McClatchy Deal's Antitrust Okay Comes With Warning To MediaNews, Hearst

By: Mark Fitzgerald The U.S. Justice Department's Antitrust Division gave the buyers and the sellers of the San Jose Mercury News and two other Bay Area dailies just about everything they could wish for.

In addition to concluding The McClatchy Co.'s sale of the Mercury News and Contra Costa Times to MediaNews "is not likely to reduce competition substantially," the agency's statement also asserted that Bay Area residents "will benefit" from the savings MediaNews will realize if and when it consolidates production and delivery of the papers.

But Antitrust's statement also includes a little-noticed warning to MediaNews, and Hearst Corp., publisher of the San Francisco Chronicle.

Under the complex three-way deal in which McClatchy is shedding the Bay Area dailies included in its blockbuster acquisition of Knight Ridder, MediaNews will buy the Mercury News and Contra Costa Times, and put them into the California Newspapers Partnership it manages with Gannett Co. and Stephens Media Group. Hearst is buying a third Bay Area daily, the Monterey County Herald, as well as the St. Paul (Minn.) Pioneer Press, and giving them to MediaNews in exchange for equity in the Denver-based chain's papers outside of California.

That might trigger yet another antitrust investigation, the government said.

"The Division's investigation did not address the effects of potential future transactions involving MediaNews and Hearst," the Justice Department statement said. "The Division is aware that Hearst has announced plans to invest in MediaNews -- ostensibly limited to its non-California newspapers -- and may be considering other collaborative arrangements with MediaNews involving San Francisco area newspapers. If and when any such arrangement is proposed, the Division will investigate whether it would adversely affect competition."

The McClatchy deal, which is expected to close later this week, is being challenged in federal court by investor Clint Reilly. Last week, a judge refused to order a temporary injunction to block the sale.