SANTA ANA, Calif. (AP) — Federal regulators who are suing to block Tribune Publishing Co. from buying the bankrupt Orange County Register and another Southern California newspaper over concerns of a news monopoly hold an "antiquated" understanding of the media market, the company said Friday.
The media giant said Thursday it had prevailed in a bankruptcy auction for the Register and the Press-Enterprise of Riverside with an offer of $56 million but the U.S. Department of Justice the same day moved to prevent the sale. The Tribune already operates the Los Angeles Times and San Diego Union-Tribune, which it purchased last year.
If it goes forward, it would give the company control of the four largest daily newspapers in Southern California, with as many as 1,000 journalists covering an area that stretches from Los Angeles to the Mexican border. It's a region of 18 million people.
In court filings, Tribune objected to the U.S. Department of Justice's "eleventh hour" interest in the deal, given that the media conglomerate was open about its interest as bankruptcy proceedings unfolded.
The company also complained that the government was relying on "severely outdated" notions of the media market and had cited 50- and 60-year-old legal cases from an era before digital publication in its bid to block the sale.
"The government's request, if granted by this court, effectively removes Tribune altogether from the proceedings in the Bankruptcy Court," according to the papers filed in U.S. District Court in Los Angeles. "A temporary restraint on Tribune will ensure that it will not acquire the properties."
The Justice Department fired back in court papers late Friday, saying that 200,000 residents of Orange and Riverside counties buy daily newspapers despite the advent of digital publications and the additional cash the higher bid would provide for creditors does not justify the loss of media competition.
The federal antitrust lawsuit could complicate matters in federal bankruptcy court Monday, when a judge will be asked to approve the deal. The bankruptcy must close by March 31, when temporary private financing keeping the two newspapers afloat will dry up.
Freedom Communications now operates both publications.
The judge operates independently but has the discretion to consider the Justice Department's concerns, said Tom Campbell, a Chapman University law professor and former director of the Federal Trade Commission's Bureau of Competition.
That could make the runner-up bidder, Digital First Media, the winner, Campbell said.
The judge "could say, 'I don't know if it's a big antitrust problem or not, but I have two bidders who don't have an antitrust problem and one who does,'" Campbell said. "The likeliest outcome is he would award it to the second bidder. That's what I would predict."
That would end regulators' concerns, but the Tribune surely would appeal, as would creditors, who would get less money from the deal, he said.
Digital First, which owns nine Southern California papers and websites, including the Los Angeles Daily News, made a $45.5 million "stalking horse bid" for the newspapers.
An investor group led by Freedom Communications' managers pulled out of bidding.
If the deal is approved, Tribune would control 98 percent of daily English-language newspaper sales in Orange County and 81 percent in Riverside County, the Justice Department estimated.
Freedom Communications filed for bankruptcy protection in November. It followed a series of layoffs and buyouts after an aggressive expansion of print journalism that included starting daily papers in Los Angeles and Long Beach and buying the Press-Enterprise of Long Beach for $27 million.
The Associated Press is among the creditors in Freedom's bankruptcy proceedings.
Follow Gillian Flaccus on Twitter at http://www.twitter.com/gflaccus .