearst and MediaNews] are making decisions about each other … that they remember that they are cooperating with each other,” Bagdikian said.

kwilliamson@examiner.com

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