The New York Times The New York Times Business January 27, 2003  

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Papers Agree to Pact on Collusion Allegations

By DAVID CARR

In a quiet end to a highly contested investigation, the Justice Department signed a consent decree on Saturday with New Times Media and Village Voice Media, two newsweekly chains that it had accused of dividing markets when they closed competing papers in Cleveland and Los Angeles last October, according to representatives of both companies.

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The Justice Department is expected to file a complaint and a competitive impact statement today, along with the consent decree, they said.

There is no admission of guilt in the consent decree, but each company is required to aid the opening of new weekly papers in Los Angeles and Cleveland by selling assets, including the rights to the names of the closed newspapers The Cleveland Free Times and The New Times Los Angeles as well as lists of advertisers, office equipment and newspaper racks. Each company will pay a fine of $375,000 to the State of California and a much smaller amount to the State of Ohio.

The federal government, which has generally stood by as media companies of all types have consolidated, apparently decided that the swap of assets and the closing of so-called alternative newspapers was anticompetitive on its face and required an immediate remedy.

That has left alternative newsweeklies, which have generally chided government for its role in media consolidation, on the wrong end of an antitrust settlement. And an administration that has taken a very dim view of judicial activism is now in a position of having its Justice Department decide which parties are given assets from a settlement to open new newspapers.

Maurice E. Stucke, the lead federal prosecutor in the case, did not return calls for comment.

The consent decree states that the two newspaper companies "entered into agreements in violation of Section One of the Sherman Act."

The deal that led to the investigation which also included lawyers from the attorney general offices of Ohio and California and the Los Angeles County district attorney took place on Oct. 2. That is when New Times Media agreed to close The New Times Los Angeles, a six-year-old weekly that competed with Village Voice Media's L.A. Weekly. And at the same time, Village Voice Media agreed to shut down The Cleveland Free Times, which shared a market with New Times Media's Cleveland Scene.

New Times Media received $11 million from Village Voice Media for its Los Angeles newspaper, while Village Voice Media was paid $2 million for its Cleveland newspaper.

James Larkin, the chief executive of New Times Media, maintained that the companies had each paid fair market value for the assets they acquired. The Justice Department took a different view, one that eventually prevailed in the settlement, saying the transaction represented an allocation of markets.

Robert Pitofsky, former head of the trade commission, said before the settlement that the exchange of significant payments was an indication that each saw value in the other's being out of a geographic market.

"When two firms, regardless of what they sell, say, `You stay West and I'll stay East,' that is a cartel behavior and illegal," said Mr. Pitofsky, now a professor of law at Georgetown.

New Times officials said they were outraged at what they viewed as an unprecedented governmental intrusion into free speech. Mr. Larkin said he believed that the company should not have been punished for taking a risk in 1996 by opening up a paper to compete with The L.A. Weekly. Mr. Larkin said they had settled the case because it had brought business to a halt at the company, which operates 11 weekly papers in Southern and Western cities like Denver, Dallas and Phoenix.

"After 32 years in this business, we may have made a bad business decision by competing with such an established weekly in Los Angeles," Mr. Larkin said in a phone interview from Phoenix. "We have taken our lumps for that, but now Justice believes that after $20 million in losses in Los Angeles and Cleveland, that they should decide who gets our assets."

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Jeff Topping for The New York Times
Michael Lacey, left, executive editor of New Times Media, and James Larkin, chief executive, outside their headquarters in Phoenix.


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