A federal judge will rule Tuesday whether the Tucson Citizen must resume publication after the Arizona Attorney General complained that Gannett Co. and Lee Enterprises Inc. violated antitrust laws by ending their joint operating agreement and stopped daily publication of the newspaper to make more money.
The Citizen published its last edition Saturday after Gannett announced there was no viable buyer after about four months on the market. Gannett said the Citizen would continue as a Web-only, blog-like commentary site for local issues, but no news.
Attorney General Terry Goddard filed a motion Friday seeking a temporary restraining order to keep Gannett from closing the Citizen, but U.S. District Judge Raner Collins wasn’t available to hear the case until Monday.
Nancy Bonnell, chief of the state attorney general’s antitrust unit, argued Gannett’s decision to stop publishing the 138-year-old afternoon newspaper violates antitrust laws by eliminating competition and fostering a monopoly situation, while injuring the community by eliminating an editorial and news voice.
Gordon Lang, an attorney representing Gannett, said the opinion and commentary Web site is intended to create a community forum, as well as a weekly Citizen editorial to be published in the Star.
“The Tucson Citizen is a failing newspaper,” Lang said. “There simply aren’t enough people to buy the Tucson Citizen, and the sad truth is that it costs more to publish than the partners get from it.”
Bonnell contended Gannett and Lee Enterprises, which publishes the morning Arizona Daily Star, determined their joint business entity, Tucson Newspapers Inc., “would make more money if they closed one of the papers.”
Tucson Newspapers Inc. handles the non-editorial operations for both newspapers, such as advertising, publishing and distribution.
“Even in recession last year, the parties made $16 million — but that wasn’t enough,” Bonnell said.
Santa Monica Media Corp. LLC offered to buy the Citizen for $250,000 in cash or $400,000 in payments for minimal assets, including the newspaper’s masthead, some editorial equipment and use of the archives, on the premise that it would compete with the Star, Bonnell said.
Gannett said the newspaper’s assets were assessed at $760,000, and its asking price was $800,000, according to court documents.
“Gannett rebuffed the offer,” stopped negotiations and shut down the paper, Bonnell said.
Until Saturday, Gannett and Lee Enterprises were 50-50 partners in a joint operating agreement through which they shared the costs, profits and losses of Tucson Newspapers Inc. The JOA, an exemption to federal antitrust law, was allowed under the Newspaper Preservation Act. The JOA was terminated with Saturday’s final edition, but the business partnership would continue outside of the legal framework of a JOA, a Gannett official said.
Don Kaplan, a lawyer representing Lee Enterprises, said the judge’s decision would reverberate nationwide. He said that if partners in a JOA can’t help out a healthy paper by shutting down the one that is failing, “then this industry is in very serious trouble.” The Citizen, he said, was losing more than $10,000 a day.
Stephen Hadland, CEO of the Santa Monica Media Co., a group of weekly newspapers in California, said he believes when the Justice Department decided it would not go ahead with an antitrust action against Gannett, the company moved quickly to close the paper.
“I believe that was always their intention. I don’t believe they ever intended to sell it,” Hadland said.
Goddard was informed of the Citizen’s pending closure when Hadland wrote a letter Friday morning asking Goddard to intervene. Goddard said he moved forward after the Justice Department notified his office at noon that it would not pursue an antitrust complaint.
Gannett, the country’s largest newspaper publisher, announced in January that the Citizen would close if it didn’t find someone to buy certain assets by March 21, but then delayed the closing to continue negotiations.
Kate Marymont, Gannett’s vice president for news, said she has no firm plans for rehiring staff if the judge orders the paper to publish again.
“I am thinking about all options, but waiting to see what happens before really getting aggressive about it,” she said.
Other than eight people retained for a transitional period, some of whom are working on the Web site, all the other employees were let go with severance packages on Friday, Marymont said. “So, it’s not like they’re sitting there waiting for that phone call,” she said.