Suit Alleging Newspaper Monopoly Going Forward

By: A federal judge has allowed a lawsuit alleging that MediaNews Group's purchase of three Northern California newspapers would create a monopoly on local readership and advertising to proceed.

MediaNews and its partners had argued that real estate developer Clint Reilly had no right to sue them because he could not prove that he suffered any economic harm when MediaNews bought the Contra Costa Times, San Jose Mercury News and Monterey County Herald last year.

Hearst, which owns the competing San Francisco Chronicle, invested $300 million in MediaNews in a complex deal that helped finance the Denver-based publisher's purchase of the three Hearst rivals. Gannett and Stephens Media Group also have a business relationship with MediaNews. All four publishers are named in Reilly's lawsuit.

Reilly argues that the investments will limit competition, driving up subscription prices and reducing journalistic diversity.

On Tuesday, a U.S. District Court judge, Susan Illston, said that Reilly has standing to sue as a consumer threatened by the potential loss of editorial quality because of media consolidation. She cited the 1970 Newspaper Preservation Act, which was passed to help multiple newspapers survive in the same market amid falling circulation.

"The NPA evidences that Congress values the existence of separate sources of newspaper content in a community," Illston said in her ruling, "and that loss of separate sources injures consumers."

She also said that Reilly could suffer economically if antitrust violations are proven at the trial, which is scheduled for April 30.

Attorneys representing MediaNews, Hearst, Gannett and Stephens Media Group did not immediately return calls for comment.