Feds Investigate Alternative Newspaper Swap

By: Lucia Moses

The recent deal between the two biggest alternative-weekly chains to close competing papers in Los Angeles and Cleveland is suddenly under the microscope. “There are very few antitrust cases that are completely open and shut, but the government appears to have a very clear case here,” said Aaron S. Edlin, law and economics professor at the University of California at Berkeley. “If I were the parties, I would be worried.”

The U.S. Department of Justice is investigating the agreement by Village Voice Media LLC and NT Media (New Times) last month that resulted in the closing of their money-losing papers in L.A. and Cleveland, the Los Angeles Times reported last week.

Edlin, an antitrust expert, compared the situation to Palmer v. BRG of Georgia (1990), in which the U.S. Supreme Court ruled that two bar-review courses broke the law by agreeing to divide their territory between Georgia and the rest of the United States.

The alt-weekly chains could have a defense if they demonstrate that splitting a market led to efficiencies. But, Edlin said, “If all the benefits derive from getting rid of the competition, then they’ve got a problem.”

In a case of dividing territory, the companies’ size may not be a consideration, experts said.

The difficulty of restarting the now-defunct Cleveland Free Times and New Times Los Angeles makes it unlikely the government would try to force the companies to go back to business, experts said. “There’s a substantial problem of unscrambling the omelet,” said UC Berkeley law professor Stephen Barnett.

More likely would be a fine, which in a criminal case could be as much as $10 million. The government could also pursue a civil-consent degree barring the companies from repeat behavior.

Advertisers claiming to be hurt by higher rates could sue for damages, too, said Don T. Hibner Jr., a Los Angeles-based antitrust lawyer.

Village Voice Media wouldn’t go beyond a statement saying it would respond to the federal investigation. New Times Chairman and CEO Jim Larkin said only: “I can’t comment on the case, and people who don’t know anything about it can’t comment.”

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