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.
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
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
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
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
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
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."