If, as Clinton's regulators argue, big market share = monopoly, how many cities in America have newspaper monopolies? Why doesn't the Justice Department break them up?
May 17, 2000
Newspapers Investigate Life Without Antitrust
By HOLMAN W. JENKINS JR.
With an election coming up, it seems a good time for those who own printing presses to seek favors from Washington. Last week, the Denver Post and the Rocky Mountain News announced that they were applying for the Justice Department's permission to engage in price fixing -- better known as a "joint operating agreement."
The Newspaper Preservation Act was signed by President Nixon after receiving a haranguing letter from the president of Hearst, reminding him of all the support the papers had given him in the previous election. The law retrospectively validated two dozen such JOAs and opened the way for more.
We don't give a toot whether two newspaper owners want to share a printing press, a fleet of trucks and their advertising and circulation staffs in order to cut costs and raise prices. Competition is overrated, especially when it's forced on people who of their own free will would rather cooperate than compete. For our money, the antitrust laws need a serious rethinking. The problem here is that making an exception for this one industry serves to leave it beholden to politicians.
Journalists themselves are divided on whether they like being objects of government favoritism. Yet even the law's supporters, which include nearly every newspaper editorial board in the country, are never heard suggesting the same freedom should be available to other participants in the economy.
Indeed, newspapering ought to be the envy of CEOs everywhere. Newspapers alone have managed to evade a major incursion of the 20th century regulatory state, though not on grounds of economic freedom (an idea hardly entertained by polite company anymore) but on grounds that waiving the antitrust rules allows good things to happen.
The official rationale is to preserve newspaper "voices." A little bird might argue that people have plenty of places to get their information, viewpoints, rumor and innuendo. Moreover, cities aren't obviously worse off when they succumb to "newspaper monopolies" (a stupid phrase in our information-surfeited world). That said, the antitrust exemption granted to newspapers has given us a chance to observe all sorts of piratical behavior that would normally bring down the wrath of the competition cops.
Like paying your competitor to go away: Many JOAs have proved to be halfway houses to one paper dropping out of business altogether, often in return for a continuing share of the surviving paper's profits. The owners of the Miami News haven't published a paper since 1988. Yet they will collect a tidy 10% of the Miami Herald's net income until 2021.
St. Louis came to a similar denouement in 1983, now being renegotiated to include a lump sum payment. And the Seattle papers just rewrote their JOA to guarantee the ultimate loser 32% of the survivor's booty until 2083. Originally created by hardheaded people who were determined to stay in business, JOAs have lately morphed into vehicles for easing one company out of business for the benefit of both.
Even as we sit here, the Honolulu papers are in court defending a deal to close the Star-Bulletin. Never mind that its owner doesn't even maintain his paper isn't profitable, just that the return isn't adequate. Sure, he bought the paper from Gannett so Gannett could buy the better-run Honolulu Advertiser. The whole arrangement smacks of a convoluted play to let Gannett emerge as the sole newspaper proprietor in town. So what? As we detailed two weeks ago, Hearst is trying a similar stunt in San Francisco.
Doesn't this sound awful? Maybe not. JOAs are a way for consenting adults to take some of the financial risk out of competition that both see as ultimately zero-sum.
"Newspaper wars," as they are called by their drooly-mouth fans, are expensive things. And though there is a tendency for journalists to believe that life should conform with sports metaphors, why gamble shareholder money on total defeat or total victory? There is every indication that the extra freedom afforded the newspaper business to operate beyond the conventions of antitrust has invited more capital into the business than otherwise would have come.
Gannett, for one, has spent millions to buy papers in competitive markets so one party or the other could declare itself "failing" for purposes of the JOA law. During hearings on the Detroit deal, Al Neuharth had to breezily bypass the question of why he bought the Detroit News just as its cross-town rival was spending zillions on a new printing plant to expand in the suburbs. Obviously Gannett was counting on its wad to scare Knight-Ridder, owner of the Free Press, into a JOA.
Likewise, the Denver Post was deemed a goner 13 years ago when Times Mirror threw in the towel by handing it over to entrepreneur Dean Singleton on easy terms.
Mr. Singleton, a notorious penny-pincher who was reportedly once pelted with beer cans by his own reporters at the Fort Worth Press, quickly turned the tables on the Scripps-owned Rocky Mountain News. After a decade of dissimulation, Scripps suddenly last week admitted to losing $123 million in combat with Mr. Singleton, who claims $200 million in profits despite the Denver wars.
You may ask, why not clobber Scripps into the ground until Mr. Singleton has Denver to himself? Because today's victory can be tomorrow's defeat, and Scripps still has deep pockets and a big investment in Denver to defend.
One thing the law has done, by waiving the prejudices of antitrust, is to create a pocket of the business world where participants have, at their option, a way to hedge the risks of inefficient, wealth-destroying, zero-sum competition. Lo, there doesn't seem to be any harm in it.
Newspapers are doing fine, and the extra freedom certainly hasn't hurt them in finding a place in an economy deluged by direct mail, TV, radio, magazines, suburban papers, freebies and the Internet.
Nor, for all the handwringing about "monopolies," have JOAs stopped papers from going defunct if they couldn't attract readers and advertisers. But neither has the law proved much of a temptation to papers duking it out in markets big enough to be worth duking it out for, like L.A., Chicago and New York. In fact, there are fewer JOAs now than when the law was passed.
If freedom to reach bargains with competitors has been such a non-event in the newspaper business, why isn't it available to everybody? We'd call it real progress when nobody has to plead with Washington for special permission to exercise what ought to be an ordinary freedom of the marketplace.
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