Justice Dept. Closes Antitrust Probe of 'Seattle Times'

By: E&P Staff The U.S. Department of Justice's Antitrust Division announced late Friday that the Seattle Times Co. did not violate antitrust laws in its dealings with its joint operating agreement partner, Hearst Corp.'s Seattle Post-Intelligencer.

"After a thorough investigation, the Antitrust Division decided to close its investigation of whether the Seattle Times Company violated the federal antitrust laws in connection with its operation of the Seattle JOA," the department said in a statement. "The Division 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."

The investigation has been closed, Antitrust announced.

The Seattle Times is "very pleased" by the decision to close the investigation, said its corporate communications manager, Kerry J. Coughlin. "We cooperated fully with the Justice Department and gave them anything they need in this investigation," she said. "Our feeling is this validates our position that we did not act anti-competitively in managing the JOA."

Antitrust said it investigated whether the Blethen family's Seattle Times, the manager of the JOA, "engaged in that made no business sense" except to put the Post-Intelligencer out of business, and give itself a Seattle daily newspaper monopoly.

The Post-Intelligencer has said the Times overspent in 2002 on newsroom hiring, marketing, and promotion in an effort to create an artificial loss that could be used to terminate the JOA. With its action Friday, Antitrust is saying the Times did not violate the law.

Antitrust said it did not need to resolve the bitter disagreement between the Times and Post-Intelligencer over whether the Times has the right to terminate the JOA. "Rather, the division considered whether the Seattle Times Company has taken actions that make no business sense but for their tendency to harm the Seattle Post-Intelligencer and whether any such actions are likely to lead to the monopolization of the relevant market," it said. "The division's investigation did not indicate that the Seattle Times Company has engaged in conduct that violates this standard."

The Times is seeking to invoke the JOA's so-called "loss notice" clause that permits either paper to terminate the agreement if the JOA suffers three consecutive years of operational losses. The Times says that's exactly what happened in the years 2000 through 2003. Hearst, however, contends losses in the first two years are related to a Christmas-season strike, and should not be counted under the JOA termination formula.

Hearst has argued repeatedly that ending the JOA would mean folding the P-I because the Seattle Times owns all the production and distribution equipment. In a JOA, two papers compete editorially but combine business, production, and delivery operations.

Frank Blethen -- whose family owns 50.5% of the Seattle Times Co., with Knight Ridder owning the rest -- has also argued that the fate of his paper is at stake. Blethen has contended the partnership with the Post-Intelligencer is "bleeding" his paper financially.

The JOA termination issue is now in court in Washington state. The two newspaper owners have agreed not to close either paper while the issue remains in litigation.

"If the companies were to decide to terminate one of the two newspapers under terms that were not part of the JOA as approved by the Department of Justice, the division would need to evaluate the antitrust issues raised by such a decision," Antitrust said in its statement.

A spokesperson at the Times Co. did not immediately respond to messages seeking comment on Antitrust's decision.

Hearst Vice President of Communications Paul
Luthringer said the Antitrust decision does not change
Hearst's position in its litigation with the Times Co.
"Our goal is to continue JOA publication of the
Seattle Post-Intelligencer and to prevent the Seattle
Times Co. from turning Seattle into a one-newspaper
town," Luthringer said.