The U.S. Department of Justice yesterday decided there wasn't enough evidence to pursue an antitrust case against The Seattle Times Co...
The U.S. Department of Justice yesterday decided there wasn’t enough evidence to pursue an antitrust case against The Seattle Times Co., ending its two-year investigation of the joint-operating agreement (JOA) between Seattle’s daily newspapers.
Federal officials said in a statement yesterday that the investigation, announced in June 2003, “did not find sufficient basis to conclude that the Seattle Times Company engaged in improper conduct that is likely to lead to monopolization of the Seattle newspaper market.”
A Justice Department spokeswoman said the announcement “speaks for itself” and declined additional comment.
Times spokeswoman Kerry Coughlin said the company was pleased with the Justice Department’s findings.
“We feel this validates our position that we didn’t engage in any anticompetitive conduct in the management of the JOA,” Coughlin said.
The Hearst Corp., which owns the rival Seattle Post-Intelligencer, said the announcement doesn’t change Hearst’s position in its long-running legal battle with The Times.“Our goal is to continue JOA-publication of the Seattle Post-Intelligencer and to prevent the Seattle Times Company from turning Seattle into a one-newspaper town,” the company said in a statement.
The federal investigators’ findings could influence that legal battle, which began in April 2003 when Hearst filed a lawsuit in King County Superior Court that seeks to block The Times from exercising an escape clause in the JOA.
Times officials claim the P-I’s sinking circulation caused The Times to lose money under the JOA from 2000 to 2002, triggering the escape clause. That clause would force the two companies to negotiate a shutdown of one paper, an end to the JOA, or both.
One part of Hearst’s lawsuit is before the state Supreme Court, which is expected to rule this spring or summer.
If the Supreme Court rules against Hearst, attorneys for the New York-based media company have said they may prolong the litigation by challenging The Times’ management of the JOA in court.
Under the JOA, both papers publish separately but The Times is required to print, distribute and market both papers equally.
Hearst officials have complained that The Times favors its own paper in running the JOA. They spelled out some of their complaints in an eight-page letter to Times Publisher Frank Blethen in January 2002. The letter outlines a number of concerns, including circulation cutbacks in outlying areas where the P-I had more readers, reducing the size of the P-I’s logo in the Sunday paper and eliminating reference to the P-I on the sides of delivery trucks.
In a 13-page reply, Blethen dismissed most of Hearst’s complaints while blaming the P-I’s eroding circulation on the newspaper’s quality, not the Times’ management of the JOA.
The Justice Department’s announcement yesterday pointedly stayed away from concluding whether The Times had “breached its contractual obligations.” Unequal treatment might be a contractual breach but would not necessarily violate antitrust laws, the statement said.
But Times attorneys would likely use the Justice Department’s findings if Hearst decided to contest The Times’ management of the JOA, said Jack Kirkwood, a Seattle University antitrust specialist.
“If Hearst tries that approach,” Kirkwood said, “The Seattle Times will likely wave this press release repeatedly in front of the judge and jury.”
While the announcement ends the current antitrust probe of the Seattle JOA, it does not necessarily mean federal investigators are done with the JOA fight.
In its announcement, the Justice Department warned it would need to evaluate antitrust issues if Seattle’s newspaper scrap leads to a shutdown of either The Times or P-I under terms not part of the JOA “as approved by the Department of Justice.”
Times officials have based their efforts to negotiate an end to the P-I on a 1999 revision of the JOA that never received Justice Department approval.
Under the revision, Hearst agreed to allow The Times, which had been an afternoon newspaper, to publish head-to-head against the P-I in the morning, beginning in 2000. In return, The Times agreed to give Hearst a larger cut of their shared revenue — 40 percent, instead of 32 percent. Justice Department officials said they did not need to approve the revised contract when it was signed by Hearst and The Times in 1999 because it was not considered a “substantive” alteration to the original 1983 agreement.
Kirkwood said the inclusion of the warning in yesterday’s announcement could have been “a sort of code to say if the terms of that revision cause the termination of one paper, then we may need to re-evaluate.”
“The antitrust division seems to be saying they’re reserving judgment on whether terms of the 1999 revision may present antitrust issues if one paper closes,” he said.
Coughlin called the likelihood of another antitrust investigation “a stretch.”
“They saw the 1999 agreement and raised no objections to it,” she said. A more likely interpretation of the announcement, she said, is that it was “a hedge for Justice if we were to come up with something outside the current agreement.”
Bill Richards is a freelance writer hired on a special contract by The Seattle Times to cover events involving the joint-operating agreement with the Seattle Post-Intelligencer. He can be reached at email@example.com.